1. Investing in Korea
Possibilities and Methods
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Nguyen Hoang Quan …………………….. 52905030057-1
Veera Yuth………………………………...52905050052-7
Supee Rungsrisawat…………………….....55050503005-0
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2. Korea‘s economy is the 15th largest economy in the world by GDP, after the world‘s financial-
economic crisis in 1997, Korea had one of the fastest recovery, three years later, they declared that they
had totally recovered the economy and continue to grow. In the previous year, unemployment rate
remain low at 3.6%. Fast growing, long-term solid policy, stable economy, high educated work force,
Korea is one of the most attractive countries for investing, along the others countries in Asia.
There are two main types of investing for foreign investors, Foreign Direct Investment and
Portfolio Investment. Both have particular requirements issued by Foreign Investment Promotion Act
(FIPA), an government agency helping investors in with their legal procedure and make investing in
Korea easier than ever.
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3. Table of contents:
Introduction…………………………………………………………………..2
I. Overview of the Economy………………………………….……….4
1. Domestic Economy.....................................................................................4
i. GDP and PPP
ii. Demographic
2. Export and Import......................................................................................5
3. Fields of Industry.......................................................................................6
i. Steel
ii. Electronic
iii. Automobile
iv. Shipbuilding
II. Investing environment………………………………..……………...8
1. Foreign Investment Promotion Act (FIPA)………………………………...8
2. Covered Interest Abbitrage (CIA)……………………………………………8
III. Investing opportunity………………...………………………………9
1. Logistic…………………………………………………………………………..9
i. Overview
ii. Advantage Location and Emergin Logistics Market
iii. Promising Investment Region for Logistics Activities
iv. Globalisation and main competitors analysis
v. Infrastructure leverage
vi. SWOT analysis
2. Regulations and Policies for logistic investment…………………………12
i. FDI Incentives in the Logistic Industry
ii. Logistics Industry Promotion Policy
3. Steps……………………………………………………………………………..14
i. Service considering
ii. Foreign Investment Notification
iii. Investment Capital Remittance
iv. Incorporation Registration and Incorporation Notification & Business Registration
v. Paid-In Capital Transfer to Corporate‘s Account
vi. FDI Company Registration
4. Financial expectation………………………………………………………..18
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4. I. Overview of the Economy
1. Domestic Economy
The economy of Korea had actually been booming since the early of 1960s to the late 1990s, and
it still has one of the highest growth rate among developed countries in the 2000s, along with Hong
Kong, Singapore and Taiwan.
STATISTIC
GDP growth rate 6.1 %
Nominal GDP $ 986.3 billion
PPP $ 1.467 trillion
Inflation 2.8 %
Gini index 31.3
Labour force 24.37 million
Unemployment rate 3.7%
Currency Won
Korea domestic economy is strongly effected and related to the world economy since its foreign
trading stand for 90% of the country GDP. In the 1997 Asia financial crisis, Korea, along with Indonesia
and Thailand are the three contries worstly effected. Even though Korea makes foreign transactions in a
very high rate of quantity and quality, but the government still keeping its growth rate (6.1%) in a
resonable rate, along with inflation (2.8%), and unemployment rate (3.7%) to keep inflow investment‘s
liquidity.
However, although Korea had maken the ―Miracle of Han river‖ and continued keeping high
growth rate in the 2000s, its growth rate in the first month of 2011 (0.5) is not really impressive because
of the world economy recession effects last from 2008.
Jan/2011
Interest rate 2.75%
Inflation rate 3.5%
Unemloyment rate 3.7%
Growth rate 0.50%
Source: www.tradingeconomics.com
The government has to face more troubles come from rising inflation rate and unemployment
rate, lowering growth rate.But it seem as a very difficult mission since Korea rely their economic growth
rate on Ex-Im.
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5. 2. Export and Import
As we‘ve known that Korea is the world‘s 11th largest trader with imports and exports
accounting for nearly 90 percent of the country‘s GDP. Korea ranked 10th in the world in terms of global
export markets share based on cumulative export from January to April 2009.
Since Korea isn‘t a country with much resources, they choosed to import resources from supplier
from around the world to manufature and export finished product such as electronic, automobile, semi-
condutor, steel, ship and petrochemical.
As we can see from the graphic, Korea‘s biggest supplier is U.S. with $63 billion dollars of
import goods, but the biggest piece of the exporting pie is belonged to China with $61.2 billion dollars
of goods, right after China is U.S. at the second place with $61 billion dollars of goods.
