foreign investment ombudsman annual report...

Foreig

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KO

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료 18-008

Foreign Investment Ombudsman

Annual Report 2017

KOTRA자료 18-008

Foreign Investment Ombudsman Annual Report 2017

2

Foreword

Known for its excellence, the Office of


offers premier services to support

foreign-invested companies


Dr. Jeffrey I. Kim

Since taking office as Ombudsman three years ago, my team and I have undertaken many

tasks to improve Korea’s investment climate. Thankfully, our efforts have had positive impact as

Korea has been widely recognized for successfully improving its investment environment. To be

effective, I believe the office must earn trust, build a strong partnership with foreign investors

and provide expeditious and appropriate grievance resolution.

There are three crucial pillars of Korea’s Foreign Investment Ombudsman System: First, our Home

Doctors operate as a point of interaction from which all contacts with foreign-invested companies

are managed. Second, the Online Regulatory Information Portal allows us to manage grievances

proactively and effectively by functioning as a channel through which foreign investors can

submit comments on legislations. Third is the role of the Foreign Investment Ombudsman who

mediates settlements.

Laws and regulations need to be amended retrospectively. For this reason, the Ombudsman

plays a pivotal role in resolving grievances effectively. For instance, government bodies may

disagree on issues where discrepancies occur between laws and practice, creating a legal gray

area. In such cases, it is up to the government licensing official to decide upon the matter and

the result may vary depending on the business-friendly tendency of the official in charge.

Foreign InvestmentOmbudsmanAnnual Report 2017


3

Therefore, my team and I have endeavored to not only address grievances through mediated

settlements but also respond to complaints through various media outlets in order to increase

consensus about the validity of the issue at hand. Thus, the key to improving investment climate

and resolving grievances lies in enhancing public awareness about the significance of foreign

investment and fostering a business friendly environment for foreign investment.

In addition, complaints filed by foreign-invested companies must be addressed promptly at the

initial stage to prevent problems from developing into major issues. In this regard, worldwide

economies and international organizations are paying close attention to Korea’s Foreign

Investment Ombudsman System for effectively preventing investor-state dispute from arising

between multinational companies and host economies.

In particular, having analyzed Korea’s Foreign Investment Ombudsman System, international

organizations including the World Bank Group and UNCTAD are strongly recommending

other member countries to adopt a similar system. Furthermore, we have shared our stories

and experiences with countries such as Brazil, Chile, Philippines, Kazakhstan and India who are

interested in adopting a system similar to our own.

As times change, so do the needs of businesses. In this regard, coupled with providing

appropriate grievance resolution services for foreign-invested companies, we will be expanding

our proactive grievance resolution procedure to prevent complaints from arising in the first

place. As committed supporter and partner of foreign-invested companies, my team and I will

continue to work hard to provide support for foreign investors to develop their business projects

in Korea. In the current era of financial globalization in which investment liberalization features

prominently, the office will endeavor to fulfill its role in promoting stable investment climate.

Above all, I hope this report will make a meaningful contribution to relevant government bodies,

investment agencies, foreign-invested companies as well as other economies working to adopt

the Ombudsman system.

Jeffrey I. Kim, Ph.D



The Foreign Investment Ombudsman System and Grievance Resolution Body 06

Annual Highlights 2017 08

Foreign Direct Investment Trends 2017

1. Global Foreign Direct Investment (FDI) Trends 16

2. Foreign Direct Investment Trends in Korea 23

3. Economic Effects of Foreign-Invested Companies 27

The Foreign Investment Ombudsman System and Grievance Resolution Body

1. Introduction to the Foreign Investment Ombudsman System 30

2. Operation of the Grievance Resolution Body 33

Contents


Foreign Investment Aftercare Performance 2017

1. Grievance Resolution Activities and Achievements 381) Prevention and resolution of foreign-invested companies’ grievances

2) Reinvestment attraction activities

3) Aftercare visits to parent companies

4) Quarterly report on grievance resolution

2. Proactive Grievance Procedures 491) Regional On-Campus Recruiting Expo for foreign-invested companies

2) World Bank Doing Business Report

3. Communication Activities for Foreign-Invested Companies 531) C-level Roundtable for Foreign-Invested Companies

2) Roundtable for foreign-invested companies and local governments

3) Roundtable for foreign-invested companies by industry

4) Regulatory Information Service for Foreign Investors

4. Ombudsman System Promotion Activities 631) Ombudsman system promotion activities

2) Public relations

Appendix

1. Legal Authority and Rights 70

2. Best practices of legislative improvement 71

3. Best practices of administrative intervention 76



6

• To resolve the grievances of foreign investors and foreign invested-companies effectively, and contribute to improving the investment environment and attracting reinvestment. - Date of establishment: Oct. 26, 1999- Place of establishment: Korea Trade-Investment Promotion Agency

Purpose

• Article 15-2 of the Foreign Investment Promotion Act (Foreign Investment Ombudsman, etc.)- Article 21-3 of the Enforcement Decree of the Foreign Investment Promotion Act

(Functions, etc. of Foreign Investment Ombudsman)- Article 21-4 of the Enforcement Decree of the Foreign Investment Promotion Act

(Operation, etc. of Grievance Committee)

Legal Basis

• Foreign Investment Ombudsman• Executive Consultants (Home Doctors) in the fields of finance, taxation, biotechnology, accounting,

law, IT, intellectual property, industrial site, labor, etc. • Employees of KOTRA

Organization

• All areas including investment system, investment incentives, taxation, finance, foreign exchange, tariff, customs, construction, environment, law, selection of industrial sites, visa/immigration, IT, intellectual property, etc. - Exceptions include private disputes between companies, the business of individual companies, requests

that contradict global standards and matters that unjustly influence other companies or industries.

Areas of Support

• Assign respective Home Doctors (executive consultants) to each foreign-invested company or region, to receive and resolve grievances • Request cooperation with the government and relevant organizations and recommend

legislative improvements to resolve grievances • Improve foreign investment system through external activities such as participating in the

Foreign Investment Committee • Prevent grievances and conduct projects to improve investment environment• Help attract reinvestment from foreign-invested companies

Responsibilities



7

History

•Tel: +82-2-3497-1823 •Fax: +82-2-3497-1699

•Website: http://ombudsman.kotra.or.kr

Contact Information

• June 1991 Establishment of the Office of the Foreign Investment Consultation within the Ministry of Trade and Industry

• April 1996 Restructuring and renaming of the Office of the Foreign Investment Consultation into the Office of the Foreign Investment Grievance Consultation under the Ministry of Trade and Industry

• July 1998 Establishment of the Investment Aftercare Team within the Korea Investment Service Center (KISC), KOTRA

• October 1999 Dr. Wan-Soon Kim commissioned as the first Foreign Investment Ombudsman

• March 2001 Previously appointed by the Minister of Commerce, Industry and Energy, Foreign Investment Ombudsman is now directly appointed by the President of the Republic of Korea in accordance with the amendment to the law

• January 2002 Office of Foreign Investment Ombudsman included within the KISC

• December 2003 Reorganization and renaming of the KISC as Invest Korea

• May 2006 Dr. Choong Yong Ahn commissioned as the second Foreign Investment Ombudsman

• May 2006 The Grievance Resolution Body placed under the purview of Foreign Investment Ombudsman

• April 2008 Dr. Choong Yong Ahn appointed as a member of the Presidential Council on National Competitiveness

• February 2010 to May 2011

Dr. Choong Yong Ahn reappointed as member of the Presidential Council on National Competitiveness

• January 2009 to June 2010

Dr. Choong Yong Ahn appointed as member of the Regulatory Reform Committee

• May 2009 Dr. Choong Yong Ahn recommissioned as Foreign Investment Ombudsman

• June 2010 to June 2012

Dr. Choong Yong Ahn appointed Chairman of the Regulatory Reform Committee

• March 2012 The Foreign Investor Support Center placed under the purview of Foreign Investment Ombudsman

• May 2012 Dr. Choong Yong Ahn recommissioned as Foreign Investment Ombudsman

• July 2014 Dr. Choong Yong Ahn resigned as Foreign Investment Ombudsman

• April 2015 Dr. Jeffrey I. Kim commissioned as the sixth Foreign Investment Ombudsman



8

◦ (Overall assessment) Foreign direct investment (FDI) flows into Korea increased by 7.7% to USD

22.94 billion (notification basis) in comparison to 2016. For three consecutive years, FDI flows into

Korea exceeded USD 20 billion.

◦ (By business type) FDI inflows increased in the manufacturing and services sectors.

◦ (By investment type) Greenfield investments continued to grow in 2016 and 2017, reaching

USD 15.02 billion and USD 15.70 billion, respectively.

2. Foreign Investment Aftercare Services 2017

Prevention and resolution of grievances

1. Foreign Direct Investment 2017

FDI trends in Korea(Unit: USD billion, %)

2013 2014 2015 2016 2017

Notified(Growth rate)

14.55(△10.7)

19.00(30.6)

20.91(10.1)

21.30(1.9)

22.94(7.7)

Arrived(Growth rate)

9.88(△7.7)

12.08(22.3)

16.50(36.6)

10.60(△35.8)

12.82(20.9)

* Source: 2017 Foreign Direct Investment Trends, MOTIE (January 2018)

(Unit: No. of cases, %)

YearLegislative

ImprovementAdministrative Intervention

Home Doctor Resolution

Total (Growth rate)

2015 14 112 336 462 (5.7)

2016 16 106 287 409 (△11.5)

2017 12 90 187 289 (△29.3)

◦ The Office of the Foreign Investment Ombudsman received a total of 289 inquiries in 2017.

Annual Highlights 2017


9

Reinvestment attraction

◦ The Office of the Foreign Investment Ombudsman has helped to attract reinvestment worth USD

761 million which accounts for 9.2% of the total amount of notified FDI worth USD 8.271 billion.

Company(Parent Company’s

Location)

Business Type

Notified Reinvestment

(Notification Date)Grievances

Lotte Versalis Elastomers (Italy)

Chemical Engineering

USD 34,916,000(Jan. 16)

Local government’s request for an investment memorandum

Sumitomo Seika Polymers (Japan)


USD 32,347,765(June 29)

Tax reduction and reinvestment application procedures

Dongwoo Fine-chem (Japan)


USD 40,000,000(Sept. 27)

Applying for changes to the individual-type Foreign Investment

Zone due to reinvestment

Umicore Materials Korea (Luxembourg)

Electrical/Electronics

USD 35,000,000(Sept. 29)

Request for support regarding delays in installing power grids

Toray Battery Separator Film Korea

(Japan)


USD 110,000,000(Sept. 29)

Legislation proposal on conducting external audit of LLCs

Ikea Korea(Sweden)

Wholesale/Retail(Distribution)

USD 259,000,000(Nov. 29)

Request for detailed guidelines for a mutually constructive relationship

with local communities

Aftercare visits to parent companies

◦ The Foreign Investment Ombudsman made several visits to a selected number of North American

parent companies this year, including visits to 12 other companies and investment promotion

agencies.

Quarterly report on grievance resolution

◦ In accordance with paragraph 7, Article 21-4 of the Enforcement Decree of the Foreign Investment

Promotion Act, the Office of Foreign Investment Ombudsman publishes quarterly reports titled

Report on Grievance Resolution for Foreign-Invested Companies offering a collection of grievance

resolutions identified by the Office of Foreign Investment Ombudsman and local governments.


10

3. Proactive Grievance Procedures

Regional On-Campus Recruiting Expo for foreign-invested companies

Date Region(Venue) Participating Companies Participants

Mar. 30Jeonbuk

(Chonbuk National Univ.)

• Schneider Electric Korea, Adecco Korea, Standard Chartered, Alps Electric Korea, Emerson Electric Korea, SGS, Boston Scientific

410

Apr. 13Gyeongbuk

(Keimyung Univ.)

• TE Connectivity Korea, Zara Retail Korea, SGS, FRL Korea, Nifco Korea, Dassault Systèmes Korea, Adecco Korea

420

May 31Chungbuk

(Chungbuk Univ.)

• Borgwarner Transmission Systems Korea, UNIQLO, Nexans Korea, Edwards Korea, SGS, Nifco Korea, Adecco Korea

340

Date Activity Agenda

May 18 Meeting with advisors from the

Australia Indonesia Partnership for Economic Governance (AIPEG)

• Performance benchmarking consultation • Share strategies to improve performance on the

Doing Business indicators

June 8Roundtable with Doing Business

respondents for the improvement of investment environment

• Invite respondents designated by the World Bank to discuss improvement strategies

• Discuss Korea’s weaknesses and ways for improvement

◦ The Regional On-Campus Recruiting Expo for foreign-invested companies began in 2011. A total

of three expos were organized this year, with an average of seven companies participating in each

event. The total number of participants in all three events amounted to around 1,170.

- Leading global companies conducted recruiting seminars and one-on-one consultations to enhance

awareness of foreign-invested companies and contribute to creating jobs in the local community.

◦ Expos were co-organized by the Office of Foreign Investment Ombudsman and local governments

to host an effective recruitment event and create opportunities to resolve grievances expressed by

global companies as well as generate jobs in the region.

World Bank Doing Business Report

◦ The World Bank’s Doing Business annual report measures and presents business regulation in

190 countries worldwide. In order to seek ways to improve Korea’s Doing Business rankings,

discussions and research projects were set up with Doing Business survey respondents and

specialists in Doing Business.


11

4. Communication with Foreign-Invested Companies

C-Level roundtable for foreign-invested companies

◦ With FDI flows into Korea hitting a record high in 2016 (USD 22.9 billion notified, 12.8 billion

arrived), a number of roundtable discussions were organized this year to acknowledge foreign-

invested companies’ contribution to Korea’s economy and attract reinvestment. Moreover,

government officials specializing in foreign investment were invited to ensure that grievances are

promptly identified and responded to.

