The recent financial crisis has pressed the Korean government to further accelerate liberalization of investment in order to improve the local financial and business environment. Foreign direct investment (FDI) in Korea has decreased in the first half of 1998 to USD 2.5 billion, a 44.9% decrease from the same period in 1997. However, the recent trend has shown substantial month-to-month increase. As of November 1998, aggregate FDI had already equaled 1997 total FDI of USD 7.0 billion.

Korea imported USD 2.4 billion in technology in 1997. The U.S. and Japan contributed 60.8% and 20.9% of the imports, respectively. The government of Korea has promoted international cooperation in R&D in various forms. At the governmental level, the International Joint Research Program, which started in 1985, has played the major role. So far, 906 joint projects have received a total of USD 41 million in support from this program. The government-sponsored research institutes are also involved in boosting cooperative international R&D efforts. Large firms have actively pursued strategic technological alliances with leading multinational corporations(MNCs).

As Korea has been losing competitiveness due to rising labor costs, restructuring the industry to improve the competitiveness of Korea's high technology and high value-added production has become an increasingly important part of the national agenda. In order to implement this agenda and to provide alternatives to those workers displaced by financial and corporate restructuring, the government has emphasized the promotion of small and medium-sized firms, especially new ventures. While beginning in the 1960s, venture business only began to emerge in the 1980s as a viable concern. There were about 1,500 venture enterprises with more than 70,000 employees in Korea as of 1996. Both public and private organizations are involved in the promotion of venture businesses.

The most ambitious national agenda adopted by the new government is the knowledge-based nation building for the 21st century. According to the plan, a substantial amount of new investment will go towards information infrastructure, development of new knowledge-based industries, improvement of the science and technology environment, and education reforms.

Many barriers and problems hindering technology-related investment and joint ventures with foreigners still need to be overcome. However, the recent efforts of the government, such as the enactment of the Foreign Investment Law, as well as actions by other public and private organizations to reform the economy and improve the investment climate, promise to induce more active involvement of foreign partners. The strategy to build a knowledge-based economy will also render a favorable environment to induce increased FDI.

Ⅰ. Introduction

Ⅱ. FDI, Technological Capability and Competitiveness

Ⅲ. FDI Trends and Policy Changes in Korea

Ⅳ. Technology Imports and Strategic Technological Alliances

Ⅴ. Knowledge-Based Economy and Prospects of Technology-Related FDI

Ⅵ. Concluding Remarks

References

Executive Summary