Korea reported a trade surplus equivalent to $3.74 billion in December of 2010. Their main
trading partners are: China, European Union, The United States and Japan.
Korea’s Ex-Im index
Export $44340.0 million
Import $40600.0 million
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6. 3. Fields of Industry
i. Steel
The upturn experienced by the Korean steel industry following the dramatic downturn in late
1997/98 has proved short lived with demand falling steadily in the second half of 2000 and continue
dropping in 2001. Never-the-less, demand at present still remains higher than in 1998 and, with the
exception of the construction sector, is expected to remain positive. Korea still being the 6th largest steel
producer world-wide. In 1989 South Korea was the world's 10th largest steel producer, accounting for
2.3 % of world steel production. South Korea continued expandinf crude steel production--19.3 million
tons for 1988, up 14.9 % over 1987. Domestic demand for steel products increased 8.5 % from 15
million tons to 16.3 million tons over the same period because of the growing demands of South Korean
industry. Domestic demand accounted for 70 % of the total, mostly because of the increased needs of
such steel-consuming industries as automobiles, shipbuilding, and electronics.
The steel industry grew in the 1970s after the government constructed the POSCO mill to service
Seoul's rapidly growing automobile, shipbuilding, and construction industries. In 1988 South Korea's
steel industry included 200 steel companies. Iron and steel production was expected to increase in the
early 1990s, given the output increases in domestic user industries. Exports were likely to be flat or to
decline because of decreased international demand.
ii. Electronic
In 1989 South Korea was a major producer of electronics, producing color televisions,
videocassette recorders, microwave ovens, radios, watches, personal computers, and videotapes. In 1988
the electronics industry produced US$23 billion worth of goods (up 35 % from 1987), to become the
world's 6th largest manufacturer. The total value of parts and components (including semiconductors)
produced in 1988 totaled US$9.7 billion, overtaking consumer electronics production (US$9.2 billion)
for the first time. Manufacture of industrial electronics also grew significantly in 1988 and totaled
US$4.6 billion (20 % of total production). Electronics exports grew rapidly in the late 1980s to more
than US$15 billion in 1988, up 40 % from 1987--to become Seoul's leading export industry. Although
South Korean electronic goods enjoyed substantial price competitiveness over Japanese products, the
electronics industry continued to be heavily dependent on Japanese components, an important factor in
South Korea's chronic trade deficit with Japan. Some South Korean firms formed joint ventures with
foreign concerns to acquire advanced technology. In the late 1980s, South Korea's leading electronics
firms (Samsung, Lucky-Goldstar, and Hyundai) began establishing overseas plants in such markets as
the Federal Republic of Germany (West Germany), Britain, Turkey, and Ireland.
By 1990 significant shifts were occurring within the electronics industry. In 1989 South Korea
had lost some of its cost advantage to newer consumer electronics producers in Southeast Asia. At the
same time, production of electronic components and of industrial electronics, particularly computers and
telecommunications equipment, continued to expand to such an extent that overall demand for South
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7. Korean electronics products was expected to increase modestly in the early 1990s. In 1990 Seoul
projected that the microelectronics industry would grow at an annual rate of 17.2 % in the early 1990s.
iii. Automobile
The automobile industry was one of South Korea's major growth and export industries in the
1980s. By the late 1980s, the capacity of the South Korean motor industry had increased more than
fivefold since 1984; it exceeded 1 million units in 1988. Total investment in car and car-component
manufacturing was over US$3 billion in 1989. Total production (including buses and trucks) for 1988
totaled 1.1 million units, a 10.6 % increase over 1987, and grew to an estimated 1.3 million vehicles
(predominantly passenger cars) in 1989. Almost 263,000 passenger cars were produced in 1985—a
figure that grew to approximately 846,000 units in 1989. In 1988 automobile exports totaled 576,134
units, of which 480,119 units (83.3 %) were sent to the United States. Throughout most of the late
1980s, much of the growth of South Korea's automobile industry was the result of a surge in exports;
1989 exports, however, declined 28.5 % from 1988. This decline reflected sluggish car sales to the
United States, especially at the less expensive end of the market, and labor strife at home. South Korea
today has developed into one of world's largest automobile producers. Hyundai Kia Automotive
Group is Korea's largest automaker.
