1-IK-newyork5

November 2011

1

I. Wow Korea II. Diamond Korea III. Technology Korea 2

1945 Independence 1950 Civil War 1962 5-years plan for Economy Development

1988 Summer Olympics 2002 FIFA World cup 2010 G20 Summit 2011 IAAF World Championship 2018 Winter Olympics 3

 Area: 100,000km2 (108th) < Kentucky St.

• 9,372,615 km2 (4th)

 Population: 50 mil (24th)

• 307 mil (3rd)

 GDP (nominal): $1.01 trillion (15th)

• 14,624 bil (1st)

 GDP (ppp): $1.46 trillion (12th)

• 14,624 bil (1st)

- Per Capita: $29,836 (26th)  GDP Growth Rate: 6.2% (2010)

- 47,123 (6th) ※ Source) IMF, World Bank

 Trade (2010):▶ Export: $466 BN ▶ Import: $425 BN

 Inflation (CPI): 2.9% (2010)

 FX Reserves: $303.4 billion (Sept. 2011)

 Unemployment: 3.7% (2010)

* Short-Term External Debt: $135 Bil (2010)

 Fiscal Balance: 2.4% of GDP (2010)

* Gross External Debt: $360 Bil (2010)

 National Debt: 33.5% of GDP (2010) 4

※ Source: The Bank of Korea, Ministry of Strategy & Finance

WOW indicators

5

I. Wow Korea II. Diamond Korea III. Technology Korea 6

Single Diamond

Chance

Firm strategy, structure and rivalry

Demand condition s

Factor conditions

Related and supp orting industries

Government

7

Source) Michal Porterâ&#x20AC;&#x2122;s Diamond model â&#x20AC;&#x201C; The competitive advantage of nations

Double Diamond Business Context

Factor conditions

Physical Factors

Politicians & Bureaucrats

Demand conditions

Related Industries MAIN FACTORS

SUB-FACTORS

Energy Resources Other Resources Demand Size Demand Conditions Demand Quality Transportation Communication Finance Education Related Industries Science & Technology Cluster Development Overall Living Environment Strategy & Structure Global Mindset Business Culture Business Context Foreign Investment Source) The Institute for Industrial Policy Studies Factor Conditions

Human Factors

Workers

Professionals

Entrepreneurs MAIN FACTORS Workers

SUB-FACTORS Quantity of Labor Force Quality of Labor Force

Politicians Politicians & Bureaucrats Bureaucrats Entrepreneurs

Professionals

Personal Competence Social Context Personal Competence Social Context

Chance Events

Chance Events

8

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

0.70 0.60  Cheapest  Most stable 0.50  Safest from natural disasters

Physical Factors

Demand conditions

Related Industri es

0.64

0.61

0.59

Workers

Human Factors

Professionals

Entrepreneurs

Power failure case by year 0.50

0.50

0.49

0.47 0.48 0.42

0.40

0.40 0.30

Source) Korea Power Statistics Information System 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Infrastructure – Basic infrastructure

Electric costs for industrial clients Korea Indonesia New Zealand Thailand Taiwan Malaysia India Hong Kong Singapore Japan Philippines Australia China Mainland

0.06 0.06

(US$ per kwh, Year 2010) 0.07 0.08 0.08 0.09 0.11 0.12 0.15 0.15 0.18 (© IMD WORLD COMPETITIVENESS ONLINE 1995-2011)

9

Distinguished Domestic Market (Demand quality / Demand conditions)

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

A Large Market with Sophisticated Consumers

Physical Factors

Related Industri es

Demand conditions

Human Factors

Workers

Professionals

Entrepreneurs

• Population: 50 million (2010) • World's 15th in GDP (2010) • Test market of early adopters for new products • Rapidly growing buying power of brand-savvy consumers • More than half of Global top 500 firms (2010)

Many global companies as your partners

10

FTAs with 2/3 of the world markets (Market size / Demand conditions)

Factor conditions

Physical Factors

Related Industri es

In Effect Chile, Singapore, EFTA, ASEAN, In dia, EU, Peru

Concluded

USA

Underway

Politicians & Bur eaucrats

Business Conte xt

Demand conditions

Workers

Human Factors

Professionals

Entrepreneurs

On the Agenda

Japan, China, Canada, Mexico, GCC, Korea-China-Japan, Australia, MERCOSUR, Russia, Israel, Vietnam, Mongolia, SACU, New Zealand, Columbia, Turkey Central America, Indonesia, Malaysia Source: www.fta.go.kr, Ministry of Foreign Affairs and Trade