Date Title Grievances and suggestions

Feb. 13

2017 Roundtable for Foreign Investors

• Suggestions to allow capital funds from Head Offices with regard to the regulation of single borrower’s credit ceiling for branches of foreign banks• Suggestions to improve tax investigations conducted by the Customs Service• Lack of detailed guidelines for a mutually constructive relationship with local

communities

Sept. 26

2017 Ministerial Roundtable for Investors

• Legally required employment quota for foreign workers• Comments about the new administration’s employment policy • Suggestions to create an effective communication channel for Foreign-Invested

Companies and the government

Dec. 7

2017 Year-End Investors’

Night

• Suggestions to organize a meeting with American companies during the FTA amendment negotiation between Korea and the US • Penalties imposed on three German automobile companies for emissions violations• Suggestions to implement Ausbildung (work-study program) in Korea

Roundtable for foreign-invested companies and local governments

Date Title Agenda

Mar. 15

Roundtable for Foreign-Invested Companies in Seoul (First half-year)

• Identify grievances and seek ways to resolve them• Strengthen cooperation between Foreign-Invested Companies and

local governments to provide expeditious and appropriate resolution

Apr. 26

Grievance Resolution Roundtable with Local

Governments

• Seek ways to cooperate with local governments to streamline grievance resolution procedures

• Review current operation of aftercare services in each local government and find effective solutions together

Nov. 15

Roundtable for Foreign-Invested Companies in Chungcheongnamdo

• Identity grievances and seek ways to resolve them• Strengthen cooperation between Foreign-Invested Companies and


Nov. 26

Roundtable for Foreign-Invested Companies in

Seoul (Second half-year)

• Identify grievances and seek ways to resolve them• Strengthen cooperation between Foreign-Invested Companies and



12

Date Title Agenda

Feb. 21 Statutory Damages for

Trademark Infringement Roundtable

• Discuss harmful effects of counterfeit goods on consumers• Share Korean government’s views on trademark infringement

Feb. 23Tools for Managing Energy Efficiency

Roundtable

• Examine the amendment of the Regulation on Energy Efficiency Labeling and Standards • Discuss with foreign-invested companies regarding the

amendment bill

Mar. 24Roundtable for the

Fashion Industry• Discuss government policies related to consumer goods• Share grievances about non-tariff barriers

June 8Roundtable on

Improving Foreign-Investment Environment

• Discuss ways to improve Doing Business rankings• Discover projects to improve business and investment

environment

June 15Roundtable for the

Services Sector• Discuss government policies related to the services sector

July 11

Conference for the Improvement of

Chemicals Related System

• Introduce chemical product regulations relevant to foreign-invested companies• Listen to grievances raised within the industry and seek ways

to resolve them

Sept. 1Roundtable for the

Chamber of Commerce Representatives

• Listen to the grievances raised by foreign-invested companies from different economies and seek ways to resolve them • Introduce government policies related to foreign investment

Oct. 27Roundtable on

Improving Chemical Product Regulations

• Explain about tighter regulations on chemical products• Examine and develop ways to deal with more stringent

regulations

Roundtable for foreign-invested companies by industry

<Translations of legislation relevant to foreign investment>

(Unit: No. of translations)

2015-2016 2017 Total

Government bills 268 193 461

Member bills 866 470 1,336

Total 1,134 663 1,797

Regulatory Information Service for Foreign-Invested Companies

◦ The Regulatory Information Service is an online platform that allows foreign investors to express their

opinions on bills and legislations. By doing so, it functions as a communication channel facilitating

interaction between foreign investors, relevant government bodies as well as the National Assembly.


13

5. Ombudsman System Promotion Activities

◦ The Foreign Investment Ombudsman aims to promote Korea's advanced Foreign Investment

Ombudsman system and aftercare services by speaking at world renowned conferences and

supporting delegations from global investment promotion agencies.

◦ Korea’s Foreign Investment Ombudsman system was widely promoted through a presentation

made at the Select USA Investment Summit, a seminar held on Korea Day celebrated at the

Instanbul Chamber of Industry and a video conference meeting hosted by the WTO to improve

foreign-investment environment

◦ By participating as a guest speaker at various conferences and writing newspaper columns, the

Foreign Investment Ombudsman actively promoted Korea’s Ombudsman System and outstanding

investment environment.

Date Agency Agenda

Feb. 7The Philippine Board

of Investment• Consultation on implementing the Ombudsman

system in the Philippines

Apr. 3Ministry of Justice and Labor of the Republic of Paraguay

• Consultation on implementing the Ombudsman system in Paraguay

May 17Investment Coordinating Board,

Indonesia• Consultation on implementing the Ombudsman

system in Indonesia

May 22 Asian Development Bank Institute • Distribution of research materials on Korea’s Foreign

Investment Ombudsman System

May 25Ministry of Planning and

Investment, Vietnam • Consultation on implementing the Ombudsman

system in Vietnam

June 18SelectUSA Investment

Promotion Agency• Presentation on Korea’s Foreign Investment Aftercare

Service at the 2017 SelectUSA Investment Summit

Aug. 20-26

Invest India, National Investment Promotion and Facilitation Agency

• Consultation on implementing the Ombudsman system in India

Aug. 23Economic Development Strategy for High Level Officials, Pakistan

• Consultation on implementing the Ombudsman system in Pakistan

Aug. 29Capacity Building Program for Free

Economic Zones, Uzbekistan• Consultation on implementing the Ombudsman

system in Uzbekistan

Sept. 19Chamber of Industry in Istanbul, Turkey

• Consultation on implementing the Ombudsman system in Turkey

Sept. 20 Australian National University• Discussion on incorporating the Foreign Investment

Ombudsman System in the RCEP agreement

Sept. 23 World Trade Organization• Introduction to Korea’s Foreign Investment

Ombudsman System through video conference

Dec. 20Ministry of Planning and

Investment, Laos • Consultation on implementing the Ombudsman

system in Lao PDR

Dec. 31 Inter-American Development Bank • Consultation on establishing an aftercare service in Haiti


1. Global Foreign Direct Investment Trends

2. Foreign Direct Investment Trends in Korea

3. Economic Effects of Foreign-Invested Companies



16

1. Global Foreign Direct Investment (FDI) Trends

Global FDI volume and trends

◦ (Global FDI volume) According to the United Nations Conference on Trade and Development

(UNCTAD), global FDI in 2017 are forecast to increase to almost USD 1.8 trillion, up by 10 %

compared to the previous year. Over the medium term, global FDI flows are expected to resume its

growth momentum in 2017 and exceed USD 1.85 trillion by 2018, although still below the 2007

peak.

<FDI flows by economic group 2005-2016 and projections for 2017-2018>

(Unit: USD billion, %)

2005

3,000

2,000

1,000

2,500

1,500

500

02007 2010 20142009 2013 20172008 2012 20162006 2011 2015 2018

PROJECTIONS

* Source: World Investment Report 2017, UNCTAD (May 2017)

59% 1,032+5%

$1,746-2%

646-14%

68 +81%

● World total

● Developed economies

● Developing economies

● Translation ecomonies


17

Foreign Direct Investm

ent Trends 2017

◦ (Overall FDI trends) Projections for global FDI flows in 2017 are cautiously optimistic due to the

modest recovery of global investment. A combination of higher economic growth expectations in

major regions, a rebound in trade and a recovery in corporate profits could have a positive effect

on a small increase in FDI.

◦ However, policy uncertainty, geopolitical risks, as well as tax policy changes could hamper the FDI

recovery in 2017.

Regional FDI volume and trends

◦ (Overall) After significant growth in 2015, the global FDI inflows continued its sluggish recovery

in 2016, with notable differences between countries and regions.

◦ (FDI trends: Developed Economies) Following a surge in FDI in 2015, FDI flows to developed

economies continued to increase in 2016 by 5%, to some USD 1 trillion. Specifically, FDI flows to

Europe stood at about USD 533 billion while flows to North American stood at about USD 425

billion.

◦ FDI outflows from developed economies declined by 11% to USD 1 trillion. To be specific, while

foreign investment by North American and Japanese MNEs improved, FDI outflows from European

countries decreased by 23%.

◦ (FDI trends: Developing Economies in Asia) FDI inflows to developing Asia contracted by 15%

to USD 443 billion in comparison to the previous year. Combined with declines in flows to Hong

Kong, FDI inflows to the region experience a downward trend for the first time since 2012, with

South Asia being the only exception.

◦ In 2015, FDI outflows from developing Asia increased by 7% to USD 363 billion. However, most

regions showed diverging trends with regard to FDI inflows, except China, with Western Asia

reaching its low.

◦ (FDI trends: Latin America and the Caribbean) FDI flows into Latin America and the Caribbean

in 2016 declined by 14% to 142 billion, as economic recession, weak raw material prices and

exchange rate volatility persist, severely hampering FDI inflows into the region.

◦ FDI outflows from the region reached a record low since 2001, driven by large intercompany debt

flows corresponding to foreign subsidiaries reimbursing loans to their parent companies. Thus,

outflows from the region decreased by 98% to USD 1 billion.


18

◦ (FDI trends: Transition Economies) FDI inflows into transition economies reversed the trend

observed over the last two years and enjoyed a robust upswing of USD 68 billion. For example,

FDI inflows to Georgia increased almost two-fold, mainly due to an exceptional rise in flows to

Kazakhstan as well as a substantial increase in flows to the Russian Federation.

◦ With outward FDI from Kazakhstan reduced to USD 5 billion, FDI outflows from the transition

economies as a whole decreased by 22% to USD 25 billion.

<FDI inflows: top 20 host economies 2015-2016>

(Unit: USD billion)


Developed Economies ● 2016 ● 2015

Developing and transition economies ● 2016 ● 2015

United States of America (1)

India (10)

Ireland (2)

Netherlands (7)

Italy (17)

China (4)

Canada (11)

Spain (24)

Brazil (8)

Luxembourg (21)

United Kingdom (14)

Russian Federation (25)

Sweden (38)

Singapore (5)

France (9)

Hong Kong, China (3)

Belgium (15)

Angola (20)

Australia (16)

Mexico (13)

391348

25433

6271

3812

2847

206

108174

4819

3321

2733

1416

134136

5964

3442

2716

1912

9269

4444

2919

22188

(X) = 2015 ranking

19


ent Trends 2017

<2014-2016 FDI inflows by economic group>

(Unit: USD billion)

FDI inflows FDI outflows

2014 2015 2016 2014 2015 2016

Developed Economies 563 984 1,032 708 1,173 1,044

Developing Economies 704 752 646 473 389 383

Transition Economies 57 38 68 73 32 25

Total 1,324 1,774 1,746 1,253 1,594 1,452


Developed Economies ● 2016 ● 2015

Developing and transition economies ● 2016 ● 2015

<FDI outflows: top 20 home economies 2015-2016>

(Unit: USD billion)


United States of America (1)

Spain (11)

Italy (18)

Canada (9)

Republic of Korea (17)

Netherlands (3)

Luxembourg (10)

Belgium (14)

France (12)

Singapore (13)

China (5)

Germany (7)

Finland (186)

Hong Kong, China (8)

Russian Federation (15)

Japan (4)

Switzerland (6)

Taiwan Province of China (22)

Ireland (2)

Sweden (21)

299303

183128

6272

3593

2727

23-16

145129

45166

31104

2315

1815

174138

5744

3250

2431

1830

6667

4244

2724

2320

(X) = 2015 ranking


20

Major Global FDI Trends

◦ (Downward trend) After falling 2% to USD 1.74 trillion in 2016, prospects for global FDI remain

bumpy.

◦ (FDI trend dominated by major economic groups) FDI flows to G20, APEC and NAFTA

accounted for 30-60% of global FDI flows. Such selected groups and intragroup initiatives such

as the One Belt One Road Initiative are projected to fuel the global FDI landscape in the future.

◦ (Increased FDI flows to developed economies) A fall in FDI flows into developing economies

was partly offset by a modest rise of FDI inflows to developed economies and an exceptional

increase in flows to transition economies, thereby increasing the total of developed economies’

share in global FDI inflows to 59%.

<2015-2016 FDI inflows to major economic groups>

(Unit: USD billion, %)

* Source: World Investment Report 2017, UNCTAD (May, 2017)

Selected GroupsShare in

world FDI inflows

Inward FDI stockShare in

world inward FDI stock

Share of world GDPFDI inflows

1,147

888G20 66%

50%57%56%

78%78%

15,28213,992

926

913APEC 53%

51%54%52%

60%60%

14,39913,020

452

423NAFTA 26%

24%29%27%

28%28%

7,8216,841

488

259Commonwealth 28%

15%19%20%

14%14%

5,2085,086

277

258BRICS 16%

15%11%9%

22%23%

2,8152,362

51

56ACP 3%

3%3%3%

2%2%

719660

● 2016 ● 2015

21


ent Trends 2017

◦ (Decreased FDI flows to developing economies) Flows to developing economies contracted

by 14% to USD 646 billion in 2016, largely due to weak commodity prices and slowing economic

growth. Nevertheless, developing economies continue to account for half of the top 10 host

economies.

◦ (Overstatement of services FDI) Services sector accounted for about 65% of global FDI stock,

while manufacturing and the primary sector accounted for 26% and 6%, respectively. However,

the data demonstrates an exaggerated allocation of FDI stock to services industry by more than

a third, largely due to services-like activities including financial holding, procurement or logistics

hubs, distribution services, and research and development being classified as investment activities

taking place in services–related industries.

◦ (Decreased FDI due to decline in international production growth) International production

of MNEs continues to expand but at a slower rate, contributing to the continuous decline in the

rate of return on inward FDI of foreign subsidiaries in host economies from 6.2% in 2015 to 6%

in 2016.

◦ (Growing role of state-owned MNEs) Currently, about 1,500 state-owned MNEs own more

than 86,000 foreign subsidies. While state-owned MNEs account for about 1.5% of all MNEs,

they own close to 10% of all foreign subsidies which demonstrates their growing role in the

global economy.

Global FDI Prospects

◦ (Overall prospects) According to the UNCTAD, global FDI flows in 2017 are projected to increase

about 5% compared to the previous year due to higher economic growth expectations in major

regions, a rebound in trade volume and improved corporate profits.

◦ Over the medium term, global FDI flows are projected to resume growth in 2017 and continue

throughout 2018 to exceed the 2015 level of USD 1.8 trillion.