Export
iv. Shipbuilding
During the 1970s and 1980s, South Korea became a leading producer of ships, including oil
supertankers, and oil-drilling platforms. The country's major shipbuilder was Hyundai, which built a 1-
million-ton capacity drydock at Ulsan in the mid-1970s. Daewoo joined the shipbuilding industry in
1980 and finished a 1.2-million-ton facility at Okpo on Geoje Island, south of Busan, in mid-1981. The
industry declined in the mid-1980s because of the oil glut and because of a worldwide recession. There
was a sharp decrease in new orders in the late 1980s; new orders for 1988 totaled 3 million gross tons
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8. valued at US$1.9 billion, decreases from the previous year of 17.8 % and 4.4 %, respectively. These
declines were caused by labor unrest, Seoul's unwillingness to provide financial assistance, and Tokyo's
new low-interest export financing in support of Japanese shipbuilders. However, the South Korean
shipping industry was expected to expand in the early 1990s because older ships in world fleets needed
replacing. South Korea eventually became the world's dominant shipbuilder with a 50.6% share of
the global shipbuilding market as of 2008. Notable Korean shipbuilders are Hyundai Heavy
Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and STX Offshore
& Shipbuilding, the world's four largest shipbuilding companies. South Korea also owns STX Europe,
which is Europe's largest shipbuilder.
II. Investment environment
Foreign direct investment was on an upward trend as 2010 drew to a close, climbing nearly 7 percent
from the prior year as of November to over $10 billion. Authorities are implementing several measures
to build on this foundation. The Ministry of Knowledge Economy is refining foreign investment
promotion legislation to extend the maximum period for which foreign companies can lease state land,
and easing the cost burden on some foreign firms by cutting land lease commission rates and making
support available for new research facilities. Several tweaks to the tax system are also in the works,
including new tax credits for creating jobs outside the Seoul metropolitan area.
Conversely, as the stock and bond markets heat up on an influx of foreign capital -- Goldman Sachs
recently predicted Korea's main index, the KOSPI, could rocket to the 2,700 point level in 2011 -- the
government is mulling ways to curb hot money inflows and foster financial system stability. Measures
under consideration include the reimposition of a withholding tax on foreign bond holdings.
1. Foreign Investment Promotion Act (FIPA)
Investing in Korea has been facilitated by FIPA, which was enacted in November of 1998. The
foundation of this Act involves two main points:
- Foreign investors will have accesses to invest in virtually all types of business in Korea
- Potential foreign investors only have to ‗notify‘ the relevant government authorities rather than
to ‗seek‘ for a consent.
Currently, out of a total classified 1,148 industrial sectors, only 31 sectors remain closed (13
permanently in 18 partially) to foreign invesment. In short, this law attempts to treat the foreign
investors equally as it does Korean investors.
A ―direct foreign investment‖ under FIPA means a foreign investor‘s acquisition of at least 10%
of total issued shares of a domestic corporation, or a foreign investor‘s acquisition of less than 10% of
total issued shares of a domestic corporation accompanied by:
- A secondment of an executive to the domestic corporation or a contract granting such
secondment right to the foreign investor.
- Execution of a supply contract for raw materials or other products for a period of at least a year
or more.
- Execution of a techonology license contract or joint development agreement.
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9. 2. Covered Interest Abbitrage (CIA)
Exchange Rate Buying Selling
USD 30.57 31.22
KRW 0.0233 0.0321
Interest Rate Deposit Borrow
Thailand 1.75% 6.38%
USA 0.25% 3.25%
Korea 2.75% 7.17%
Borrow from US bank at 3.25%
US 10,000,000*3.25%= US 10,325,000
Convert from US to Won
US 10,000,000*1,300.6= W 13,006,000,000
Lent money to Korean at 7.17%
W 13,006,000,000*7.17%=W 13,938,530,200
Convert back into US
W 13,938,530,200/1,300=US 10,717,000
Return borrowed money
US 10,325,000 - US 10,717,000= US 332,000
Convert into Thai Baht
US 332,000/30.57= 10,149,240 Baht (Covered Interest Arbitrage)
III. Investing opportunity
1. Logistic
i. Overview
As far as global corporations are concerned, building an efficient logistics system is the key to
their competitiveness. South Korea is located in Northeast Asia between China, which has been growing
not only as a major base for manufacturing, but also the world's largest market, and Japan, which is still
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10. steadily increasing her economic weight. This location gives South Korea certain geo-economic
advantages.