61% of world GDP, 46.2% of world trade volume, 39.7% of world population

11

FTA with Korea

Politicians & Bur eaucrats

Business Conte xt

(Trade & service openness / Demand conditions)

Factor conditions

Physical Factors

Demand conditions

Workers

Related Industri es

Human Factors

Professionals

Entrepreneurs

KORUS FTA

 More job creation for American’s workers: tens of thousand - eliminating non-tariff barriers, export-related new jobs

 More economic benefits for Americans: new U$ 1 Tri market - sharing annual economic growth of 5% in Korea

 More American products sold to Korea: U$10 Bil to 11 Bil - exporting more agricultural, auto/truck/green cars, machinery/equipment

 More American services sold to Korea: new 560 Bil market - financial, express delivery, legal, accounting, healthcare, education

 A competitive marketplace: to market share 21% from 9% - regaining a strong hand to compete with EU, China, Japan Source) U.S. International Trade Commission

12

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

Physical Factors

Demand conditions

Related Industri es

Incheon Int’l Airport Gyeonggi Province

South Chungcheong Province

Voted the best airport in pas senger service by ACI for 6 years (s ince 2005) • World’s 2nd for cargo volume

Gangwon Province

Workers

Human Factors

Professionals

Entrepreneurs

Well-Organized Highway

North Chungcheong Province North Gyeongsang Province

Total extens ion: 4,77

4km

•

North Jeolla Province South Gyeongsang Province South Jeolla Province

Source: KOSIS

Busan Port Gwangyang Port KTX

World’s 5th high-speed train m anufacturer

World’s 17th 182M tons (2008)

5th largest for cargo handli ng 13

The Most Wired Country

Politicians & Bur eaucrats

Business Conte xt

(Communication / Related industries)

Factor conditions

Physical Factors

Demand conditions

Workers

Related Industri es

Professionals

Entrepreneurs

 ITU, ICT development index world rank 2nd / 2009 → 3rd /2010 → 1st /2011 92.0%

Human Factors

103.0%

97.9%

95.0% 74.2%

2009

2010

55.1%

2011

93.3%

22.9% 8.0% 9.0% 8.6% GDP

9.7%

4.8% 7.3%

IPTV

102.0%

64.7% 1.6% 5.0%

17.2% S.TV

40.8%

Digi TV

BcN

S.phone

F.phone

Source) Annual report of Korea Communications Committee

By 2013, the speed of wired and wireless Internet in Korea will be 10 times faster than it currently is. Using t his Internet network, we can watch Ultra Definition TV (UDTV), which will be 4 to 16 times clearer than the e xisting High Definition TV (HDTV). In addition, we will also watch HD level video clips with mobile phones.

We will make the world’s best converged infrastructure of wired, wireless and broadcasting systems with a g uaranteed speed of 1 Gbps for wired networks and 10 Mbps for wireless networks.

- 11 Feb 2011, Minister of MKE

14

Politicians & Bur eaucrats

Business Conte xt

Doing business world rankings Rank 1 2 4 8 10 13 17 18 19 20 25 89 91 98 105 126 129 132 136 183

Economy Singapore Hong Kong United States Korea Ireland Canada Thailand Malaysia Germany Japan Taiwan, China Sri Lanka China Vietnam Pakistan Brazil Indonesia India Philippines Chad

Source) World bank, Jun 2011

Korea is in 8th of 183 <9 categories> • Dealing with Construction Permits,

• Getting Electricity, • Registering Property, • Getting Credit, • Protecting Investors, • Paying Taxes, • Trading Across Borders, • Enforcing Contracts, • Resolving Insolvency

Factor conditions

Physical Factors

Demand conditions

Related Industri es

Workers

Human Factors

Professionals

Entrepreneurs

World’s best countries Sort by: Rank Country 1 2 3 7 9 11 13 14 15 17 19 20 37 58 59 63 78 81

Finland Switzerland Sweden Canada Japan United States New Zealand United Kingdom Korea Ireland Belgium Singapore Malaysia Thailand China Philippine India Vietnam

Source) Newsweek, Aug 2010

Korea is in 15th of 100 <5 categories> • Education • Health • Quality of life • Economic dynamism • Political environment