<Global economic growth rates 2016-2017 and prospects for 2018>

(Unit: %)

2016 2017 2018

IMF OECD IMF OECD IMF OECD

Growth rate

Total 3.1 2.9 3.6 3.3 3.7 3.7

Developed economies 1.6 1.7 2.2 2.4 2.0 2.4

Emerging economies 4.2 N/A 4.6 N/A 4.9 N/A

* Source: 2018 Prospects for FDI inflows to Korea, KOTRA (January 2018)


22

◦ ( FDI prospects for MNEs) According to the UNCTAD’s survey of 100 executives of MNEs on

their investment between 2017-19, 58% of executives polled plan to increase their foreign

investments during the period, 14% plan to maintain their existing level of investment, and 18%

are expected to reduce investment.

<Economic growth rates of major economies 2016-2017 and prospects for 2018>

(Unit: %)

2016 2017 2018

IMF OECD IMF OECD IMF OECD

US 1.6 1.5 2.2 2.2 2.3 2.5

EU 1.7 1.7 1.5 2.4 1.9 2.1

Japan 0.5 0.8 0.6 1.5 0.7 1.2

China 6.6 6.7 6.2 6.8 6.5 6.6

* Source: 2018 Prospects for FDI inflows to Korea, KOTRA (January 2018)

23


ent Trends 2017

2. Foreign Direct Investment Trends in Korea

FDI inflows and trends in Korea

◦ (Notification/Arrival Basis) On notification basis, foreign direct investment (FDI) flows into Korea

in 2017 increased by 7.7% year on year to USD 22.94 billion. As such, FDI flows into Korea

exceeded USD 20 billion for three consecutive years. On arrival basis, FDI inflows increased by

20.9% year on year to USD 12.82 billion.

* Notification (USD billion): 14.55 (2013) → 19.00 (2014) → 20.91 (2015) → 21.30 (2016) → 22.94 (2017)

* Arrival (USD billion): 9.88 (2013) → 12.08 (2014) → 16.50 (2015) → 10.60 (2016) → 12.82 (2017)

(Unit: USD 100 million)

2012 2013 2014 2015 2016 2017

Notification Basis 162.9 145.5 190.0 209.1 213.0 229.4

Arrival Basis 107.1 98.8 120.8 165.0 106.0 128.2

* Source: Foreign Direct Investment Trends 2017, MOTIE (January 2018)

<FDI flow to Korea 2012-2017>

(Unit: USD 100 million)

2012

300

200

100

250

150

50

020142013 201720162015 2018

Notified Trend

Arrived Trend


24

◦ (Investment trends by economy) Japans’s FDI flows to Korea resumed growth for the first time

in four years to USD 1.84 billion, an almost 1.5 times increase compared to 2016 (USD 1.25

billion), largely due to economic recovery. Moreover, the US increased its FDI flows to Korea by

21.5% compared to the previous year demonstrating a strong growth momentum, regardless of

rising interest rates and decrease in corporate tax. As for EU, its FDI flows into Korea reached USD

7.06 billion, retaining its record high of last year, due to the increase in services FDI. China, on the

other hand, saw a sizeable decrease in FDI flows to Korea by 60.5% owing to the government

policy geared towards strengthening control and inspection of FDI.

<FDI flows to Korea by economy 2016-2017>

▶ Notified(Unit: USD million, %)

2016 2017

Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 TotalGrowth

rate

US 549 1,264 1,260 803 3,876 365 2,081 458 1,805 4,710 21.5

Japan 161 531 194 359 1,246 407 412 867 156 1,842 47.8

EU 1,763 2,447 1,110 2,076 7,396 876 1,339 932 3,915 7,062 △4.5

China 375 332 955 386 2,049 163 315 130 201 809 △60.5

Others 1,393 1,739 976 2,626 6,732 2,040 1,593 1,604 3,283 8,519 26.5

Total 4,241 6,313 4,495 6,250 21,299 3,851 5,740 3,991 9,361 22,943 7.7

▶ Arrived(Unit: USD million, %)

2016 2017


rate

US 336 318 128 556 1,339 193 419 244 95 951 △29.0

Japan 173 252 166 222 812 246 336 497 155 1,234 52.0

EU 1,127 1,049 778 895 3,849 1,129 572 1,503 3,145 6,348 64.9

China 50 56 175 199 480 42 67 22 68 198 △58.6

Others 409 1,347 892 1,477 4,124 1,382 934 1,034 735 4,086 △0.9

Total 2,095 3,022 2,139 3,349 10,604 2,992 2,328 3,300 4,198 12,817 20.9

* Source: Foreign Direct Investment Trends 2017, MOTIE (January 2018)

25


ent Trends 2017

FDI trends in Korea

◦ (Overall assessment) In 2017, FDI flows to Korea increased by 7.7 % from the previous year to a

record high of USD 22.94 billion (notification basis), exceeding last year’s record high of USD 21.3

billion, thereby reaching over USD 20 billion for three consecutive years. Such robust growth trend

is projected to continue, ushering in a new era defined by “FDI inflows of over USD 20 billion.”

- On arrival basis, Korea attracted large volumes of FDI which increased by 20.9% to USD 12.82

billion. Underpinning such trend is Korea’s stable investment destination by successfully retaining

its highest credit rating so far, despite the challenging international contexts weighed down

by North Korea’s nuclear threats. Meanwhile, enhanced cooperation with large companies,

investment expansion in fourth industrial revolution, increased investment in services industry

such as real estate, wholesale and retail as well as Investor Relations, have all contributed to

Korea’s record high level of FDI in 2017.

◦ (By business type) In 2017, FDI among the manufacturing sector saw an overall increase while

services sector FDI remained stable.

- Manufacturing sector FDI rose by 41.2% to USD 7.25 billion (notification basis) compared to the

previous year and rose by 91.5% to USD 5.22 billion (arrival basis) thereby reaching USD 7 billion

for the first time in three years since recording USD 7.65 billion in 2014.

- Services sector FDI declined by 0.3% to USD 15.46 billion (notification basis) compared to the

previous year and fell by 2.8% to USD 7.52 billion (arrival basis). After reaching an all-time high

in 2016, services sectors FDI continued its growth momentum, exceeding USD 15 billion in 2017.

◦ (By investment type) Greenfield investments for new businesses and facilities and continued to

accelerate for four consecutive years. In 2017, it rose by 4.5% to reach its record high of USD 15.7

billion (notification basis).

- In comparison with M&A, greenfield investment can be more effective as it enables job creation,

value-chain establishment with MNEs and transfer of new technologies. Moreover, greenfield

investment can easily induce reinvestment.

- M&A investments registered a 15.4% increase to USD 7.24 billion (notification basis), and a

91.4% increase to USD 6.45 billion (arrival basis).


26

▶ Arrived(Unit: USD million, %)

2016 2017


rate

Manufacturing 675 527 883 641 2,726 501 938 962 2,821 5,221 91.5

Parts & Materials

325 467 491 553 1,837 357 531 799 1,197 2,885 57.1

Services 1,393 2,422 1,235 2,686 7,737 2,439 1,378 2,331 1,375 7,523 △2.8

Others 26 72 21 22 141 52 11 8 2 73 △48.2

Total 2,095 3,022 2,139 3,349 10,604 2,992 2,328 3,300 4,198 12,817 20.9

* Others include primary industry, electricity, gas, water and construction

** Source: Foreign Direct Investment Trends 2017, MOTIE (January 2018)

<FDI trends in Korea by industry 2016-2017>

▶ Notified(Unit: USD million, %)

2016 2017


rate

Manufacturing 1,264 1,588 1,466 815 5,133 971 1,860 1,328 3,087 7,247 41.2

Parts & Materials

729 1,210 778 600 3,317 525 844 1,173 1,302 3,843 15.9

Services 2,951 4,322 2,953 5,286 15,512 2,818 3,866 2,651 6,124 15,459 △0.3

Others 27 404 76 148 655 63 14 12 149 238 △63.7

Total 4,241 6,313 4,495 6,250 21,299 3,851 5,740 3,991 9,361 22,943 7.7

* Others include primary industry, electricity, gas, water and construction

27


ent Trends 2017

3. Economic Effects of Foreign-Invested Companies

◦ (Exports and Imports) In 2015, exports from foreign-invested companies in Korea recorded

11.04 trillion won, accounting for 21.0% of all exports from Korea. Imports reached 8.39 trillion

won, accounting for 19.2% of all imports to the country.

◦ (Employment) The share of employees working at foreign-invested companies in Korea decreased

slightly from the previous year (6.0%), accounting for 5.8% of all enterprises in Korea, while the

number of employees increased by 4,400 with the total number reaching 558,420 in 2015.

<Share of exports/imports by foreign-invested companies in Korea>

(Unit: billion won, %)

KoreaForeign-invested

companies

Share of Foreign-Invested Companies export/import

in Korea

2013 2014 2015 2013 2014 2015 2013 2014 2015

Export 560,559 572,544 525,700 113,233 103,058 110,397 20.2 18.0 21.0

Import 515,469 526,524 436,937 110,826 109,517 83,892 21.5 20.8 19.2

* Note: Korea’s export and import statistics for all domestic enterprises is based on the time of entry of goods through customs. By contrast, the statistics on foreign-invested companies’ exports and imports is based on the time of the companies’ accounting data process. Thus, statistical variance may occur.

** Source: The Survey Result of Actual States of Foreign-Invested Companies’ Management (Fiscal year 2015), Invest Korea (October 2017)

<Scale of foreign invested companies’ employment in Korea>

(Unit: number of employees, %)

KoreaForeign-invested

companies

Share of Foreign-Invested Companies

export/import in Korea

2013 2014 2015 2013 2014 2015 2013 2014 2015

All industries 8,736,678 9,233,783 9,627,931 515,464 554,027 558,420 5.9 6.0 5.8

Manufacturing 2,878,146 2,961,714 3,083,977 276,302 269,516 271,390 9.6 9.1 8.8

Non- manufacturing

5,491,974 5,898,262 6,165,205 208,695 247,727 240,443 3.8 4.2 3.9

Financial 385,658 391,319 391,487 30,467 36,784 46,587 7.9 9.4 11.9

* Financial industry is not included in non-manufacturing industries

** Source: The Survey Result of Actual States of Foreign-Invested Companies’ Management (Fiscal year 2015), Invest Korea (October 2017)


1. Introduction to the Foreign Investment Ombudsman System

2. Operation of the Grievance Resolution Body



30

1. Introduction to the Foreign Investment Ombudsman System

◦ (Purpose) The Foreign Investment Ombudsman system was introduced on Oct. 26, 1999, under

the Foreign Investment Promotion Act, for the purpose of supporting the affairs of grievance

settlement in foreign-invested companies operating in Korea. The Foreign Investment Ombudsman

is commissioned by the President on a recommendation of the Minister of Trade, Industry and

Energy, via the deliberation of the Foreign Investment Committee.1)

Legal Basis for Foreign Investment Ombudsman System

• Paragraph ①,②,⑩, Article 15-2 of the Foreign Investment Promotion Act

① For the purpose of supporting the affairs of grievance settlement in foreign-capital

invested companies, the Foreign Investment Ombudsman is commissioned from among

the persons of abundant learning and experience in foreign investment business.

② The Foreign Investment Ombudsman under paragraph ① (hereinafter referred to as

“Foreign Investment Ombudsman”) shall be commissioned by the President after the

recommendation of the Minister of Trade, Industry and Energy and deliberation thereon

by the Foreign Investment Committee.

⑩ The Korea Trade-Investment Promotion Agency shall establish a grievance committee under

its jurisdiction in order to support the business of the Foreign Investment Ombudsman.

• Paragraph ②, Article 21-4 of the Enforcement Decree of the Foreign Investment Promotion Act

② A Foreign Investment Ombudsman shall be the head of a grievance committee under

Article 15-2 (10) of the Act (hereinafter referred to as “grievance committee”).

1) As provided in Paragraph ①,②, Article 27-2 of the Foreign Investment Promotion Act, the Foreign Investment Committee is chaired by the Minister of Trade, Industry and Energy, and its members include ministers of relevant government departments and agencies; the Minister of Strategy and Finance, Minister of Foreign Affairs, Minister of Government Administration and Home Affairs, Minister of Environment, heads of central administrative organizations related to the committee agenda, mayors and provincial governors and the president of KOTRA.


31

The Foreign Investment O

mbudsm

an Systemand G

rievance Resolution BodyLegal Basis for the Function of the Office of Foreign Investment Ombudsman

• Paragraph ③-⑥, Article 15-2 of the Foreign Investment Promotion Act

③ If necessary for settling the grievances of foreign investors and foreign-capital invested

companies, the Foreign Investment Ombudsman may request that the head of a relevant

administrative agency and foreign-investment related agency (hereinafter referred to as

“relevant administrative agency, etc.”) render necessary cooperation in the following

subparagraphs. In such cases, the head of the relevant administrative agency, etc. in

receipt of such request shall comply therewith, unless extenuating circumstances exist:

1. Giving explanations to a relevant administrative agency, etc. or submitting data in

accordance with the standards prescribed by Presidential Decree;

2. Stating opinions of related employees, interested persons, etc.;

3. Requesting cooperation for site visits.

④ Where deemed necessary after resolving the grievances of foreign investors and foreign-

capital invested companies, the Foreign Investment Ombudsman may recommend that

the heads of relevant administrative agencies and public agencies take corrective measures

on related affairs.

⑤ Upon receipt of recommendations made under paragraph ④, the heads of relevant

administrative agencies and public agencies shall, in writing, notify the Foreign Investment

Ombudsman of the grievance-handling results within a period as prescribed by Presidential

Decree.

⑥ If the heads of relevant administrative agencies and public agencies fail to implement

recommendations to take corrective measures made under paragraph ④, the Foreign

Investment Ombudsman may request them to submit matters regarding such

recommendations to the Foreign Investment Committee as an agenda.

2) Paragraph ⑤ (Written Notification of Handling Results to Foreign Investment Ombudsman), ⑥ (Submit Unfulfilled Recommendation as Agenda for the Foreign Investment Committee) of Article 15-2, the Foreign Investment Promotion Act

◦ (Function) Foreign Investment Ombudsman and his grievance resolution body collect and analyze

information concerning the problems foreign companies experience, request the cooperation of

and recommend the implementation thereof to relevant administrative agencies, propose new

policies to improve the foreign investment promotion system and carry out other necessary tasks

to assist foreign-invested companies in solving their grievances.

