ombudsman services for foreign investors as a dispute...

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2010/IEG/WKSP1/012

Ombudsman Services for Foreign Investors As a Dispute Prevention and FDI Promotion Measures

Submitted by: Korea Trade-Investment Promotion Agency (KOTRA)

Workshop on Dispute Prevention and Preparedness

Washington, DC, United States26-30 July 2010

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Ombudsman Services for Foreign Investors Ombudsman Services for Foreign Investors as a Dispute Prevention & FDI Promotion Measuresas a Dispute Prevention & FDI Promotion Measures

Workshop on dispute prevention and preparednessWashington D.C., 29 July 2010Washington D.C., 29 July 2010

Dr. Choong Yong AhnForeign Investment OmbudsmanChairman, Presidential Regulatory Reform [email protected]

Order of Presentation

I. Shift from Foreign Debt Financing to FDI Attraction Regime

II. Importance of Aftercare Services

III. Achievements of the Ombudsman’s Office

IV. Some Cases of Grievance Resolutions

V U d t th O b d S tV. Upgrades to the Ombudsman System

VI. Concluding Remarks

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I Shift from Foreign Debt Financing to FDI I. Shift from Foreign Debt Financing to FDI Attraction Regime

Little reliance on FDI until the Asian financial crisis in 97/98

Resorting to foreign licensing to cultivate indigenous capability through reverse engineering of imported capital, parts, and finished goods, etc.

Korea’s Development Model Before Asian Financial CrisisKorea’s Development Model Before Asian Financial Crisis

and finished goods, etc.

Sharp contrast to FDI-led industrialization models such as Malaysia and other developing nations

One of the lowest FDI to GDP ratios in the world

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International Comparison of Inbound FDI

Korea’s Low Level of FDI: Traditional Reliance on Korea’s Low Level of FDI: Traditional Reliance on Foreign Borrowing Foreign Borrowing

Inflow of FDI/Total Fixed Capital Formation ( %)

Inward Stock of FDI as a Percentage of GDP

2006 2007 2008 1990 2000 2008

Developed Economies 13.4 17.1 11.4 8.1 16.1 24.7

Developing Economies 13.0 13.1 12.8 13.8 25.1 24.8

EU 19.4 23.4 13.0 10.6 25.6 35.1

UK 37.2 37.0 21.8 20.6 30.4 36.9

US 9.4 10.9 12.5 6.8 12.9 16.0

Netherlands 5.2 71.0 -2.0 23.1 63.3 74.0

Africa 27.3 27.0 29.0 12.5 26.2 33.2

Asia 11.4 11.0 10.7 16.0 25.4 22.7

Latin America 11.4 14.4 13.5 9.6 21.5 23.5

UNCTAD, World Investment Report 2009

Latin America 11.4 14.4 13.5 9.6 21.5 23.5

China 6.4 6.0 6.0 5.1 16.2 8.7

Hong Kong 108.5 130.4 148.8 262.3 269.3 388.1

Malaysia 18.6 20.6 18.4 23.4 56.2 33.0

South Korea 1.8 0.9 2.8 2.0 7.1 9.8

Singapore 90.2 78.7 43.8 82.6 119.3 179.3

Thailand 16.2 17.1 13.5 9.7 24.4 38.4

Under IMF direction and WTO principles, Korea switched to a proactive in-bound promotion of FDI to overcome shortage of foreign exchange during Asian financial crisis of 1997/8

Korea’s Shift Towards FDI Attraction Korea’s Shift Towards FDI Attraction

Under the Lee Myung-Bak administration, Korea is now more engaged than ever in such mega-trends as the globalization of ICT and the drive to free trade

- Cross-border movement of goods, service and investment- Fragmentation of production and supply chains - Korea’s rush towards outbound FDI due to rise of China- Making Korea as a business hub in Northeast Asia

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Lee Myung-Bak Government has set a business-friendly environment as a top national priority geared towards a knowledge-based economy

Presidential Council on National Competitiveness was established

Priority Agenda of Lee MyungPriority Agenda of Lee Myung--Bak GovernmentBak Government

Presidential Council on National Competitiveness was established to address the issue of FDI attraction by inviting heads of foreign business associations in Korea as regular members

ⅡⅡ I t f Aft S iI t f Aft S iⅡⅡ.. Importance of Aftercare ServicesImportance of Aftercare Services