South Korea is well equipped with logistics infrastructure which includes airports, seaports,
multi-modal cargo terminals, and logistics complexes. The country has also built up the world's best
logistics information systems, thereby providing speedy, efficient customs clearance services. Global
corporations can utilize South Korea's airports and seaports to rapidly and frequently connect to a great
number of cities within Northeast Asia to build the optimum supply chain.
Advantage Location and Emerging of Logistics Market
Asia includes Northeast Asia which consists of Korea, Japan, China, Hong Kong, Taiwan,
Mongolia, North Korea, and Siberia. It is noteworthy that the share of Northeast Asia in the Asian
economy is overwhelmingly huge. In 2008, 68% of Asia's GDP came from Northeast Asian countries
(excluding eastern Siberia). Northeast Asia accounts for a majority of Asia's trade: 81% of Asia's total
export, 76% of Asia's total import.
Although India is expected to grow into the third largest economy in the world by 2050, it is no
exaggeration to say that the center of the world economy is shifting not to Asia but to Northeast Asia.
India's GDP would be just half of China, and its per capita income is expected to be lower than that of
China.
Asia's Share of Global Merchandize Export
350
300
250
200
150 $ billion
100
50
0
Korea China Japan Singapore Hongkong Taiwan
In 2006, the market share of third-party logistics was 38.8 percent only, compare to 75 percent to
90 percent in the U.S. and Europe, where manfatures focus on production and outsource logistics-related
activities to specialized firms. This suggests that the high percentage of first- and second-party logistics
discourages the growth of specialized transporters in Korea. It‘s also mean the logistic industry in Korea
is still not booming yet, and it would be a great advantage to invest in ahead, the benefit might return in
later than 3 years, but the amount would be huge. Anyway, it‘s the mean of investing.
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11. ii. Promising Investment Region for Logistics Activities
South Korea has massive logistics complexes in the hinterland areas of her major international
airports and ports. Such complexes constitute free trade zones, offering various benefits to foreign-
invested companies. Furthermore, wider areas including free trade zones are operated as free economic
zones to support the activities of foreign corporations.
South Korea's free trade zones, free economic zones, the Greater Seoul Area, which has a
massive domestic demand for logistics, and the Chungcheong region offers the optimal logistics
conditions within Northeast Asia and South Korea.
Thus, South Korea's superior logistics infrastructures and services can be effectively utilized to
intensively handle import and export products in Northeast Asia or to undertake any logistics business
involving sea and air transportation. The Korean logistics market - with its fast growing third-party
logistics business - also constitutes a great attraction for global logistics companies wishing to enter
Korea.
iii. Globalisation trend and competitors analysis
Although globalisation trend has started since the 1990s along the the booming of internet, but
there is no sign of the stop of globalisation. More over, the globalisation is shifting world economic
center from the Western to the Eastern countries.
The reasons of this shifting are up coming labor force, market, purchasing power, etc. of Asia
countries, especially the Eastern Asia countries. Therefore, Korea is more than deserved to be the hub,
providing and issuing the on coming economic trend from the other side of the Pacific.
About internal advantage, Korea has large educated labor force and high technology in either
biology, information or engineer.
About external advantage, Korea is a member of Asia Pacific Economic Corporation (APEC)
and also is considered and a extended member of AFTA + 3 (Asia Free Trade Association and China,
Japan, South Korea). And the country also believe that they can compare with China, Taiwan or even
Japan.
About Korea‘s main competitor, those are China, Taiwan and Japan.
China is now the second largest economy in the world, just right behind the U.S. and there‘s no
doubt that Chinese are going to overcome the Americans. But still, China has too tight policies in
investing and operating under the Communism government. In the record, last year, the world largest
search engine, Google had to moved out to Hongkong because of China‘s tight policies and information
censors.
Strengths: cheap labor force, large market, high purchasing power
Weaknesses: tight policies and information censors, high corruption rate
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12. Taiwan although has very high technology industry, and they are eying cooperation in logistics
services with China to boost customs clearance efficiency and transform the island into a logistics hub in
the Asia Pacific region, the Council for Economic Planning and Development (CEPD) said recently. The
CEPD has developed a plan with will commit US$ 3.19 billion between 2010 and 2013 to building
Taiwan into an Asia Pacific logistics hub. And so on, China has privately voiced its willingness to work
with Taiwan in logistics services.