◦ In particular, the Foreign Investment Promotion Act, partly revised on Dec. 11, 20122), newly

included some provisions that strengthened the Ombudsman's authorities to provide prompt

support and improve regulations regarding grievances faced by foreign investors more effectively.


32

•Paragraph ②-⑥, Article 21-3 of the Foreign Investment Promotion Act

② A foreign investment ombudsman shall perform the following duties:

1. Investigation and handling of complaints of foreign investors and foreign-capital

invested companies;

2. Preparation of policy measures for improving a foreign investment system and

recommendation on the implementation thereof to the relevant administrative agencies

and public agencies;

3. Other necessary matters for handling complaints of foreign investors and foreign-

capital invested companies

③ “Standards prescribed by Presidential Decree” in Article 15-2 (3) 1 of the Act means any

of the following:

1. Where it is necessary for investigating whether a foreign investment-related system

complies with international practices or standards;

2. Where it is necessary for tackling difficulties experienced by foreign-capital invested

companies in their management or improving the related systems;

3. Where it is necessary for improving the living conditions of foreign investors and

foreigners working for foreign-capital invested companies

④ A recommendation for corrective measures under Article 15-2 (4) of the Act (hereafter

referred to as “recommendation for corrective measures” in this Article) shall be made in

a document specifying the following matters:

1. Current status and problems of related Acts and subordinate statutes, institutions and

policies;

2. Details of recommendation for corrective measures;

3. Matters recognized by foreign investment ombudsman as being necessary, such as the

reply deadline for related administrative agencies and public agencies.

33


mbudsm

an Systemand G

rievance Resolution Body

2. Operation of the Grievance Resolution Body

◦ (Organization) The grievance settlement body, headed by Foreign Investment Ombudsman, is

currently operated by Investment Aftercare Division at Korea Trade-Investment Promotion Agency

(KOTRA) and supports the work of Foreign Investment Ombudsman.

◦ (Grievance Resolution Process) Home Doctors ① receive foreign investors’or foreign-invested

companies’grievances via on-site visits, online or email, ② examine the grievances and seek

resolutions by contacting relevant organizations, if there are any, ③ keep and manage matters

related to the grievance resolution in the SCRM, KOTRA's customer management system, and

notify the filing company of the results.

Legal Basis for Operation of the Grievance Settlement Body

• Paragraph ②,③ and ⑤-⑧, Article 21-4 of the Enforcement Decree of the Foreign Investment Promotion Act

② A foreign investment ombudsman shall be the head of the grievance committee under

Article 15-2 (10) of the Act (hereinafter referred to as “grievance committee”).

③ The head of the grievance committee may request cooperation from a relevant

administrative agency or a foreign-investment related agency to settle complaints of

foreign investors and foreign-capital invested companies. In such cases, the agency upon

receipt of a request for cooperation shall present the results of resolving complaints or its

opinion on such matters within seven days after receipt of the request.

⑤ In order to efficiently settle the complaints of foreign investors and foreign-capital invested

companies, the head of the grievance committee may designate the staff in exclusive

charge of settling complaints for each region or foreign-capital invested company, and

may administer such staff.

⑥ Where an employee belonging to the grievance committee hears opinions or visits a site

under Article 15-2 (3) of the Act in order to support the duties of the foreign investment

ombudsman, he/she shall carry a certificate of identification indicating his/her authority

and produce it to interested persons.

⑦ The head of the grievance committee shall analyze the results of settling complaints raised

by foreign-capital invested companies on a quarterly basis and report them to the Minister

of Trade, Industry and Energy within one month after expiration of each quarter.

⑧ Except as otherwise expressly provided for in paragraphs (2), (3), (5), (6) and (7), matters

necessary for the organization and operation of the grievance committee shall be

determined by the president of the Korea Trade-Investment Promotion Agency.


34


The 6th Foreign Investment Ombudsman Dr. Jeffrey I. Kim

• Foreign Investment Ombudsman (April 2015 to date)

• Professor at Sungkyunkwan University, Korea (1988-2014)

• Former President of Incheon Development Institute

• Former Advisor to the Minister of Finance

Education

- 1981: Ph. D. in Economics, The University of Chicago, US

- 1976: M.A. in Economics, Kent State University, US

- 1973: B.A. in Economics, Sungkyunkwan University, Korea

Career

- 1981 to 1982: Assistant Professor of Economics, University of Colorado, Boulder

- 1982 to 1984: Researcher, Korea Development Institute

- 1984 to 1987: Advisor to the Minister of Finance

- 1996 to 1997: President, Incheon Development Institute

- 1988 to 2014: Professor, Sungkyunkwan University

- October 2011 to October 2013: Chairman of Korea National Oil Corporation Board

of Directors

- November 2013 to March 2015: Chairman, Korea Financial Investors Protection

Foundation

- April 2015 to date: Foreign Investment Ombudsman

Other Activities

- 2013: President, The Korean Economic Association

- 2010: President, Korea International Economic Association

- June 2009 to May 2010: President, Korea International Finance Association

- 2003 to 2004: President, Korean Association of Trade and Industry Studies

- 2002 to 2003: President, Korean Association of Futures and Options

35


mbudsm

an Systemand G

rievance Resolution Body

FAQ

Q Who can use the Foreign Investment Ombudsman system?

A Foreign investors and all companies registered as foreign- invested companies in Korea may use

the system.

Q How can a company file its grievance with the Office of Foreign Investment Ombudsman?

A A foreign-invested company may file its grievance through any convenient means, including

e-mail, the Ombudsman's website( Q&A), phone, fax, Twitter and in person. Companies may

also receive on-site assistance from consultants of the Office of Foreign Investment Ombudsman.

Q How much does grievance resolution cost?

A All steps in the grievance resolution process, including consultation and assistance, are provided

to foreign-invested companies at no charge.

Q In what areas can grievance resolution be applied?

A We provide resolution for grievances in all fields, ranging from corporate management to the

living environment of foreign investors. Exceptions include private disputes between companies,

the sales of individual companies, requests that contradict global standards and matters that

unfairly influence other companies or industries.

Q Will a consultation with the Ombudsman’s Office be kept confidential?

A Other than for the purpose of resolving the problem, all grievances filed would be kept strictly

confidential and not revealed to any third party pursuant to paragraph 8, 9, Article 15-2 of the

Foreign Investment Promotion Act.

Q Could a filing company be at a disadvantage with government authorities or local government agencies for filing a grievance?

A Absolutely not. The Ombudsman's Office seeks to resolve grievances from the foreign investor's

point of view. Also, cases involving government agencies can be handled anonymously at the

request of the filing company or if deemed necessary.

Q How can a filing company check the status of the grievance resolution process?

A A Home Doctor will keep the company informed through every step of the resolution process,

and receive other inquiries at any time.


1. Grievance Resolution Activities and Achievements


3. Communication Activities for Foreign-Invested Companies




38

1. Grievance Resolution Activities and Achievements

1) Prevention and resolution of foreign-invested companies’ grievances

◦ Home Doctors assigned to each company makes on-site visits to identify problems faced by foreign-

invested companies and facilitate corrective action accordingly. To this end, the Office of Foreign

Investment Ombudsman provides a one-stop service that includes all types of grievance resolution

services from resolving problems with the help of Home Doctors, to seeking administrative

intervention which requires collaboration with relevant government bodies, to seeking legislative

improvement which entails changes to laws.

<Grievance resolution by year 2008-2017>


Field of Grievance Resolution Type*

No. of CasesGrowth Rate

(%)Legislative

ImprovementAdministrative Intervention


2008 353 △4.5 20 64 269

2009 365 3.4 24 62 279

2010 385 5.4 13 38 334

2011 403 4.6 13 63 327

2012 348 △13.6 6 104 238

2013 383 10.0 5 98 280

2014 437 14.0 9 112 316

2015 462 5.7 14 112 336

2016 409 △11.5 16 106 287

2017 289 △29.3 12 90 187

Total 3,834 - 132 849 2,853

* “Legislative improvement” refers to regulatory reforms and/or change in laws; “Administrative intervention” refers to steps taken to make improvements within an existing legal framework; “Home Doctor resolution” refers to problems solved internally by Home Doctors, often through consultations.

** The number of resolution cases has slightly decreased due to a decline in the number of Home Doctors (10 → 6.5) caused by organizational restructuring and personnel transfers in 2017


39

Foreign Investment A

ftercarePerform

ance 2017

◦ In 2017, the Office of the Foreign Investment Ombudsman handled a total of 289 grievances

from foreign-invested companies. By resolution type, 12 cases were resolved through legislative

improvements, 90 were resolved through administrative intervention and 187 were resolved

through the help of Home Doctors.

◦ According to the analysis of the 289 cases resolved in 2017, those related to environmental issues

topped the ranking with 38 cases (13.1%), followed by others (35 cases, 12.1%), visa/immigration

(20 cases, 6.9%), investment incentives (29 cases, 10.0%), standards/certification/inspection (20

cases, 6.9%), labor/human resources (20 cases, 6.9%), investment system/procedure grievances

(19 cases, 6.6 %), customs/trade (18 cases, 6.2%), intellectual property rights (17 cases, 5.9 %),

plant sites (16 cases, 5.5%), taxation (11 cases, 3.8%). Others include finance/foreign exchange

(10 cases, 3.5%), insurance and welfare (7 cases, 2.4 %), construction/land (4 cases, 1.4%), road/

transportation (4 cases, 1.4%), sales/distribution/advertisement (4 cases, 1.4%), labor disputes (2

cases, 0.7 %), R&D (1 case, 0.3%), civil disputes (1 case, 0.3%), living environment (1 case, 0.3

%), and electricity/water supply (1 case, 0.3%)

<Different types of grievances 2017>

Construction & land 1%Road & transportation 1%

Labor disputes 1%

Sales, distribution & advertisement 1%Insurance & welfare 2%Finance & foreign exchange 3%Taxation 4%

Electricity & water supplies 0%Living environment 0%

Civil disputes 0%R&D 0%

Visa & immigration

11%

Others 12%

Environment 13%

Investment incentives

10%Labor relations

& HR

7%

Standards,certification & inspection

7%

Investment procedure

7%

Customs & trade 6%

Plant site 6%

Intellectual property 6%

Legislative Improvement

4%


70%Administrative Intervention

26%

2016

Legislative Improvement

4%


65% Administrative Intervention

31%

2017

<Grievance settlement by resolution type 2016-2017>


40

◦ A total of 38 cases of grievances related to environmental issues were resolved in 2017, accounting

for the largest share (13.1%) of grievances handled this year. Most of the problems were related

to environmental issues including legal problems with registration and evaluation of chemical

products, improvement of undistributed lands, and legislation changes regarding protection and

control of wildlife.

◦ The number of grievances related to environmental issues has been growing steadily in the last

five years. This growth continued throughout this year, which saw a sizeable increase from 29

cases in 2016 to 38 cases in 2017. The most frequently raised grievance was related to amending

the Chemicals Control Act, recording 13 cases out of 38.

<Annual record of different types of grievances 2013-2017>


2013 2014 2015 20162017 Growth rate

(’17/’16)Settled Ratio

R&D 0 0 0 3 1 0.3 △66.7

Construction & land 17 9 10 13 5 1.7 △61.5

Plant site 15 14 12 9 16 5.5 77.8

Customs & trade 23 37 37 17 19 6.6 11.8

Finance & foreign exchange 4 11 11 16 10 3.5 △37.5

Standards, certification & inspection 33 26 41 24 20 6.9 △16.7

Others 57 89 78 61 34 11.8 △44.3

Labor relations & HR 30 28 24 27 20 6.9 △25.9

Labor disputes 3 2 0 1 2 0.7 100.0

Road & transportation - 1 2 2 4 1.4 100.0

Civil disputes 1 7 6 7 1 0.3 △85.7

Insurance & welfare - 1 5 2 7 2.4 250.0

Visa & immigration 33 46 37 34 31 10.7 △8.8

Living environment 6 2 6 3 1 0.3 △66.7

Sales, distribution & advertisement 10 12 11 8 4 1.4 △50.0

Electricity & water supplies 1 1 3 2 1 0.3 △50.0

Taxation 40 30 52 28 11 3.8 △60.7

Intellectual property 0 0 0 19 17 5.9 △10.5

Unfair treatment 1 1 4 4 0 0.0 △100.0

Investment incentives 53 56 51 58 29 10.0 △50.0

Investment procedure 48 55 58 42 18 6.2 △57.1

Environment 8 9 14 29 38 13.1 31.0

Total 383 437 462 409 289 100.0 △29.3

41


ftercarePerform

ance 2017

◦ The number of on-site visits to foreign-invested companies and foreign chambers of commerce

in Korea and walk-in consultation at the Ombudsman’s office amounted to 586 in 2017. As the

troubleshooter and main contact point for foreign-invested companies, the Foreign Investment

Ombudsman and Home Doctors endeavor to build mutually constructive relationship with foreign

investors.