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As reinvestment by existing foreign companies shared more than 50 percent As reinvestment by existing foreign companies shared more than 50 percent of total inbound FDI, the aftercare service is becoming increasingly of total inbound FDI, the aftercare service is becoming increasingly important and pointed out as an effective tool for crossimportant and pointed out as an effective tool for cross--border investment border investment facilitation by the UNCTAD, OECD and APECfacilitation by the UNCTAD, OECD and APEC

Trends of New Investment by NewlyTrends of New Investment by Newly--Entered Entered Foreign Companies and Reinvestment by Foreign Companies and Reinvestment by Existing Foreign CompaniesExisting Foreign Companies

Trends of Korea’s FDI

Re-investment New Investment

Source: The Ministry of Knowledge Economy

Total ForeignTotal Foreign--invested Companies Included in the invested Companies Included in the Fortune 500 Listed in KoreaFortune 500 Listed in Korea

10,318

2002

11,484

2003

12,955

2004

14,771

2005

14,583

2007

Total

F 500 223 247 263 264 245

1-4

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The creation of friendly attitude and reputation from the foreign investors in The creation of friendly attitude and reputation from the foreign investors in

Korea through word of mouth, hence having significant influence over the Korea through word of mouth, hence having significant influence over the

d i id i i ki f th f i i tki f th f i i t

One of the best policies for FDI is to offer quality aftercare services

Importance of Aftercare ServicesImportance of Aftercare Services

decisiondecision--making of the new foreign investorsmaking of the new foreign investors

Responsible Partner Award given by the EUCCK(December 8, 2008)

- Investment Ombudsman was honored with the Responsible Partner Award, given by the

European Union Chamber of Commerce in Korea at their 2008 Korea-EU Industrial Cooperation

Day awards ceremony for his efforts to assist companies from Europe pursue business in Korea.

The aftercare service for the foreign-invested companies is one of the most effective core strategies in the foreign investment promotion

ⅢⅢ Achievements of the Ombudsman’s OfficeⅢⅢ.. Achievements of the Ombudsman’s Office

“ Both grievance resolution and aftercare services tend to prevent potential legal disputes!”

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Oct. 1999 Office of the Foreign Investment Ombudsman (OFIO) was established by the Foreign Investment Promotion Act.

- Staffed with “Home-Doctors,” specialists in taxation, tariffs, construction, labor, Finance, law, IPR, technology, etc.

Historical BackgroundHistorical Background

gy

Oct. 2007 OFIO received WAIPA (World Association of Investment Promotion Agency) Excellence Award.

May 2006 OFIO strengthened by the reorganization of Invest Korea

May 2006 Dr. Choong Yong Ahn appointed the second Foreign Investment Ombudsman

Dec. 2008 OFIO also received the Responsible Partner Award from EUCCK

June. 2010 Dr. Choong Yong Ahn was appointed as Chairman of the Presidential Regulatory Reform Committee

June. 2009 Dr. Choong Yong Ahn reappointed the second term of Foreign Investment Ombudsman

Foreign Investment Ombudsman is appointed by the President of Republic of Korea on the recommendation ofthe Minister of Knowledge Economy

Investment Ombudsman Aftercare ServicesInvestment Ombudsman Aftercare Services

☞ Valuable role as an advocate in resolving difficulties on behalf ☞ Valuable role as an advocate in resolving difficulties on behalf of foreign investors, thus providing unobstructed paths for optimum business performance

☞☞ Foreign investment promotion through rationalization Foreign investment promotion through rationalization and improvement of the investment system customsand improvement of the investment system customsand improvement of the investment system, customs and improvement of the investment system, customs and practices of Korea.and practices of Korea.

