[2020 Future Business Forum] Jang Sang-hyun "In the Post-Corona Era, Strategies for Attracting Investment in New Industries and Service Sectors Must Be Established"

Jang Sanghyun KOTRA Invest Korea CEO Lecture

Jang Sang-hyun, CEO of KOTRA Invest Korea, is giving a lecture at the '2020 Asia Future Business Forum' held on the 28th at the Chosun Hotel in Jung-gu, Seoul, under the theme "The Direction of the Korean Economy in the COVID-19 Pandemic Era." Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Kim Ji-hee] "The COVID-19 pandemic is expected to accelerate changes in the global trade environment, including not only existing uncertainties but also the restructuring of global value chains (GVC). We need to establish investment attraction strategies for the post-COVID era, focusing on promising industries such as emerging sectors like pharmaceuticals, bio, IT, and services."

Jang Sang-hyun, CEO of KOTRA Invest Korea, made these remarks on the 28th at the '2020 Asia Future Enterprise Forum' hosted by Asia Economy, discussing investment attraction strategies in the era of the COVID-19 pandemic.

First, CEO Jang identified uncertainty, innovation, and GVC restructuring as key characteristics of the changing trade environment during the COVID-19 pandemic. He said, "Before the COVID-19 crisis, the keywords describing the global trade and investment environment were uncertainty and innovation. Uncertainty includes global economic recession and the rise of protectionism, while innovation involves the acceleration of the Fourth Industrial Revolution and strengthened investment regulations on core technologies in advanced countries. These factors will continue to have an impact even after COVID-19."

He added, "In addition, the characteristic of 'accelerated GVC restructuring' will be added." Earlier, as COVID-19 spread in China, the center of global manufacturing, 938 out of the Fortune 1000 companies suffered damages. Experiencing production disruptions originating from China, global companies have recognized the importance of managing GVC risks. Revisions to strategies centered on 'cost reduction and just-in-time supply' have become inevitable.

According to economists' analysis, GVC risks vary depending on industry inventory and supply chain characteristics. CEO Jang explained, "Industries such as advanced technology, automotive, and textiles/apparel face high risks of GVC disruption, whereas platform businesses and digital sectors have lower risks. Due to increased GVC risks from COVID-19 and strengthened protectionism, the multipolarization toward regional value chains (RVC) and national value chains (NVC) will accelerate."

Due to the impact of COVID-19, domestic foreign direct investment (FDI) is also expected to decline. Last year, FDI reached $23.3 billion, the second-highest record ever. In the first quarter of this year, FDI was $3.27 billion, a 3.2% increase from $3.17 billion in the same period last year, showing a similar scale to recent years' first-quarter foreign investments. The problem starts from the second quarter. Recently, the United Nations Conference on Trade and Development forecasted that international FDI will decrease by 30-40% until next year.

CEO Jang said, "According to our own survey, global companies perceive Korea as a stable investment destination but are postponing new investments until the end of COVID-19. However, they are open to investing in promising sectors."

At the event, short- and mid-to-long-term strategies to attract foreign investment after COVID-19 were shared. Invest Korea plans to select target companies responding to key issues such as competitive core industries and global companies' GVC restructuring in the mid-to-long term, and further induce additional investments from foreign-invested companies through post-management.

CEO Jang identified four promising Korean industries to focus on in the post-COVID-19 era: core industries, new industries, service industries, and K-Industry linked to the Korean Wave (Hallyu). Especially, new industries such as medical, pharmaceutical, bio, and IT sectors have become the most focused areas for global companies due to COVID-19. They plan to support the globalization of companies through startup matching (CVC).

The service industry is similar. During the previous COVID-19 crisis, there was no panic buying domestically, confirming strengths in logistics and distribution sectors. CEO Jang said, "We will actively attract global e-commerce and platform companies and continuously expand investment attraction in online games, movies, and entertainment, which are less sensitive to sudden variables like COVID-19."

Invest Korea will also select target companies responding to global companies' GVC restructuring and the differentiation of RVC and NVC. CEO Jang said, "While discovering investment projects that reinforce existing GVCs, we plan to focus on attracting investments in logistics and distribution centers related to vulnerable sectors such as electronics, IT, pharmaceuticals, and automobiles." Additionally, in line with the global trend of repatriating overseas companies, they will support returnee companies.

Short-term strategies centered on 'strengthening communication' were also shared. He said, "We are currently providing regular newsletters and project implementation support to ensure foreign-invested companies can carry out their business without disruption. We expect that strengthening communication will help complement information asymmetry and alleviate anxiety."

Furthermore, they proposed measures to digitalize the entire foreign investment process, including discovery, negotiation, agreement, reporting, and post-support. CEO Jang explained, "When discovering target companies, we utilize IR videos and overseas trade offices, and at the negotiation or agreement stages, we have adopted online negotiations and drone-assisted on-site inspections."