<Foreign Investment Ombudsman’s grievance prevention activities 2017>

No. Activities

1 Visit to the Australia Embassy (Jan. 12)

2 Meeting with ECCK (Feb. 8)

3 Meeting with Yuanta Savings Bank (Feb. 15)

4 Meeting with the new Minister of the Embassy of the People’s Republic of China (Feb. 16)

5 Roundtable on statutory damages for trademark infringement (Feb. 21)

6 Meeting with the Investment Promotion Division in the Incheon Metropolitan City (Feb. 22)

7 Roundtable on tools for managing energy efficiency (Feb. 23)

8 Walk-in consultation with Schindler (Feb. 24)

9 Roundtable for Foreign-Invested Companies in Seoul (Mar. 15)

10 Roundtable for the fashion industry (Mar. 24)

11 Meeting with the Ambassador of the Republic of Paraguay to Korea (Apr. 3)

12 Meeting with the Honorary Ambassador of Foreign Investment Promotion for Korea (Apr. 17)

13 Grievance Meeting with Local Governments (Apr. 26)

14Business trip to Ulsan City to cooperate with the local government on grievance resolution for SBK (Apr. 27)

15 Business trip to 3M Korea’s factory in Naju (May 24)

16 Roundtable to improve foreign-investment environment (June 8)

17 Monthly meeting with MOTIE on grievance resolution (June 9)

18 Consultation with Apple (June 19)

19 Meeting with the German Mechanical Engineering Industry Association (VDMA) (June 30)

20 Consultation with the executive of Ikea regarding grievances (July 10)

21 French Korean Chamber of Commerce and Industry Annual Meeting (July 6)

22 Roundtable on chemical product regulations (July 11)

23 Visit to the France Embassy (July 14)

24 Meeting with the executive of Rand Corporation (July 10)

25 Visit to the Turkey Embassy (Aug. 30)

26 Roundtable for chambers of commerce in Korea (Sept. 1)

27 Ministerial Roundtable for Investors (Sept. 26)

28 Consultation with the executive of Mercedes Benz Korea regarding grievances (Nov. 3)


42

No. Activities

29 The Foreign-Invested Company Day (Nov. 7)

30Consultation with the European Chamber of Commerce in Korea (ECCK) regarding grievances (Nov. 14)

31 Roundtable for Foreign-Invested Companies in Chungcheongnamdo (Nov. 15)

32 The ECCK 5th Year Anniversary Reception (Nov. 28)

33 2017 Ministerial Year-End Investors’ Night (Dec. 7)

34 Consultation with Hewlett Packard regarding grievances (Dec. 14)

35 Consultation with Vice President of Areva Korea regarding grievances (Dec. 20)

2) Reinvestment attraction activities

◦ FDI can be divided into new investment and reinvestment by foreign-invested companies already

operating in Korea. The portion of reinvestment out of the total FDI flows into Korea (notification

basis) in 2017 contracted by 18.7% to 36.1% from 54.8% in 2016.

◦ Thanks to the significant increase in new investment this year in comparison to 2016 and continuous

rise in reinvestment in commodity goods, we are optimistic about reinvestment prospects in 2018.

<FDI by investment type 2016-17>

(Unit: USD million)

2016 2017 Comparison(’17/’16)Amount Ratio (%) Amount Ratio (%)

Notification basis

New investment

8,013 37.6 12,568 54.8 1.57

Reinvestment 11,674 54.8 8,271 36.1 0.71

Total (*) 21,299 100.0 22,943 100.0 1.08

Actual investment

New investment

2,675 25.2 5,228 40.8 1.95

Reinvestment 6,831 64.4 5,949 46.4 0.87

Total (*) 10,604 100.0 12,817 100.0 1.21

* Note: Long-term loan is included in total (*).

** Source: Foreign Direct Investment Trends 2017, MOTIE (January 2018)

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◦ Reinvestment has accounted for nearly half of Korea’s total FDI for the past 17 years. This has

raised the significance of reinvestment attraction which includes providing investment aftercare

services to existing foreign-invested companies.

◦ Aftercare services for existing foreign-invested companies in Korea has emerged as a core strategy

of inducing FDI as it creates a virtuous cycle of resolving grievances aired by foreign-invested

companies. This results in improving investor satisfaction, which in turn, draws reinvestment from

existing companies as well as new investment from potential investors.

◦ The Foreign Investment Ombudsman and the team have made efforts to improve Korea’s

investment environment by holding various events such as meetings with executives of foreign-

invested companies and other regular meetings with foreign-investors thereby successfully

inducing reinvestment of USD 761 million(9.2%) in 2017 out of the total USD 8.271 billion

notified for reinvestment.

<Reinvestment in Korea 2001-2017>

(Unit: USD million, %)

Year Total FDI Reinvestment

Amount Ratio

2001 11,288 4,332 38.4

2002 9,095 3,222 35.4

2003 6,471 3,936 60.8

2004 12,796 5,556 43.4

2005 11,566 7,716 66.7

2006 11,247 6,516 57.9

2007 10,516 4,921 46.8

2008 11,712 6,265 53.5

2009 11,484 6,591 57.4

2010 13,073 6,869 52.5

2011 13,673 6,939 50.7

2012 16,286 7,411 45.5

2013 14,548 6,530 44.9

2014 19,003 9,501 50.0

2015 20,910 8,687 41.5

2016 21,299 11,674 54.8

2017 22,943 8,271 36.1

* Source: Investment Consulting Center, KOTRA


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<Reinvestment through grievance resolution 2017>

Company(Parent Company’s

Location)

Business Type

Notified Reinvestment

(Date of notification)

Grievances

Lotte Versalis Elastomers

(Italy)


USD 34,916,000(Jan. 16)

Local government’s request to submit investment memorandum

FFG DMC (Taiwan)

Machines/Equipments

USD 13,329,568(Jan. 13)

The company’s credit rating based on the parent company

Otis Elevator (UK)

Machines/Equipments

USD 14,000,000(June 23)

Regulation to assign a set number of elevators to each elevator engineer

Sumitomo Seika Polymers Korea

(Japan)


USD 32,347,765(June 29)

Tax reduction and reinvestment application

Dongwoo Fine-chem (Japan)


USD 40,000,000(Sept. 27)

Applying for changes to the individual-type Foreign Investment Zone due to reinvestment

Umicore Materials (Luxembourg)


USD 35,000,000(Sept. 29)

Request for support regarding delays in installing power grids

Toray Battery Separator Film Korea

(Japan)


USD 110,000,000(Sept. 29)

Legislation proposal on conducting external audit of LLCs

Cotem (China)


USD 15,500,000(Nov. 23)

Reinvestment incentives

Ikea Korea(Sweden)

Wholesale/Retail

(Distribution)

USD 259,000,000(Nov. 29)

Request for detailed guidelines for a mutually constructive relationship with local communities

Albermarle Chemicals Korea

(Netherlands)


USD 10,000,000(Dec. 18)

Failure to use cash grants for employment or educational training

3) Aftercare visits to parent companies

◦ With a view to increasing the efficiency of grievance resolution and attracting reinvestment,

the Foreign Investment Ombudsman has been visiting the parent companies of foreign-

invested companies operating in Korea more than twice a year since 2005. During the visits, the

Ombudsman listens to the grievances and opinions regarding investment in Korea and promotes

Korea’s investment environment as well as the Foreign Investment Ombudsman system.

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◦ In particular, the Ombudsman selected hidden champions from the North American region that

have experienced successful grievance resolution and are therefore expected to expand their

business in Korea. He visited their parent companies twice this year to listen to their grievances

and opinions regarding investment in Korea, and held discussions on implementing reinvestment

projects.

<Visits to parent companies of Foreign-Invested Companies 2017>

Location (Period)

Company/ organization

Agenda

US(Mar. 12-19,

2017)

3M• Grievances about product recall of anti-microbial filter in July 2016• Introduce policies pursued by the Ministry of Environment

Stratasys• Request for deregulation regarding authorization procedures for

3D printers • Consultation about reinvestment plans

Sabre Corp.• Consultation about joint venture with Korean companies and R&D

investment • Promote Korea’s investment environment

AT&T • Consultation about M&A investment and direct investment by

companies related to mobile security softwares

Topgolf• Consultation about joint venture with Korean companies • Grievances regarding the difficulty of discovering businesses in

Korea

Legoland Carlsbad

• Request to complete excavation taking place in Chuncheon • Request for reduced taxation for imported capital goods for the

construction of amusement parks

US/Canada(June 12-20,

2017)

EMP Belstar• Listen to presentations on business strategies and investment

analysis• Promote Korea’s investment environment

Momentive• Request for support in land/site search to expand R&D center in

Korea • Promote job fairs for foreign-invested companies

iOTTie• Introduce government support related to logistics • Promote KOTRA’s joint logistics projects

HOOPP• Introduce Korea’s aftercare services for foreign-invested companies• Promote Korea’s investment environment

Hydrogenics• Promote Korea’s hydrogen fuel market and its potential• Discussion on resuming projects with Kolon, currently suspended

due to regulations

National Geographic

• Introduce Korea’s aftercare services for foreign-invested companies• Introduce KOTRA Invest Korea Plaza and how to become a resident


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◦ The Foreign Investment Ombudsman's visit to the parent companies of foreign-invested companies

enables cooperation between KOTRA Business Centers, foreign-invested companies in Korea,

their parent companies, as well as the Foreign Investment Ombudsman to improve aftercare

services for foreign-invested companies and increase the efficiency of grievance resolution.

Moving forward, the Ombudsman will step up efforts to establish an investment environment

commensurate with global standards by continuing to address grievances, visit parent companies

and expand communication channels for companies at home and abroad.

▲ 3M (Mar. 13, 2017)ParticipantsOmar A. Vargas(Global Head of Government Affairs)

▲Momentive (Mar. 13, 2017)ParticipantsErick Asmussen (CFO)

▲ AT&T (Mar. 15, 2017)ParticipantsStella Park (Director of Business Solutions)

▲ Hydrogenics (June 15, 2017)ParticipantsWido Weskbroek (Vice President)Jin Kim (P.M.)

<Visits to parent companies of Foreign-Invested Companies 2017>

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4) Quarterly report on grievance resolution

◦ In accordance with paragraph 7, Article 21-4 of the Enforcement Decree of the Foreign Investment

Promotion Act, the Foreign Investment Ombudsman and the Investment Aftercare Division publish

the “Report on Grievance Resolution for Foreign-Invested Companies” every quarter by compiling

cases of grievances resolved by the Foreign Investment Ombudsman and the Investment Aftercare

Division, as well as local governments.

* Paragraph ⑦, Article 21-4 of the Enforcement Decree of the Foreign Investment Promotion Act: The head of the grievance committee shall analyze the results of settling complaints raised by foreign-capital invested companies on a quarterly basis and report them to the Minister of Trade, Industry and Energy within one month of the expiration of each quarter.

◦ The “Report on Grievance Resolution for Foreign-Invested Companies” is composed of grievance

resolution, reinvestment attraction and grievance prevention activities of the Grievance Settlement

Body every quarter as well as local governments’ aftercare services for foreign companies.

◦ In addition, the report introduces a variety of projects, such as the regional on-campus recruiting

expo and meetings with foreign-invested companies held each quarter, and the promotion activities

of the Office of Foreign Investment Ombudsman. These activities include the arrangement of

meetings with foreign delegations and public relations work at home and abroad.

◦ By distributing the quarterly report to local governments and major institutions, the Investment

Aftercare Division shared the grievance resolution cases of the Grievance Resolution Body and

local governments, promoted the work of Foreign Investment Ombudsman and helped establish

an effective aftercare system.

* The report provides details on foreign-invested companies’ grievances and the process of grievance handling, so it is restrictively distributed and managed as confidential material.

◦ The government has conducted the Joint Assessment on Local Governments since 2010 for

proactive and efficient grievance resolution by local governments, and it requested that the Office

of Foreign Investment Ombudsman verify an index of FDI promotion by local governments for a

fair evaluation.

◦ At the government’s request, the Foreign Investment Ombudsman and the Investment Aftercare

Division have held discussions for improving the assessment index with MOTIE and relevant

agencies, aiming to establish a more efficient aftercare and monitoring system.


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Legal Basis for Grievance Resolution Activities by Local Governments

The Office of the Foreign Investment Ombudsman and the Investment Aftercare Division publishes the “Report on Grievance Resolution for Foreign-Invested Companies” every quarter by compiling cases of foreign company grievances or suggestions that were received, raised and resolved by each local government within ten days of the end of every quarter to strengthen cooperation with 17 local governments, including Sejong Special Autonomous City, providing aftercare services to global companies. (Paragraph ②, Article 22 of the Enforcement Decree of the Foreign Investment Promotion Act)

Legal Basis for the Function of a Local Government's Foreign Investment Promotion Office

•Paragraph ①, Article 16 of the Foreign Investment Promotion Act

① Every central administrative agency, Special Metropolitan City, Metropolitan City, Do,

Special Self-Governing Province and Si/Gun/Gu (referring to an autonomous Gu) may each

designate its office in charge of foreign investment as a foreign investment promotion office,

or install a foreign investment promotion office, for the purpose of efficiently rendering

support for foreign investment by encouraging the smooth handling of civil petitions

concerning permission, authorization, license, approval, designation, cancellation, report,

recommendation, consultation, etc. related to foreign investment (hereinafter referred

to as “permission, etc.”), by supporting swift handling of grievances of foreign investors

and foreign-capital invested companies, and by establishing a cooperation system among

related institutions.

• Paragraph ②, Article 16 of the Foreign Investment Promotion Act

② When a foreign investment promotion official receives a request for cooperation by a

relevant administrative agency, the Investment Support Center or grievance committee

with respect to civil petitions concerning foreign investment, he/she shall cooperate in a

positive manner.

• Paragraph ②, Article 22 of the Enforcement Decree of the Foreign Investment Promotion Act

② Every foreign investment promotion official shall, upon receiving a request from the head

of a grievance committee to submit the current status of the receipt, examination and

resolution of difficulties provided for in paragraph ①-4, cooperate with the head of the

grievance committee by submitting it within ten days after the end of every quarter.

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※ The Office of Foreign Investment Ombudsman is committed to creating jobs by helping

foreign-invested companies find qualified workers, one of the most common grievances

raised by foreign-invested companies. Furthermore, we contribute to raising awareness

about foreign-invested companies and creating jobs in local communities.

<Regional On-Campus Recruiting Expo for Foreign-Invested Companies>

Date Region (Venue) Participating Companies Participants

Mar. 30Jeonbuk

(Chonbuk National Univ.)

• Total of 7 companies (Schneider Electric, Adecco Korea, Standard Chartered, Alps Electric Korea, Emerson Electric, SGS, Boston Scientific)

410

Apr. 13Gyeongbuk

(Keimyung Univ.)

• Total of 7 companies (TE Connectivity Korea, Zara Retail Korea, SGS, FRL Korea, Nifco Korea, Dassault Systemes, Adecco Korea)

420

May 31Chungbuk

(Chungbuk Univ.)