Strenghths: developed information technology
Weaknesses: political risk, policy of investing
Japan is now the third biggest world economy, after China and The U.S, they have been the
logistic center for East Asia for decades. They have advantage in infrastructure, experience, punctual,
hard working. Japan is blocking the way of Korea to reach out the Pacific, and they are still. But Korea
can take advantage in young population, which is a big trouble for Japan government. The rate of old
people in Japan is getting higher everyday, 21% of the population is over 65 and it would be 25.6% in
2030. Japan need more young people to take care of the elderly and lack of labor force.
Strenghs: advantage locations, reliable labor force
Weaknesses: old populations
In the World Bank‘s Logistics Performance Index (LPI), South Korea is ranked 23 rd, Singapore
2nd, Japan 7th, HongKong 13th, Taiwan 20th, and China is 27th.
Conclusions:
Although Korea is only out-performed China in LPI, and there are plenty of competitors, the
government‘s seem like trying very hard to improve it.
iv. Infrastructure leverage
Korea has been making substantive efforts to secure infrastructure for logistics including
upgrading roads, railways, airports and port facilities in order to increase national competitiveness.
Major infrastructure for logistics, including airports and seaports, has been significantly expanded.
The following part of Infrastructure leverage is about some outstanding facility of Korea, which
are mainly used for logistic and transportation purposes. You may find these are complicating but we
listed them here as an added informations for our selection of logistic investment.
- Foreign companies are participating in SOC private investment projects driven by Korea in the
form of equity investments or long-term loans (over five years). AMEC of the United Kingdom
has invested in the construction of the Incheon Bridge (at 18.5km, the sixth longest in the world).
- Incheon International Airport, as the second largest international cargo airport and one of the
top 10 international passenger airports. In addition, Incheon International Airport has been
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13. recognized as the "Best Airport Worldwide" for four consecutive years for the first time in the
history of the Airport Service Quality (ASQ) survey.
- The Busan New Port next to the current port of Busan is the fifth largest port (13,452,000 TEU)
based on the quantity of goods transported by ports across the world in 2008. Phases 1-3 of the
Port's Northern Container Logistics Support Complex have been developed, with several foreign
companies already established within. They include C. Steinweg Warehousing PTE., COSTCO
Logistics Co., and Sanyo Maritime, among others.
- The development project at the Northern Container Logistics Support Complex (Phase 4
scheduled for 2011) is in progress (0.22 million m2), and the Southern Container Logistics
Support Complex (1.42 million m2) and the Woongdong District Logistics Support Complex
(3.58 million m2) are planned for development, as well.
- Gwangyang Port is exclusively reserved for containers, and development of its Eastern Logistics
Support Complex (1.95 million m2) was completed in 2008. Foreign companies like TESCO
Holdings, and Mevius, have already established operations there and plans are in place to
develop a Western Logistics Support Complex (1.93 million m2) by 2012.
- The Port of Pyeongtaek located near the capital region is developing an area of 1.43 million m2
for a logistics support complex by 2010 and is set to develop an additional 1.2 million m2 by
2015.
- Ulsan Port, characterized by a high presence of liquid cargo, accommodates foreign-invested
companies including Stolt Haven, Vopak, and Odfjell. Designs are being executed to secure a
port logistics support complex of 440,000 m2 by 2011. The respective ports of Incheon, Pohang,
Masan, and Mokpo are planning to actively attract more foreign logistics companies while
developing their port logistics support complexes, as well.
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14. v. SWOT analysis
Strengths Opportunities
- Well equiped facilities and educated labor - Asian high growth rate lead to high growth
force rate of demand for logistic services
- Highly supporting policy - Shift of industry – from large enterprises to
- Geography advantage third-party logistic firms.
- Developed shipbuilding industry - Government supporting policies
- Strong legal system - AFTA+3 and APEC members
- Low rate of risks
Weaknesses Threats
- Number of competitors in North East Asia - War and natural disasters
- Cost of operating due to high exchange rate
- High rate of domestic enterprise
protections
2. Regulations and Policies for logistic investment
i. FDI Incentives in the Logistics Industry
In accordance with the 7-year Tax Break Operation Regulation for free economic zones, which
was resolved in March 2009, large-scale foreign-invested companies are eligible for 7-year tax breaks.
Major incentives for foreign companies that invest at least USD 10 million in the logistics sector include
a 100% exemption from corporate tax and income tax for 5 years, and a 50% exemption for a further 2
years. The hinterland areas of airports and harbors, which are mostly located in the FEZs, benefit from
these tax breaks.