15

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

Physical Factors

Demand conditions

Workers

Related Industri es

st 1

150

 High school graduation 98% (age 25 to 34)  Tertiary school entrance 81.5%  R&D productivity Average hours actually worked

138

Human Factors

Professionals

Entrepreneurs

Labor disputes 115

108

121 86

100 Domestic 50

Invested 15

15

19

22

2006

2007

2008

2009

12

0 2010

Source) Ministry of Employment and Labor

Hours per year person in employment

2,256

16

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

Physical Factors

Related Industri es

Demand conditions

Workers

Human Factors

Professionals

Entrepreneurs

EIU Democracy Index  20th globally  1st in Asia

• Fair Trade Commission • The Anti-Corruption & Civil Rights Commission • Regulatory Reform Committee 17

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

Dec. 1, 2011

Physical Factors

Related Industri es

Demand conditions

Workers

Human Factors

Professionals

Entrepreneurs

Grand Ballroom, The Ritz Carton Hotel in Seoul

18

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

Physical Factors

Demand conditions

Workers

Related Industri es

Business Efficiency - Labor Market Attracting and retaining talents is a priority in companies 1 Korea 8.15

Human Factors

Professionals

Entrepreneurs

 R&D manpower doubled in 5 years  World 9th researchers ratio to population  Asia 4th in training employees

2 Taiwan

7.96

3 Australia

7.78

18

4 Malaysia

7.74

16

5 Singapore

7.67

14

6 China Mainland

7.47

12

7 India

7.45

10

8 Thailand

7.30

9 Hong Kong

7.29

10 Japan

7.01

11 New Zealand

6.89

4

12 Philippines

6.81

2

13 Indonesia

6.19

0

Researchers / Per thousand employed, full-time equivalent 2008 or latest available year

1999 or first available year

9.5%

8

6

19

http://stats.oecd.org/Index.aspx?DataSetCode=CSP2010

Politicians & Bur eaucrats

Business Conte xt

Factor conditions

Physical Factors

Related Industri es

Demand conditions

Workers

Human Factors

Professionals

Entrepreneurs

Key attractiveness indicator for KOREA From a list of 15 indicators, respondents of the Executive Opinion Survey were asked to select 5 that they perceived as the key attractiveness factors of their economy. The bars in the figures show the percentag e of responses per indicator from the highest number of responses to the lowest.  Dynamism of the economy  High educational level  Skilled workforce  Reliable infrastructure  Competent managers  Productivity of workforce  Strong R&D network  Policy stability & predictability  Access to financing  Competitive tax regime  Lack of corruption  Harmonious labor relations  Effective legal environment  Low operating costs  Low regulatory burden

97.00 94.00 67.00 62.00 48.00 25.00 19.00 11.00 8.00 7.00 7.00 7.00 6.00 3.00 1.00 © IMD WORLD COMPETITIVENESS ONLINE 1995-2011

20

I. Wow Korea II. Diamond Korea III. Technology Korea 21

To the ITC Service Ecosystem Hardware

Communication

Software

Service

Hardware Communication

Software

Service

To lead to least energy and least materials usage.

• Cloud computing • Data center

• Smart grid • Smart city

• e-government • U-healthcare

22

New Growth Engine Development Plan (Science and Technology / Related industries) • Reinforce R&D activities : IT, BT, GT • Invest U$ 24.5 billion for 5 years starting 2009 • Create new market of U$ 700 billion Short-term plan (3~5 yr’s)

New Growth Engine (17 ind.)

Long-term plan (Within 10 yr’s)

• Renewable energy (tidal, recycled resources)

• Renewable energy (solar, fuel cell)

• Renewable energy (marine bio fuel)

• Advanced green city

• Reducing carbon energy (nuclear power plant)

• Reducing carbon energy ( CO2 recycle)

• Advanced water treatment

• Green transportation system

• IT fusion system

• LED applications

• Convergence of broadcast & communications

• Value-added food industry

• New materials, Nano

• Global healthcare

• Global education services

• Robot application

• Green finance

• Bio-pharmaceuticals, medical devices

• MICE* · Tourism

Development Strategy

Mid-term plan (5~8 yr’s)

• Contents, software

• Application development

• Preoccupy core technology

• Develop fundamental technology

• System infrastructure improvement

• Create new market

• Train human resources

* MICE : Meeting, Incentive Tour, Convention, Exhibition

23

Chungcheongbuk-do Seoul

GT – Solar valley

IT – IT Convergence

Incheon IT – Smart city

Jeollabuk-do GT - Photovoltaic

ChungNam IT – Display, Semiconductor

Busan GT – Wind power

24

• Chosen by many global companies • Strong government supports • Diverse FDI incentives 25

Chosen by many US companies (2,095/14,410) More than 2,000 companies from USA have their business in Korea

Foreign-owned firms paid out large dividends last year, nearly more than double the average of all companies listed on the country's main stock market, a local fund market research instit ution said Sunday.