• Total of 7 companies(Borgwarner Transmission Systems Korea, UNIQLO, Nexans Korea, Edwards Korea, SGS, Nifco Korea, Adecco Korea)

340

◦ The regional on-campus recruiting expos were joined by global leading enterprises from different

industries located in different regions. The recruiting event provided employment information as

well as one-on-one job consultation for the participants. It not only helped HR personnels from

foreign-invested companies find qualified workers, but also allowed the participants to gain useful

and practical information from the participating companies.

1) Regional On-Campus Recruiting Expo for foreign-invested companies

◦ The regional campus recruiting expo aims to address labor shortage problems faced by foreign-

invested companies in different regions and offer job seekers with information about job

opportunities in global companies. Ultimately, it strives to raise public awareness of foreign-

invested companies and redress the mismatch between job openings and job seekers, between

metropolitan areas and provincial areas in terms of information accessibility.

◦ The recruiting event began in 2011 and since then has been organized every year to provide

students in different regions with information about job opportunities in foreign-invested

companies. This year, a total of three job expos were held in separate regions.

◦ In 2017, an average of 7 foreign companies participated in each event with the total number of

participants amounting to 1,170.


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◦ The expos were co-organized by the Investment Aftercare Division and local governments, from

the preparation of the event to the delivery of aftercare services, resulting in successful and

well-attended recruiting event. With a view to providing effective aftercare services for foreign-

invested companies, the Ombudsman’s Office has made great advances in promoting cooperation

between central and local government to redress grievances aired by foreign companies located

in various regions in the country.

* KOTRA took charge of the overall management of the expos, including liasing with foreign companies, while the local governments promoted the event to the universities in each region.

◦ As part of the Government 3.0 project, recruitment presentations made by participating companies

were filmed on the spot and uploaded on to the Ombudsman’s website to provide information for

those who were unable to participate.

◦ Compared to foreign companies in the metropolitan area, many multinational enterprises in other

provinces have difficulty finding qualified employees due to geographical isolation. By expanding

recruiting expos, the Foreign Investment Ombudsman and the Investment Aftercare Division will

endeavor to resolve the skilled-labor shortage of foreign-invested companies and seek to create

a virtuous cycle where more skilled workers lead to further job creation, to strengthen the local

economy and attract more reinvestment into Korea.

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<Regional On-Campus Recruiting Expo for foreign-invested companies 2017>

▲ Jeonbuk Province (Mar. 30, Chonbuk National Univ.)

▲ Jeonbuk Province (Mar. 30, Chonbuk National Univ.)

▲ Gyeongbuk Province (Apr. 13, Keimyung Univ.)

▲ Gyeongbuk Province (Apr. 13, Keimyung Univ.)

▲ Chungbuk Province (May 31, Chungbuk Univ.)

▲ Chungbuk Province (May 31, Chungbuk Univ.)


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2) World Bank Doing Business Report

◦ The World Bank has been publishing Doing Business reports every October for the last 15 years,

the result of measuring business regulation in 190 countries worldwide. It plays a critical role in

determining FDI decisions of foreign investors.

◦ With a view to improving performance and securing Korea’s position in the top rankings, research

projects have been carried out on each of the 10 areas of the life of a business. Moreover, we

held an in-depth performance benchmarking consultation with professionals in Doing Business

indicators to identify the steps needed to achieve improvement.

<Economy rankings 2017>

Rank 1 2 3 4 5 6 7

EconomyNew

ZealandSingapore Denmark Korea Hong Kong US UK

Scores 86.55 84.57 84.06 83.92 83.44 82.54 82.22

2016 Rank 1 2 3 5 4 8 7

* Source: Doing Business 2018, World Bank Group (October, 2017)

<Ways to improve Doing Business rankings>

Date Activity Agenda

May 18 Meeting with advisors from the

Australia Indonesia Partnership for Economic Governance (AIPEG)

• Performance benchmarking consultation • Share strategies to improve performance on

the Doing Business indicators

June 8Roundtable with Doing Business

respondents for the improvement of investment environment

• Invite respondents designated by the World Bank to discuss improvement strategies

• Discuss Korea’s weaknesses and ways for improvement

◦ A comprehensive analysis of Korea’s relatively weak areas such as paying taxes (24th), dealing

with construction permits(28th), trading across borders (33rd), registering property (39th), getting

credit (55th) is currently underway to identify the underlying factors that might explain such

weakness. In addition, measures will be taken to improve on areas that needs the most attention

and recommendations will be submitted to the relevant government bodies accordingly.

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3. Communication Activities for Foreign-Invested Companies

1) C-level Roundtable for Foreign-Invested Companies

※ The Office of Foreign Investment Ombudsman aims to build an efficient grievance resolution

procedure and create a promising avenue for expressing grievances and achieving remedies

by facilitating interaction between foreign-invested companies and relevant government

bodies through roundtable discussions that provides appropriate grievance resolution

services for foreign investors.

◦ The Office of Foreign Investment Ombudsman arranged roundtable discussions with foreign

investors to acknowledge foreign-invested companies’ contribution to Korea’s economy which

hit a record high of FDI inflows in 2016 (USD 22.9 billion notified and USD 12.8 billion received).

◦ During the roundtable discussions, the Office of Foreign Investment Ombudsman explained about

Korea’s policy direction on foreign investment, listened to the grievances raised by foreign investors

and promoted reinvestment. Moreover, government officials specializing in foreign investment

were invited to ensure that grievances are promptly identified and responded to.

◦ The C-level Roundtable for Foreign Investors allowed representatives from foreign-invested

companies and foreign chambers of commerce in Korea to voice grievances on specific issues

concerning individual companies as well as those covering a broad range of subjects including

the need to improve investment environment through deregulation and establish an official

communication channel to facilitate interaction between the government and foreign-invested

companies.

◦ To provide expeditious and appropriate grievance resolution, foreign-invested companies were

invited to send in their concerns prior to the meeting to ensure that their grievances are promptly

reviewed and solutions are identified by relevant government bodies.

◦ Grievances raised during the roundtable discussions were referred to Home Doctors at the Office

of Foreign Investment Ombudsman to find a remedy through follow-up consultations etc.


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◦ Date/Venue: Feb. 13, 09:00-10:30, Four Seasons Hotel (Grand Ballroom)

◦ Participants: 38- Foreign investors: 23 participants including CEOs of foreign-invested companies and

representatives of foreign chambers of commerce

- Government officials: 11 participants including Acting President, Second Vice Minister of MOTIE, Deputy Minister of Trade and Investment at MOTIE

- KOTRA: 4 participants including President of KOTRA, Foreign Investment Ombudsman and Head of Invest Korea

Grievances and suggestions

2017 Roundtable for Foreign Investors

• Requests for continued support for the tourism industry• Suggestions to amend the Foreign Investment Promotion Act • Requests for detailed guidelines for a mutually constructive relationship with local

communities• Requests for airline deregulation• Requests for adherence to global standards regarding the classification of HS

codes for export goods• Suggestions for innovation in the financial services industry• Suggestions to allow capital funds from Head Offices with regard to the

regulation of single borrower’s credit ceiling for branches of foreign banks• Requests for review of the Designation of Products of Risk Concerns and Safety

and Labelling Standards regarding printer ink and toner cartridges• Suggestions to improve tax investigations conducted by the Customs Service

<2017 Roundtable for Foreign Investors>

▲ Photo session with participants ▲ Meeting taking place

① 2017 Roundtable for Foreign Investors

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◦ Date/Venue: Sept. 26, 07:20-09:30, Grand Hyatt Hotel (Namsan Room II)

◦ Participants: 35- Foreign investors: 25 participants including CEOs and representatives of foreign

chambers of commerce

- Government officials: 8 participants including Minister of MOTIE, Deputy Minister of Trade and Investment at MOTIE

- KOTRA: 2 participants including Head of Invest Korea, President of KOTRA, Director General of Office of Foreign Investment Ombudsman

Grievances and suggestions

2017 Ministerial Roundtable for Investors

• General interest in the impact of new administration’s policies on business activities • Suggestions to create a communication channel for Foreign-Invested Companies

and the government • High expectations about cultural exchange and ties in trade and investment

between Korea and China• The significance of Korea-EU FTA and the need to promote cooperation among

businesses• Requests for a roadmap on labor market and innovative growth in economy• Comments on legally required employment quota for foreign workers• Concerns regarding the amendment of the Foreign Investment Promotion Act • The need for guidelines for a mutually constructive relationship with local

communities such as issues regarding customs during Chuseok holidays• Keen interest in the impact of Brexit on Korea and the UK • Comments on the new administration’s employment policy (minimal wage,

regular wage, permanent positions)• Requests for participation of companies during new FTA negotiations

<2017 Ministerial Roundtable for Investors>


② 2017 Ministerial Roundtable for Investors


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◦ Date/Venue: Dec. 7, 18:00-20:00, Young Bin Gwan, The Shilla (Emerald Hall)

◦ Participants: 66- Foreign investors: 59 participants including CEOs and representatives of foreign

chambers of commerce

- Government officials: 5 participants including Minister of MOTIE, Deputy Minister of Trade and Investment at MOTIE

- KOTRA: 2 participants including Head of Invest Korea, Director General of Office of Foreign Investment Ombudsman

Grievances and Suggestions

2017 Ministerial Year-End Investors’

Night

• Suggestions regarding the operation of new production facilities in Saemangeum, Gunsan • Suggestions regarding the operation of Office of Research/ Ewha University-

Industry Collaboration Foundation• Discussions on the investment plan to use Korea as a regional stronghold to

enable penetration into the Asian market• Suggestions to organize meetings hosted by foreign chambers of commerce• Signing a contract between universities and industries to establish smart cities and

smart campuses in Korea• Discussions on signing MOUs with domestic businesses to develop semiconductor

technologies• Suggestions to implement Ausbildung (work-study program) in Korea • Discussions on Korea being blacklisted as a tax haven by EU • Discussions on the penalties imposed on three German automobile companies for

emissions violations• Requests for a meeting with AMCHAM and American companies during the FTA

amendment negotiation between Korea and the US

<2017 Ministerial Year-End Investors’ Night>


③ 2017 Ministerial Year-End Investors’ Night

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2) Roundtable for foreign-invested companies and local governments

※ The Office of Foreign Investment Ombudsman provides an effective avenue for foreign-

invested companies in provincial areas to express their concerns by offering a reliable

structure of grievance resolution where executives of foreign-invested companies, local

government officials, the Foreign Investment Ombudsman and Home Doctors can find

effective solutions together.

◦ Roundtable discussions with foreign investors were organized for the first time in 2017, joined

by executives of foreign-invested companies, government officials, the Foreign Investment

Ombudsman and Home Doctors to effectively address grievances faced by foreign-invested

companies doing business in provincial areas.

◦ In order to prevent foreign-invested companies from being marginalized, meetings are organized

in different regions to create a communication channel for foreign-invested companies doing

business in provincial areas.

<Roundtable for Foreign-Invested Companies and local governments 2017>

Date Title Agenda

Mar. 15

Roundtable for Foreign-Invested Companies

in Seoul(First half-year)

• Identify grievances and seek ways to resolve them

• Strengthen cooperation between Foreign-Invested Companies and local governments to provide expeditious and appropriate resolution

Apr. 26 Grievance Resolution Roundtable with Local

Governments

• Seek ways to cooperate with local governments to streamline grievance resolution procedures

• Review current statistics of aftercare services in each local government and find effective solutions together

Nov. 15 Grievance Resolution Roundtable with Local

Governments



Nov. 26

Roundtable for Foreign-Invested Companies

in Seoul(Second half-year)




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<Roundtable for Foreign-Invested Companies and local governments 2017>

▲ Grievance Resolution Roundtable with Local Governments

▲ Grievance Resolution Roundtable with Local Governments

▲ Rountable for Foreign-Invested Companies in Chungcheongnamdo

▲ Rountable for Foreign-Invested Companies in Chungcheongnamdo

▲ Roundtable for Foreign-Invested Companies in Seoul

▲ Roundtable for Foreign-Invested Companies in Seoul

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3) Roundtable for foreign-invested companies by industry

※ The Office of Foreign Investment Ombudsman organizes ad hoc small-scale meetings

throughout the year to provide a space for discussion on complex grievances specific to

an industry. Foreign Investment Ombudsman, government officials, and Home Doctors

work together to respond promptly and effectively to complaints raised by foreign-invested

companies.

◦ Roundtable discussions for foreign-invested companies by industry have been organized since the

third quarter of 2016 with executives of global enterprises, officials from relevant government

bodies, the Foreign Investment Ombudsman and Home Doctors to tackle complex issues raised

by foreign-invested companies.

◦ Building upon the CEO Forum for Foreign-Invested Companies and the Foreign Investment Advisory

Council Meeting organized until 2015, the roundtable discussions ensure strict confidentiality and

stimulating discussions in order to effectively resolve grievances and improve Korea’s regulatory

system.


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<Roundtable for foreign-invested companies by industry 2017>

Date Title Agenda

Feb. 21 Statutory Damages for

Trademark Infringement Roundtable

• Discuss harmful effects of counterfeit goods on consumers

• Share Korean government’s views on trademark infringement

Feb. 23 Tools for Managing

Energy Efficiency Roundtable

• Examine the amendment of the Regulation on Energy Efficiency Labeling and Standards

• Discuss with foreign-invested companies regarding the amendment bill

Mar. 24 Roundtable for the

Fashion Industry• Discuss government policies related to consumer goods

• Share grievances about non-tariff barriers

June 8Roundtable on

Improving Foreign-Investment Environment

• Discuss ways to improve Doing Business rankings

• Discover projects to improve business and investment environment

June 15 Roundtable for the

Services Sector• Discuss government policies related to the services

sector

July 11

Conference for the Improvement of

Chemicals Related System

• Introduce chemical product regulations relevant to foreign-invested companies

• Listen to grievances raised within the industry and seek ways to resolve them

Sept. 1Roundtable for the

Chamber of Commerce Representatives

• Listen to the grievances raised by foreign-invested companies from different economies and seek ways to resolve them

• Introduce government policies related to foreign investment

Oct. 27Roundtable on

Improving Chemical Product Regulations

• Explain about tighter regulations on chemical products

• Examine and develop ways to deal with more stringent regulations

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<Roundtable for foreign-invested companies by industry 2017>

▲ Roundtable on Improving Foreign-Investment Environment

▲ Roundtable on Improving Foreign-Investment Environment

▲ Conference for the Improvement of Chemicals Related System

▲ Conference for the Improvement of Chemicals Related System

▲ Roundtable for the Chamber of Commerce Representatives

▲ Roundtable for the Chamber of Commerce Representatives


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4) Regulatory Information Service for Foreign Investors

※ The Regulatory Information Service for Foreign Investors is provided by the Office of Foreign

Investment Ombudsman in cooperation with the Regulatory Reform Committee under the

Office of Government Policy Coordination to seek opinions of foreign-invested companies.