Currently, foreign tenant companies within the logistics complex of Incheon International
Airport obtain a 50% exemption from land rental charges for 5 years in cases where the initial
investment ranges between USD 5-10 million, and a 100% exemption for 5 years in cases where the
investment cost totals USD10-15 million.
The Ministry of Land, Transport and Maritime Affairs (MLTM), which is responsible for the
logistics sector, has decided to offer a range of incentives to be applied according to the scale of
investment by foreign companies newly established in the hinterland complexes of free trade zones such
as Busan New Port, Gwangyang Harbor, and Pyeongtaek-Dangjin Harbor (March 2009). As such,
differentiated incentives are provided according to the size of a company's investment, such as a 5-year,
50% exemption from rental charges for an investment of USD 5 million; a 5-year exemption from rental
charges for an investment of USD 10 million; a 7-year exemption from rental charges for an investment
of USD 15 million; and a 15-year exemption from rental charges for an investment of USD 50 million.
Separately, certain local governments provide their own incentives for cargo attraction in a bid to
help companies overcome the recent economic downturn, and to assist challenges faced by the logistics
industry specifically, and thereby enhance its competitiveness.
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15. There are four main kind of promoting zone for industries, those are: Free trade zone, Foreign
investment zone, Free economic zoneand National industries zone.
ii. Logistics Industry Promotion Policy
The South Korean government, having recognized logistics services as a key to national
development, has established and is now revising a National Logistics Master Plan composed of 5-year
phases. Under this plan, the government will foster the logistics industry as a new growth engine with
the aim of creating global value-added, in line with the overall goal of raising logistics value-added to
11% of the country's GDP by 2020. At the same time, five major strategies are being implemented to
ensure that corporate logistics costs will account for 6% of sales to build low-cost, high efficiency
national logistics systems, and to enhance the global competitiveness of key national industries.
The government is striving to develop South Korea's logistics system into the world's best so as
to enhance the country's competitiveness while effectively supporting corporate activities. Domestic and
foreign companies can take advantage of a range of support policies concerning facility location, taxes
and finance to build optimal logistics systems.
iii. Strategies under the National Logistics Master Plan
Vision: ‘2020 Global Logistics Powerhouse’
- To lead the co-prosperity of Nort-East Asia
- To create added value
- To lead the high-tech knowledge-based economy
Goal: To create the national wealth through the logistics industry
- To improve the efficiency of the national logistics system
There are five main strategies to improve the logistics industry, which are key acts of Korea.
Strengthen global logistics systems
- Expand the infrastructure of major airports and harbors and develop them into international
logistics centers.
- Strengthen their linkages to Nort-East Asia‘s logistics networks.
- Conduct sales activities vigorously and openly to attract global logistics companies.
Build and update hardware infrastrucures
- Push for combined development and activation of logistics hubs facilities.
- Strengthen the linkage functions between industries and logistics hubs.
- Refine urban and provincial logistics bases to activate regional logistics functions.
- Activate massive argo transportation systems so as to balance the use of various means of
transportation.
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16. - Refine cargo handling facilities and equipment to build efficient transportation systems in
linkage with logistics hubs.
- Build eco-friendly logistics systems.
Strengthen software-oriented logistics systems
- Push ahead with national logistics informatization and networking in order to promote the
efficientcy of national logistics systems and to strangthen the linkage between industries and
logistics.
- Diffuse standardization systems to enhace the efficiency of national logistics.
- Develop and diffuse future-oriented, cutting-edge logistics technologies with potentially great
economic ripple effects.
- Strengthen system support for fostering logistics experts who will lead the advancement and
internationalization of the logistics industry.
Activate the logistics industry
- Foster specialist logistics companies.
- Enhance the transparency of the logistics markets to resolve such problems as market distortion.
- Strengthen support for the offorts of domestic logistics companies to globalize their oprations.
Establish national logistics base systems
- Establish inegrated logistics policy systems.
- Refine systems or the compilation of logistical statistics.
3. Foreign Investment Procedures
i. Investment form
Branch Office and Subsidiary
Establishment of a branch office is governed by the Foreign Exchange Transaction Act of Korea
and does not require incorporation in Korea. A subsidiary, however, is established as a Korean corporate
entity pursuant to the Korean Commercial Code (―KCC‖) after filing a foreign report inder the FIPA.