- The Korea times, Oct 7, 2011 -

26

Scientific Infrastructure

Defining the Competitiveness of Koreaâ&#x20AC;&#x2122;s IT/BT/GT

27

One-Stop Service

Overseas Network of 42 KBCs (Korea Business Centers) Central Governments

Provide information on FDI

incentives, markets and industries Arrange meetings w/govt. officials

Local Governments

Resolve investors’ grievances

Assist in business-site selection

Help seek business partners

Provide administrative support

Improve business and living environment

28

FDI Incentives

Corporate income tax

Acquisition tax

Property tax

Tariff, VAT, ICT for capital goods

Cash support for a FDI To finance the construction of facilities or the purchase of equipment related to the investment

Reduction or exemption of rent

Support for building of infrastructure

Subsidies for employment and education

Support in settling into Korea

Facilitate R&D activities

29

Incentives Tracks for FDI Incentives

Qualification

Procedure

 Confirm whether tax reduction is available fro m MOSF.**  Positively influence and importance o n domestic economy and technology  Register foreign investment notification to KOT Status of RA  Less than 3 years from the date laun on income, corporate tax: 10 High-tech ind ched or more effective than the existing  Apply with copies of Application for of tax redu ustry 0% for 5yrs, 50 technology ction & copies of Description of business % for after 2yrs  Manufacturing in domestic area  Evaluated by relevant organization within 2 wk on local tax*: 100% for 5yrs, s 50% for after 2yrs TAX Exem on customs : 100% for 5yrs <Individual type>  Documentation with Local Government ption  Manufacturing biz : FDI $30M or mor  Application to MKE** e FIZ (Foreign  R&D center : FDI $2M. or more & 10  Evaluation by Foreign Investment Committee Investment Z Researchers one) <Complex type> 15 FIZ complex; Cheonan, Pyungdong, Daebul, S on income, corporate tax : 1 acheon, Ochang, Gumi, Inju, Jan  Manufacturing biz : FDI $10M or mor 00% for 3 yrs, 50 gan1&2, Dandong, Jinsa, … e. % for after 2yrs on local tax* : 100% for 3yrs, 50% for after 2yrs

LAND Su

on customs : 100% for 5yrs

pport Reduction of rent fee Support for infrastructure

CASH G RANT

6 FEZ; Incheon, Busan&Jinhae, Gwangyanman, Daegu, Hwanghae, Saemangum

 More than 30% of foreign investors' stock rate with introducing high-degree technology / Creating new jobs / contributing to local economy

 Discussion with KOTRA /Invest Korea

The Cash can be used for ; • Land Acquisition & Rent Cost  More than 30% of foreign investors' stock rate • Construction Cost

Other

 Manufacturing biz : FDI $10M or mor FEZ (Free Ec e. onomic Zone)  R&D center : FDI $1M or more & 10 Researchers

 Manufacturing biz : Parts & Material Specialty or high-tech status

 Designation of Investment plan  Preliminary Negotiation with KOTRA

 Application to KOTRA • Set-up Cost for Basic Infrastr  R&D center : new R&D Facilities and over 5 Researc  Evaluation by Foreign Investment Committee ucture hers  Final Decision within 60 days after official appl • Purchase of Capital Goods, R ication &D equipment & Materials 30

Support for the improvement of living and management environment * Local Tax: acquisition, registration, property tax, ** MOSF: Ministry of Strategy and Finance, *** MKE : Ministry of Knowledge Economy, Financial Support for Employment & Training

"On coming to Korea, we found that the attitude to doing business, capital markets, regulations and transparency were ideal for new business to grow.”

- John Walker AM, Chairman, Macquarie Group of Companies, Korea

“A world-famous work ethic by highly educated workers, strong business infrastructure, proximity to the rising N ortheast Asian market and an ambitious FTA strategy are some of the attractions of this dynamic market” - Amy Jackson, President, Amcham Korea

For further information Please send an email to Jaewon Lyu at Jaewon@kotra.or.kr www.investkorea.org

31