Government and member bills relevant to foreign investors are translated into English and

submissions made by foreign investors are referred to relevant government bodies.

◦ At the Third Ministerial Meeting on Regulatory Reform (May 6, 2015), the President of the

Republic of Korea emphasized the importance of establishing a system to reflect the opinions of

foreign investors during the legislative process. The need for a communication channel for foreign

investors was raised as many foreign investors have complained about the lack of means to voice

their opinions about laws and regulations.

◦ Compared to Korean companies, foreign-invested companies were relatively in the dark with

regard to information sharing of regulatory policies due to a lack of an efficient communication

process. However, owing to the close cooperation with the government ministries and the

national assembly, an online communication channel for foreign investors was created to reflect

the opinions of foreign investors in the legislative process thereby enhancing policy transparency

and predictability.

◦ A total of 461 government bills and 1,336 member bills have been translated into English to be

uploaded on the Regulatory Information Service website jointly provided by the Office of the

Foreign Investment Ombudsman (http://ombudsman.kotra.or.kr) and the Office for Government

Policy Coordination (http://e.better.go.kr).

<Regulatory Information Service for Foreign Investors>

▲ English version of the Regulatory Information Portal (http://e.better.go.kr)

▲ Ombudsman website (http://ombudsman.kotra.or.kr)

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1) Ombudsman system promotion activities

※ The Office of the Foreign Investment Ombudsman is devoted to attracting reinvestment

through various activities such as giving presentations on successful grievance resolution

cases and improvement of Korea’s investment environment as a result. The Ombudsman

also publicizes the excellence of the Foreign Investment Ombudsman System worldwide,

attracting potential investors and setting a solid foundation to provide new investment

opportunities in Korea.

◦ The Office of the Foreign Investment Ombudsman provided support to international delegations

through the OFIO‘s Knowledge Sharing Program and gave presentations at international

conferences to promote Korea’s Foreign Investment Ombudsman system and business-friendly

environment worldwide.

◦ In 2017, the Office of the Foreign Investment Ombudsman contributed know-how about

attracting foreign-investment to delegations from various developing countries including those

from the Philippines, Paraguay, Indonesia, Pakistan, Uzbekistan, India, Australia and Lao DPR to

promote Korea’s Foreign Investment Ombudsman system and FDI aftercare services.

◦ As part of presentations on investment promotion activities, the Foreign Investment Ombudsman

shared Korea’s aftercare services geared towards supporting foreign investors which can

be benchmarked by low income countries to improve their investment environment. The

Ombudsman also introduced preemptive actions taken for grievance resolution and discussed

Korea’s exceptional investment environment.

◦ The Office of Foreign Investment Ombudsman contributed to promoting global trade and

investment by providing information to ADBI about Foreign Investment Ombudsman system and

aftercare services for foreign-invested companies in Korea and by offering consulting services

for those planning to implement a similar system in their own country through the Knowledge

Sharing Project.

◦ The IDB and KOTRA have built a partnership to foster trade and investment relations between

Korea and Latin America and the Caribbean. Through this accord, the Office of Foreign Investment

Ombudsman provided consulting services in Haiti on developing a similar Ombudsman system to

our own and transferred our knowledge in trade and investment promotion to help create an

enhanced investment environment for Koreans doing business in Haiti.


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<Promotional Activities for Foreign Delegations 2017>

Date Agency Agenda

Feb. 7The Philippine Board of

Investment• Consultation regarding implementation of similar

Ombudsman system in the Philippines

Apr. 3Ministry of Justice and Labor of

the Republic of Paraguay• Consultation regarding implementation of similar

Ombudsman system in Paraguay

May 17 Investment Coordinating Board

(Indonesia)• Consultation regarding implementation of similar

Ombudsman system in Indonesia

May 22Asian Development Bank

Institute (ADBI)• Distribution of research materials on Korea’s Foreign

Investment Ombudsman system

May 25Ministry of Planning and

Investment (Vietnam)• Consultation regarding implementation of similar

Ombudsman system in Vietnam

June 18SelectUSA Investment

Promotion Agency• Presentation on Korea’s Foreign Investment Aftercare

Service at the 2017 SelectUSA Investment Summit

Aug. 20 - 26

Invest India, National Investment Promotion and Facilitation Agency (India)

• Consultation regarding implementation of similar Ombudsman system in India

Aug. 23Economic Development

Strategy for High Level Officials (Pakistan)

• Consultation regarding implementation of similar Ombudsman system in Pakistan

Aug. 29Capacity Building Program for

Free Economic Zones (Uzbekistan)

• Consultation regarding implementation of similar Ombudsman system in Uzbekistan

Sept. 19Chamber of Industry in Istanbul

(Turkey)• Consultation regarding implementation of similar

Ombudsman system in Turkey

Sept. 20 Australian National University• Discussion on incorporating Foreign Investment

Ombudsman system in the RCEP agreement

Sept. 23 World Trade Organization• Introduction to Korea’s Foreign Investment

Ombudsman through video conference

Dec. 20Ministry of Planning and

Investment (Laos)• Consultation regarding implementation of similar

Ombudsman system in Lao PDR

Dec. 31Inter-American Development

Bank (IDB)• Consultation regarding establishment of aftercare

service in Haiti

◦ In response to requests from investment promotion agencies and related organizations in

developing countries such as the Ministry of Planning and Investment in Vietnam and Chamber

of Industry in Istanbul, the Foreign Investment Ombudsman dispatched Home Doctors to give

talks on Korea’s aftercare services for foreign-investment companies and our proactive grievance

resolution procedure, to provide consulting services on developing a similar Ombudsman system

to our own and to promot Korea’s excellent investment climate.

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ance 2017

<Ombudsman System PR Activities 2017>

▲ Participated as a guest speaker at the SelectUSA Investment Summit, invited by the Department of Commerce

▲ Giving a presentation on Korea’s Ombudsman system during the Korea Day Seminar held at the Istanbul Chamber of Industry

▲ Workshop on aftercare system for foreign investors in Haiti

▲ WTO Investment Facilitator video conference meeting

▲ Introducing Korea’s Ombudsman system to the Uzbekistan delegation

▲ Introducing Korea’s Ombudsman system to the Lao PDR delegation


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2) Public relations

※ The Foreign Investment Ombudsman and the Investment Aftercare Division have taken the

lead in publicizing the excellence of Korea’s grievance resolution system and enhancing

public awareness about foreign investment through various channels.

◦ The Foreign Investment Ombudsman actively promoted the Ombudsman system, grievance

resolution process and successful improvement of the investment environment by distributing

promotional brochures and writing newspaper columns for major domestic and foreign

newspapers.

◦ By writing regular business columns under the titles such as “Chemicals viewed as two-edged

sword” and “J-nomics is friendly to FDI” for the Korea Times in 2017, the Foreign Investment

Ombudsman offered his analysis and policy suggestions regarding major grievances as well as on

issues relevant to environmental regulations and FDI promotion.

<Foreign Investment Ombudsman Articles 2017>

No. Date Publication Title

1 Jan. 10 Korea Times Caring attitude saves the economy

2 Feb. 22 Korea Times Foreign investors’ uniform voices

3 Mar. 22 Korea Times Betting on ROK’s economic resilience

4 Apr. 19 Korea Times Spotlighting road to ROK’s prosperity

5 Apr. 19The Korean

Economic DailyUrgent need for a Gross Domestic Expenditure (GDE)

that measures B2B

6 May 23 Korea Times Our FDI ombudsman copied

7 June 19 Korea Times Secrets of FDI attraction and retention

8 July 18 Korea Times Chemicals viewed as two-edged sword

9 Aug. 22 Korea Times All nations desire FDI inflows

10 Sept. 18 Korea Times Country risk and FDI

11 Oct. 11 Korea Times Korea’s bilateral FTAs put to severe test

12 Oct. 16 Korea Times On Korea’s FDI targeting

13 Nov. 13 Korea Times J-nomics is friendly to FDI

14 Dec. 18 Korea Times We all benefit from FDI incentives

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ance 2017

◦ Moreover, the Foreign Investment Ombudsman contributed to writing articles for KOTRA Express,

a magazine published by Invest Korea, KOTRA to provide useful information for foreign-invested

companies such as successful cases of grievance resolution, most common grievances raised by

foreign-invested companies and various measures undertaken by KOTRA in order to address them.

<Ombudsman’s Office Articles for KOTRA Express 2017>

Date Title

Jan. Korea’s Economy Unlikely to be Affected by Political Instability

Feb.Korea’s Foreign Investment Ombudsman Promotes World-Renowned Ombudsman System in Spain

Mar.Acting President and Foreign Investment Ombudsman Offer Support to Foreign Investors at Roundtable

Apr. Policy Options under Global Economic Nationalism

May MPS Scholars Visit Seoul to Promote Freer Trade and Investment

June Stronger FDI Policy to be Pursued under New Administration

July Ombudsman Shares Knowledge at SelectUSA Roundtable

Aug. Foreign Firms Learn about New Chemical Regulations at OFIO Forum

Sept. Developed and Developing Countries Vie for FDI Attraction

Oct. Why does Korea Focus on Notification-Based FDI?

Nov. Will the Bitcoin be a Means of Payment for Foreign Investment?

Dec.J-nomics Welcomes Foreign Direct Investment with Four-Wheel-Drive Growth Policy

1. Legal Authority and Rights

2. Best practices of legislative improvement

3. Best practices of administrative intervention

APPENDIXAppendix


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• Paragraph 4 of Article 15-2 of the Foreign Investment Promotion Act

For the purpose of resolving the grievances of foreign investors and foreign-invested

companies, Foreign Investment Ombudsman may, if necessary, recommend that relevant

government bodies take corrective measures on laws, systems and policies according to the

Foreign Investment Promotion Act.

• Paragraph 4, 5, 6 of Article 21-3 of the Enforcement Decree of the Foreign Investment Promotion Act

(4) A recommendation for corrective measures under Article 15-2 (4) of the Act (hereafter

referred to as “recommendation for corrective measures” in this Article) shall be made in

a document specifying the following matters:

1. Current status and problems of related Acts and subordinate statutes, institutions and

policies;

2. Details of recommendation for corrective measures;

3. Matters recognized by the Foreign Investment Ombudsman as being necessary, such as

the response deadline for related administrative agencies and public agencies.

(5) “Period prescribed by Presidential Decree” in Article 15-2 (5) of the Act means 30 days

after receipt of a recommendation to take corrective measures from a Foreign Investment

Ombudsman pursuant to Article 15-2 (4) of the Act.

(6) The Foreign Investment Ombudsman may verify and inspect the performance of the

details of recommendations for corrective measures.

Foreign Investment Ombudsman’s Legal Authority and Rights Appendix 1

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<Grievances resolved through legislative improvement 2017>

No Grievances

1Request to revise the list of chemical substances requiring off-site consequence analysis

2Grievance regarding lack of EMC testing on imported used photocopying machines by Korea Customs Service

3 Grievance regarding the designation of toner cartridge as a product of risk concerns

4 Suggestion to ease regulations regarding foreign capital outflows

5Grievance regarding the provision of commercial bank loans to companies headed by a foreign national

6 Request to improve visa processes

7Grievance regarding the impracticability of the regulation providing for mandatory employment of professional veterinarian at all times

8 Suggestion to remove the provision for manufacturer-sales manager of cosmetics

9 Suggestion to address problems regarding redundant inspection procedures

10Grievance regarding the enactment of the Guidelines on the Price Labelling System of Agricultural Machinery and Its Components

11Suggestion to remove internal PSU from the list of goods subject to customs verification of clearance requirements

12Grievance aired by LLCs regarding the proposal of the legislation on external audit of companies

◦ In 2017, 12 out of 289 grievances submitted to Foreign Investment Ombudsman and Home

Doctors required legislative improvements. The Ombudsman’s Office made efforts to improve

unreasonable systems through close cooperation with relevant organizations for the following

grievances.

Best Practices of Legislative ImprovementAppendix 2


72

Appendix 2

Contents

Organization Ministry of Environment, Ministry of Employment and Labor, Ministry of Trade, Industry and Energy

Regulation Regulations on Off-site Consequence Analysis, Ministry of Environment

Guidance on Off-site Consequence Analysis in Accordance with Unified Submission Requirements, National Institute of Chemical Safety

Grievance (Background) With regard to chemical accidents, the Chemicals Control Act requires facilities handling hazardous chemicals to prepare an off-site consequence analysis, while the Occupational Safety and Health Act provides for the submission of process safety report, thereby placing great burden on the facilities to conduct inspections as well as submit reports.

(Main issue) Off-site consequence analysis reports and process safety reports are similar in nature, yet each require different documents for submission. Therefore, suggestions were made to either unify the submission requirements or allow both ministries to accept documents required from the other ministry in order to eliminate redundancy.

Resolution and Results

(Resolution) In December 2016, negotiations with the relevant organization and the Roundtable on Chemical Product Regulations were conducted to stress the need to address redundant regulations. Next, in cooperation with the Ministry of Environment, Ministry of Employment and Labor, and MOTIE, an ‘Investigation Team to Eliminate Redundant Regulations’ was formed to unify submission requirements and create a system of mutual acceptance of documents. Finally, the Ministry of Environment newly inserted the Article 5-3 on the Regulations on Off-site Consequence Analysis, providing a legal basis for unified submission requirements for off-site consequence analysis reports in January 2017.

(Result) The National Institute of Chemical Safety informed the company about the publication of the Guidelines on Unified Process and unified notification procedure for off-site consequence analysis and process safety report.