Under the FIPA, in order to be qualified as a foreign investor, the investor is erquired to invest a
minimum of KRW 50 million (approximately $ 51,000) and acquire 10% or more of the total issued and
incentives available to foreign dicret investments.
In general, a subsidiary would be received both by Korean business partners and by the Korean
public more favorably than a branch, because in apprearance, a subsidiary is a Korean company, where
as a branch is a foreign company. Also, the establishment of a subsidiary tends to be considered as a
solid long-term commitment to Korea by the foreign investor. Furthermore, a subsidiary may also have a
more enhaced local character and indentity than a branch.
If the Korean presence of a foreign company is structured as a branch, the liabilities of the branch
will be directly attributable to the foreign company. If, on the other hand, the Korean presence is
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17. structured as a subsidiary, the liabilities of the subsidiary generally would not be attributed to the parent
company.
Therefore, investing sub-company is considered as the best choice for us.
Other options:
- Turnkey operation: The biggest disadvantage of Turnkey opration is that it‘s a lack of long-
term market presence, since logistic investing is not getting any return value in short-term but the
profit would be huge in long-term. Therefore, Turnkey operation is not a proper choice.
- Licensing, Franchising and Joint Venture: The disadvantage of these three is that the investors
are lack of management. Because of there are many risks, either systematic or unsystematic risk
in the logistic industry, the investors must have control on their investing money. So Licensing,
Franchising and Joint Venture are out of the list as Turnkey.
- But in order the set up a network of logistic, which is the highly priority, the company must
make contracts with other firms in order to have advantage in cheap bounded warehouse, ships
and air-crafts maintaining and supplying. In order the do so, we should make subcontracting to
have our own supplier and use the exist infrastrutures of Korea, therefore we don‘t have to invest
and build up own infrastructures and supply our operating activity in order to lower the cost and
time to have everything in ready. The company choose to concentrate on helping its customers in
logistic.
ii. Service considering
There are plenty of professional companies provide consulting services for foreign firms to
invest in Korea since the government issues many regulations and policies to encourage FDI, expecially
in logistics industry.
Firms should seriously consider this posibility. Normally, there is no foreign firm has
understading about the country as well as the local consulting companies because of the different in
culture, economy, etc. One of the openest gate to invest in an Asian country is through full service.
Those consulting companies have understanding about the market, the society and especially
relationships with the FIPA.
Although we highly likely to apply consulting service, steps in detail should be examined.
iii. Foreign Investment Notification
A foreign investor or an agent may report their investment at Invest KOREA (KOTRA), Korea Business
Centers (KBC) of KOTRA, headquarters and branches of domestic foreign exchange banks, or domestic
branches of delegated foreign banks.
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18. Reporting person: A foreign investor or an agent
Delegated agency: Headquarters and branches of domestic banks, domestic branches of
delegated foreign banks, Invest KOREA (KOTRA), or Korea Business Centers (KBC) of
KOTRA.
Processing period of foreign investment report: Immediately (The certificate of completion of
report is issued without delay)
Required Documents
Two copies of the foreign investment report form per investment type (new stocks, existing
stocks, long-term loans etc.)
Documents certifying Thai nationality of the company.
o A foreign corporation or group: Certificate of incorporation issued by the government or
other authorized organizations of Thailand, or proof that the said corporation or group is
based in Thailand.
o Foreign individuals: Certificate of citizenship, passport, or other proof of a foreign
investor's nationality, issued by the government or other authorized organizations of
Thailand.
Additional documents required when necessary:
Documents certifying object of investment
Documents certifying share acquisition
Letter of attorney (where an agent, a foreign investor confers the right of representation, reports
the investment and applies for permission)
iv. Investment Fund Remittance
In principle, investment funds shall be remitted through a foreign currency bank under the name
of the foreign investor. Funds from domestic sources are not recognized as foreign investments. In the
process of paying up for stocks, a bank issues a certificate of paid-up stocks (required in case of
registration of incorporation) and a certificate of foreign currency purchase (required in case of
registration of a foreign-invested company).
v. Incorporation registration and Incorporation Notification & Business Registration
After the report of the foreign investment is accepted by the foreign exchange bank, steps may be
taken to establish the foreign invested enterprise. The following documents are required to incorporate
and register the foreign invested enterprise with the court registry office which has jurisdiction over the
location where the foreign invested enterprise is to be located:
a. Articles of incorporation of the foreign invested enterprise
b. Names, addresses, date of birth and nationality of the directors of the foreign invested enterprise
and the copies of their passports.
