2021 Investment Environment Report Released
Stability and Infrastructure Recognized
[Asia Economy Reporter Kim Suhwan] The U.S. Department of State has evaluated that South Korea welcomes foreign investment and offers stability and highly skilled labor, but there is a need to ease regulatory environments.
In the South Korea section of the "2021 Investment Climate" report released on the 21st (local time), the Department of State stated that South Korea provides foreign investors with political stability, public safety, world-class infrastructure, a highly skilled workforce, and a dynamic private sector.
It also mentioned that the South Korean government welcomes foreign investment and offers incentives to foreign companies that contribute technology and investment to South Korea's manufacturing sector.
However, the Department of State explained that South Korea's ability to attract foreign direct investment is lower than expected given the size of its economy. The Department cited regulatory opacity, inconsistent regulatory interpretations, unexpected regulatory changes, outdated corporate governance, rigid labor policies, uniquely Korean consumer protection measures, and the political influence of chaebols as obstacles.
The Department of State also pointed out that a more relaxed regulatory environment is important to promote innovation in technologies such as 5th generation (5G) mobile communications, autonomous vehicles, cloud computing, and the Internet of Things. It emphasized that these technologies cannot mature under strict regulations that do not align with international standards.
The Department explained that over the past decade, the South Korean government has implemented various measures to address regulatory issues, such as establishing a "Foreign Investment Ombudsman" to respond to foreign investors' concerns.
It also introduced the case of the "Regulatory Sandbox" program launched in 2019 to promote the introduction of new products in the financial services, energy, and technology sectors. The regulatory sandbox is a system that exempts existing regulations for a certain period when launching new products or services.
Regarding the response to COVID-19, the Department of State evaluated South Korea as exemplary for being science-based, transparent, and trustworthy.
The Department reported that South Korea successfully managed the pandemic without locking down the economy by including fiscal and financial responses.
The Department further praised South Korea's economic situation as better than almost all countries in the Organisation for Economic Co-operation and Development (OECD). However, it pointed out that the risk of COVID-19 resurgence still remains.
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