Grievances resolved through legislative improvement 1

Eliminating redundant inspection procedures

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APPEN

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Appendix 2

Contents

Organization Ministry of Agriculture, Food and Rural Affairs

Regulation Agricultural Mechanization Promotion Act, Guidelines on the Price Labelling System of Agricultural Machinery and Its Components

Grievance (Background) The Ministry of Agriculture, Food and Rural Affairs enacted and implemented the Guidelines on the Price Labelling System of Agricultural Machinery and Its Components requiring sellers to label the actual price of the machinery and prohibiting the labelling of manufacturer’s suggested retail price.

(Main issue) Requesting documents regarding the cost of manufacture of imported agricultural machinery leads to the disclosure of confidential information, thereby triggering business risks.


(Resolution) Hosted roundtable discussions to offer suggestions to the relevant government bodies and continuously engaged in talks to enable legislative improvement.

(Result) The Ministry of Agriculture, Food and Rural Affairs amended the Guidelines on the Agricultural Machinery Purchase Support 2017, and removed the provision which sets forth manufacture cost report submission requirements for institutions responsible for producing manufacture cost report of agricultural machinery receiving government support.


Price labelling system of agricultural machinery


74

Appendix 2

Contents

Organization National Radio Research Agency

Regulation Customs Act

Grievance (Background) As Power Supply Unit (PSU) is an item subject to safety certification pursuant to the Electrical Appliances and Consumer Products Safety Control as well as the Radio Waves Act, it does not undergo a separate electromagnetic compatibility (EMC) testing when imported as a replacement part. This creates a problem in the customs clearance process, causing difficulty with server replacement.

(Main issue) Imported PSU as a replacement part should not be subject to EMC testing.


(Resolution) Requested that PSU be exempt from being subjected to customs verification of clearance requirements has been submitted as it has already been certified as a component part of a server/storage.

(Result) Server/storage PSU (internal) is no longer subjected to customs verification of clearance requirements.


PSU no longer subject to customs verification of clearance

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APPEN

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Appendix 2

Contents

Organization Financial Services Commission, Ministry of Trade, Industry and Energy

Regulation Act on External Audit of Stock Companies

Grievance (Background) The Financial Services Commission proposed measures to improve accounting standards to enhance transparency in accounting. An amendment bill of the Act on External Audit of Stock Companies was also proposed by a member of the National Assembly.

(Main issue) LLCs subject to external audit would have to comply with the disclosure policy regarding accounting audit and financial statements. Such excessive disclosure of material information would result in hampering the company’s business in Korea.


(Resolution) Successfully cooperated with relevant government bodies and suggested regulatory improvements to the Regulatory Reform Committee to waive disclosure requirements for LLCs.

(Result) Suggestions regarding external audit of LLCs, such as the need to consider the number of their employees, sales and stakeholders before deciding on the subject of external audit and the scope of the accountant’s report, have been successfully applied to the Amendment of the Act on External Audit of Stock Companies.


A bill to have LLCs subjected to external audit of companies


76

◦ Among the grievances received by the Foreign Investment Ombudsman and the Investment

Aftercare Division, a total of 90 cases which accounts for 31.1 % of grievances handled in 2017,

required administrative intervention. The Ombudsman's Office aimed to preemptively address the

grievances by working with relevant administrative agencies and organizations.

Best Practices of Administrative InterventionAppendix 3

<Grievances resolved through administrative intervention 2017>

No Grievances

1 Request to revise standards regarding facilities handling hazardous chemicals

2 Lack of EMC testing on imported used photocopying machines by Korea Customs Service

3 Designation of toner cartridge as a product of risk concerns

4 Difficulty with taking out long-term loans for FDI

5 Import prohibition of sourdough

6Difficulty settling country of origin marking requirements for Korea-India Comprehensive Economic Partnership Agreement

7 Strengthen fire protection system inspections

8 Credit guarantees for companies headed by a foreign national

9 Local tax deduction

10 The need to improve extremely low dividend tax credit

11 Request to ease excessive individual consumption tax on luxury goods

12 Improvement of regulations limiting integrated capital gains in tax filing

13 Legal validation of electronic signatures

14 IBK’s refusal of payment guarantees

15 Enquiry regarding plans to innovate the financial industry

16Issues with the Patent Court’s method of calculation regarding compensation for trademark infringement

17 Issues with the submission of a robot to be presented international exhibition

18 Request to improve visa process

19 Personal guarantees required for business loans

20 Difficulty participating in public sector tender and R&D projects

21 British companies’ weakened market competitiveness due to Brexit

22 Request for a damage protection plan against parallel imports

23 The need to improve Korean Standard to comply with the global standards

24 Implement feasible energy policy to reach the emission reduction goal

25 Request to improve road signs

26 Request to address the problem followed by inspection delays

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No Grievances

27Regulation which provides for a specific number of elevators to be managed by per elevator manager

28 Request for support regarding the extension of warehousing period at the Incheon Airport

29 Request for possible ways to sell sawdust and its by-products

30Issues regarding the submission of confidential business information regarding the operation of an aquarium

31 Protection of computer programs pursuant to the Patent Act

32 Pledged investment incentives

33 Extending patent rights to imported goods

34 Request to clarify patent indirect infringement regulation

35 Visa support for heads of R&D centers

36 Visa and Immigration Priority Card support for the president of a parent company

37 Restricting additional evidence during patent nullity proceedings

38Request for investigation into the issue of importing sludges containing precious metals for refining process

39 Taxation issues

40 Suggestion to accept patent application in foreign languages

41 Fair pricing policy for pharmaceutical companies and streamlining relevant regulations

42 Request for support regarding E-7 visa process

43 Difficulty in penetrating pharmaceutical market

44 Extending temporary employment period

45 Modified standards regarding the renewal of Korean Industrial Standards (KS) certification

46 Labor disputes

47Issues regarding the transfer of capital goods to China included in the subsidies agreement with Daegu Metropolitan City

48 Issues with the attachment of the KC mark on apparels

49 Approve of European trucks entering the Korean market

50Grievance related to the investigations regarding petitions submitted to the Ministry of Employment and Labor

51 Review of alcohol labelling and extension of the enforcement date

52 Restricting monetary assistance for paid leave

53Removing the requirement for consent when changes to disadvantages are made in the Rules of Employment

54 Request to extend the period of reduction in rent

55 Excessive regulations regarding nonconformity


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No Grievances

56 Request for tangible improvements regarding document requirements for recommendation of prizes

57 Changes to rent fee reduction contract terms following renewal of Free Trade Zone contract

58 Request for MOTIE’s cooperation with administration regarding complex zones

59 Issues with visas for dispatched employees

60 Issues with non-tariff barrier due to type-approval system

61 Issues related to the employment of an Australian trainee in Korea

62 Tax incentives for foreign workers

63 Urgent visa issue for an executive from the parent company

64 Changes to individual-type Foreign Investment Zone after reinvestment

65 Enquiry regarding long-term purchase of nickel from Korea Resources Corporation

66 Certification regarding change of item for certificate of origin

67Enactment of the Guidelines on the Price Labelling System of Agricultural Machinery and Its Components

68 Contract for equipment investment

69 A bill on the external audit of companies which includes LLCs

70 Request to clarify safety management standard for facilities handling hazardous chemicals

71 Request to improve pipeline internal pressure testing standard

72 Request to improve facility inspection procedures for facilities handling hazardous chemicals

73 Grievances regarding the Act on the Registration and Evaluation, etc. of Chemical Substances (1)










83 Issues with the Power Supply Unit (PSU) subject to customs verification of clearance requirements

84 Issues regarding softwares being used without Korea Resouces Corporation’s license

85 Delays in land adjudication regarding office building

86 Changes to tax reduction and reinvestment

87Issues related to the amendment of the Enforcement Decree on Wildlife Protection and Management Act

88 Issues regarding the exemption of kitchen scales (non-commercial) from Type Approval

89 Enquiry on possible increase in building coverage ratio of foreign schools

90 Regulations regarding land severance

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APPEN

DIX

Appendix 3

Grievances resolved through administrative intervention 1

Import prohibition of sourdough

Contents

Organization Ministry of Food and Drug Safety

Regulation Korea Food Code

Grievance (Background) Although sourdough is accepted in most countries, it has been prohibited in Korea since propionic acid was detected in 2014.

(Main issue) During the visit to the parent companies in December 2012, the company expressed grievances regarding Korea’s import prohibition on ingredients including those used for bakery and requested for measures to lift the ban on importing sourdough.


(Resolution) After the visit to the company and the Belgium Embassy in Korea in 2017, a meeting was organized with the Ministry of Food and Drug Safety from which it was found that unlike deliberate ingestion of acids, naturally occurring propionic acid is not regulated. Thus, we requested that the company submit supporting documents.

(Result) The Ministry of Food and Drug Safety confirmed that propionic acid found in sourdough from the company occurs naturally and took necessary measures to allow imports of sourdough.


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Appendix 3


Higher building coverage ratio for school

Contents

Organization Ministry of Land, Infrastructure and Transport, Seoul Metropolitan Government

Regulation National Land and Planning and Utilization Act (Article 30), Enforcement Decree of the National Land and Planning and Utilization Act (Article 25)

Grievance (Background) Seoul Foreign School decided to alter the scope of its building/urban planning facilities (school), and notified its decision accordingly. However, relaxation of building regulations requires notification of changes to urban planning facilities or the municipal ordinance of each City or Gun, which entails cooperation with City/Gun Urban Planning Committee.

(Main issue) The school is committed to expanding its facilities to create quality learning environment. Therefore, efforts need to be made to revise previous decisions on the area and scope of the building such as increasing the height of the building, building coverage ratio and floor area ratio.


(Resolution) We provided the school with explanations regarding the National Land Planning and Utilization Act and the Seoul Metropolitan Government Ordinance on Urban Planning.

(Result) As the school was not in urgent need of expansion of its assembly hall etc. further decisions were deferred taking into consideration the directions of the relevant Office of Education.

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APPEN

DIX

Appendix 3


Delays in land adjudication regarding office building

Contents

Organization Investment Promotion Division, Gyeonggi Provincial Government

Regulation Act on Acquisition of and Compensation for Land, etc. for Public Works

Grievance (Background) A company has expanded its business to Icheon and their new office building is in its completion stage, ready to secure roads and formulate a district unit plan. However, the company has applied for adjudication as the landowner has opposed to the use of the land.

(Main issue) Although the competent organization is delaying the procedure due to the large number of adjudication applications, request for prompt assessment of the case is necessary as the company plans to move into the new office building no later than March 2017.


(Resolution) We submitted our request for prompt assessment of the company’s adjudication application to the competent Land Tribunal.

(Result) Decisions have been made to accelerate the process and complete the adjudication by this year through coordinated effort with the relevant local government.


82

Appendix 3


Changes to individual-type FIZ following reinvestment

Contents

Organization Investment Promotion Division, Gyeonggi Provincial Government

Regulation Foreign Investment Promotion Act

Grievance (Background) With plans for reinvestment, a company has applied for changes to individual-type FIZ. However, the relevant organization has continued to defer necessary action and notification.

(Main issue) The relevant local government must complete assessment and notification regarding the application filed by the company by September 2017.


(Resolution) Through discussions with the relevant local government, we found that the delay was largely due to the fact that the company’s reinvestment was considered as part of its initial investment which benefited from tax reduction. Thus, additional documents must be submitted to demonstrate that the two investments are unrelated.

(Results) The relevant local government completed its assessment and notified approval of changes to the company’s individual-type FIZ. Buttressed by our administrative intervention, the government was able to attract reinvestment from the company.

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APPEN

DIX

Appendix 3


Taxation issues

Contents

Organization Incheon Main Customs

Regulation Customs Act

Grievance (Background) A company is subject to tax reduction regarding its imported goods. Nonetheless, the Customs imposed tariffs of 5.6 billion won to the company due to conflicting interpretation of regulations regarding the calculation of royalties and depreciation period when determining the customs value.

(Main issue) The company has requested for a review of the decision as their depreciation period is in accord with the company’s accounting standards as well as relevant laws.


(Resolution) We visited Incheon Main Customs in April 2017 and requested for a review of their decision, pointing out that unquantified royalties should not be considered in determining the customs value according to the WTO Customs Valuation Agreement and that depreciation period other than that which was accepted in the actual accounting process should not be applied according to tax laws.

(Results) The Korea Customs Service set up the Audit Decision Deliberation Committee in April 2017 and made decisions to return previously levied tariffs of 5.6 billion won to the company. The return procedure was completed in June 2017.


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Appendix 3


Extension of warehousing period at Incheon International Airport

Contents

Organization Incheon InternationalAirport, Ministry of Land, Infrastructure and Transport

Regulation Incheon International Airport’s Lease Terms

Grievance (Background) A company has been operating a warehouse within the air freight warehouse in Incheon Airport through a contract due to expire in May 2017. Meanwhile, the company has established a new warehouse near Daegu City to be completed in October 2017.

(Main Issue) While the company wants to extend its warehousing period from the contract expiration date in May until the completion of the new warehouse in October, the Airport stated that it needs to rent out its warehouse vacancy, giving rise to difficulty in concluding the negotiation.


(Resolution) We arranged meetings for the company and the Airport on three occasions in June 2017, submitted a report to the Airport stating the company’s reasons for applying for an extension and issues which may arise should the Airport refuse to grant extension. We also requested cooperation from the Ministry of Land, Infrastructure and Transport.

(Result) Incheon International Airport has decided to divide the warehousing space and grant extension for the space used by the company until October 2017 and rent out the remaining space through open tendering.

Copyright © 2018 by KOTRA. All rights reserved.

Foreign Investment Ombudsman In Chul Kim

Publisher KOTRA

Publication Date March 2018

Address 06792) 13, Heolleung-ro, Seocho-gu, Seoul, Korea

Tel +82-1600-7119

Website www.kotra.or.kr / ombudsman.kotra.or.kr

Printed by Jeonwoo Yongsachon, Seoul, Korea 02-426-4415

ISBN 979-11-6097-646-5 (95320)

Foreign Investment Ombudsman Annual Report 2017KOTRA자료 18-008


Annual Report 2017

ISBN : 979-11-6097-646-5 (95320)

foreign investment ombudsman annual report...

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