c. Name, address, date of birth and nationality of the representative director of the foreign invested
enterprise (from among the directors). Therepresentative director is the person who is authorized
18

19. by Korean law and the Articles of Incorporation to represent the company. If there will be more
than one representative directors, foreign invested enterprise has to identify such directors and
whether they will be acting only jointly or separately.
d. Name, addresses, date of birth and nationally of the statutory auditor of the foreign invested
enterprise and the copy of the passports. There must be at least one statutory auditor for a
chushik hoesa (who must be a natural person and an accounting firm may not serve as a statutory
auditor). The statutory auditor performs certain statutory supervisory functions, separately from
independent auditors (who are usually accountatns). There is no restriction regarding nationality
of the statutory auditor.
e. Notarized acceptance letters to be signed by each of the directors (and representative director)
and the statutory auditor (and representative director) and the statutory auditor (if required) and
the report on seal impression by the representative director(s) of the foreign invested enterprise.
With the above information and documents, an inaugural meeting of the foreign invested
enterprise will be held, where the directors, representative director(s) and the statutory auditor( if
required) will be appinted. Since a certificate of full payment of capital contribution issued by the
foreign exchange bank is one of the documents necessary for court registration, the foreign investor
must remit the investment funds after the report on the foreign investment is accepted by the bank and
before the court registration is to be effected.
vi. Registration with the Tax office
The foreign invested enterprise must be registered with the local tax office to obtain a business
ID number. This can be completed within 1-2 weeks after court registration of the foreign invested
enterprise. The tax office registration requires a copy of a lease agreement evidencing the foreign
invested interprise‘s actual presence in Korea.
vii. Paid-in Capital Transfer to Corporate’s Account
When registration of incorporation and business is completed, a new company becomes a legally
valid corporation. A bank requests required documents and transfers paid-in capital to the account of the
newly established corporation.
viii. FDI Company Registration
A foreign investor (or an agent) or a foreign-invested company shall register the foreign-invested
company at delegated authorities within 30 days after the occurrence. The registration will be made at
FIPA and consist of three procedures:
Finished the report on foreign investment with a foreign exchange bank
Incorporation and registration with the court registry office
Registration with the competent tax office
Required Documents
19

20. Registration form of a foreign-invested company
Copy of the certificate of incorporation and business registration of a foreign-invested company
Copy of foreign exchange purchase certificate or foreign currency deposit certificate
Shareholders' list (corporate seal, certified copy of the original) or documents certifying that
payment of stocks is transferred
Additional documents required when necessary
Documents certifying object of investment
Copy of documents certifying that the transfer of assets has been completed (where a foreign
investor makes an investment in kind with capital goods)
Copy of an investigation report by an inspector or a written statement by an appraiser, in
accordance with the Commercial Act (where a foreign investor makes an investment in stocks or
domestic real estate)
o Documents pertaining to acquisition of stocks
o Letter of attorney where an agent makes the report
i. Financial expectancy
Investment Outlay (Millions Won)
Construction………………… 4,000
Land…………………………. 2,000
Equipment……………….…. 1,000
Legal fees & other fees….… 200
Total………………………. 7,200
Income statement (Millions Won)
1 2 3 4 5
Total Sale Revenue 20,000 25,000 26,000 27,000 30,000
Material cost 4,000 7,000 7,000 7,500 8,500
Labor cost 5,000 5,000 5,000 5,000 6,500
Total variables cost 9,000 12,000 12,000 12,500 15,000
Gross Profit 11,000 13,000 14,000 14,500 15,000
G&A 3,000 3,000 3,000 3,000 3,000
20

21. Depreciation 500 500 500 500 500
EBIT 7,500 9,500 10,500 11,000 11,500
Korean Income Tax 2,250 2,850 3,150 3,300 3,450
Net Income 5,250 6,650 7,350 7,700 8,050
Net Present Value - NPV
1 2 3 4 5
Net Income 5,250 6,650 7,350 7,700 8,050
Depreciation 500 500 500 500 500
Working Capital 1,000 400 300 300 300
Net cash flow 4,750 6,750 7,550 7,900 8,250
Net profit in Baht 132 187 209 219 228
Presence Value 0.82 0.67 0.55 0.45 0.37
factor
0 1 2 3 4 5 Year
Million Bath (200)
108
125
114
99
84
Total: 530 million Bath
NPV = 330 million Bath (Accept project)
-oOo-
THE END
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