UPDATE 2-S.Korea sees '04 foreign direct investment doubling


(Updates with comments from investor, analysis, background)

By Kim Myong-hwan

SEOUL, Sept 24 (Reuters) - South Korea's commerce minister said on Wednesday foreign direct investment would nearly double next year, driven by an economic recovery and also government efforts to entice foreign investors.

The country has been losing its attractiveness as a venue for foreign investment in recent years mainly on concerns over its militant trade unions, the crisis over North Korea's nuclear ambitions and China's rise as a regional industrial powerhouse.

"We expect FDI will rise to about $10 billion in 2004, up from an estimated $5-$6 billion in 2003, as the economy is expected to recover from late this year and due to our efforts to create a better environment for foreign investment," Yoon Jin-sik told Reuters after making a speech to a group of foreign business leaders invited to check out investment opportunities.

With a sharp slide in foreign investment threatening to derail the country's ambitions of becoming a business hub for North Asia, South Korea said this month it would offer cash grants and other incentives to try to win back overseas money and support flagging growth in Asia's fourth-largest economy.


"Aside from arranging a seminar for foreign investors in the country, we also plan to send delegations to them in their countries to explain what we can offer," Yoon said.

He said he would lead a delegation to Japan in October to attract investors in the sectors of high-tech components and materials to South Korea.

Steve Rodgers, vice-president of Canadian automotive parts maker Magma International Inc, said South Korea's drive to offer more incentives was quite encouraging.

"South Korea has good quality infrastructure in the car industry, for example," Rodgers said. "Especially, what the government does now is quite positive to foreign investors."

Foreign direct investment (FDI) in the first half of 2003, measured by investment plans submitted to the government, fell 44 percent from a year earlier to $2.7 billion. FDI has been falling since it hit a peak of $15.5 billion in 1999, according to the ministry's data.

Reflecting gripes from expatriates living in South Korea, the ministry said this month investment in education, hospitals or other sites targeting foreigners living in the country would receive financial support from the government.

The finance ministry has previously said it would broaden the scope for tax incentives for foreign investors.

In addition, South Korea has sought to make its job market more flexible, giving employers more scope to lay off workers or employ temporary ones, since it accepted reform prescriptions from international lenders in late 1997 during the Asian crisis.

As part of an aim of doubling the country's per-capita gross domestic product (GDP) to $20,000 by 2012, the commerce ministry has picked 10 key high-tech sectors to focus on.

These include digital display devices, fourth-generation mobile phones, high-tech automobiles and next-generation semiconductors, the ministry said.



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