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Appointment of the Foreign Investment Ombudsman as Chairman of the Appointment of the Foreign Investment Ombudsman as Chairman of the

Presidential Regulatory Reform Committee (June 16, 2010) Presidential Regulatory Reform Committee (June 16, 2010)

The Chairmanship is expected to bolster the Ombudsman's role of improving

Ombudsman Appointed as Chairman of the Presidential Regulatory Reform Committee

The Chairmanship is expected to bolster the Ombudsman's role of improvingforeign investment environment by reviewing new regulations and pursuingregulatory reforms.

b hi i h ll b d dd i i

Ombudsman has expressed a wide range of recommendations onderegulation to remove existing impediments to foreign investment

Serves as a Member of the Presidential Council Serves as a Member of the Presidential Council on National Competitivenesson National Competitiveness

Membership in the PCNC allows Ombudsman to address grievance issues directly to various ministers and heads of relevant government authorities

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CEO of KOTRA

OrganizationOrganization

Overseas Support OfficePromotion TeamStrategy & IR Aftercare Team

Invest KOREA

Investment Ombudsman

39 Overseas Offices(KBC)

3 teams 4 teams 3 teams 1 team

IdentificationIdentification PromotionPromotionPromotionPromotion SupportSupport AftercareAftercarePlanningPlanning

1-4Invest KOREAInvest KOREA

Attracting FDI Attracting FDI

Promoting FDI in Korea (Discovering potential overseas investors)

Providing administrative support for FDI attraction

FDI ReportingFDI ReportingLicense/Permit License/Permit

ApplicationsApplications

Facilitating foreign business entry and establishmentConducting surveys on investment conditions in Korea and PR activitiesImproving investment environment

ForeignForeign--invested Firm invested Firm RegistrationRegistration OneOne--Stop ServiceStop Service

ApplicationsApplications

Project ManagerProject Manager

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Investment Ombudsman’s effort in his role of foreign investment promotion, Investment Ombudsman’s effort in his role of foreign investment promotion, through rationalization & improvement of the investment system, customs through rationalization & improvement of the investment system, customs and practices of Korea.and practices of Korea.

Aftercare Services by Investment Ombudsman within Aftercare Services by Investment Ombudsman within KOTRAKOTRA

Role of Investment OmbudsmanRole of Investment Ombudsman

Support for FDI Support for FDI

Contribution to the Sustainable Growth of the

Korean Economy Attracting FDI

Aftercare Services

OmbudsmanOmbudsman

ppppAttractionAttraction

Aftercare Services of Ombudsman’s Office Aftercare Services of Ombudsman’s Office

The Ombudsman Office’s “Home Doctor” system delivers one-stop services to resolve a variety of grievances

CooperationRecommendationCooperationRecommendation

Home Doctor:Solution Provision

ForeignInvestor

The Office of the The Office of the Investment OmbudsmanInvestment Ombudsman

Blue House, Ministries,

Government Agencies

http://www.i-ombudsman.or.krhttp://www.i-ombudsman.or.kr

Report Complaints

ForeignInvestmentCommittee

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Various Approaches to Grievances Various Approaches to Grievances

Meetings with foreign-invested companies and relevant government officials have been held as often as possible

Preemptive Measures to Prevent Grievances Preemptive Measures to Prevent Grievances

These meetings served as a platform for compiling difficulties and complaintsfrom the foreign-invested companies and reinforced networking between thelocal government authorities and relevant FDI companies.

Grievance Resolution RecordGrievance Resolution Record

550 82.6%

90.4%94.4%Resolution Rate (%)

case

94.0%

Unit: Cases

500

450

400

350

200

150

27.2%

23.2%

54.7%

343

475

324

370353353351

369

428

365

103 144112 102 95 87 92

72 84 86

02000 20032002 20042001 2005 2006 2007 2008 2009

Annual Cases of System Improvement & Administrative Intervention

Source: Office of the Foreign Investment Ombudsman

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Grievance Filing by Category (Unit: % of Case, 2009)

Investment Incentive11% Investment Process

9%

Taxation & Tariffs

Others29%

Performance of Grievance Resolution(2009)

Recently, taxation and tariffs, and investment incentives replaced labor issues as the most frequently filed grievances, although labor issues still have the biggest impact on Korea’s FDI environment

16%

Labor & HR Management

10%

Certification & Inspection

6%Visa &

Immigration7%

Construction10%

Finance & F/X4%

Source: Office of the Foreign Investment Ombudsman

Grievance Resolution Performance

Classification

24No. of Cases Filed

TotalSystem Improvement

In-house Resolution

Administrative Intervention

62 365279

p

(Unit: Number of Case, 2009)

Ombudsman’s Activities (Major Events in 2009)Ombudsman’s Activities (Major Events in 2009)

Date: November 6 to 7, 2009Date: November 6 to 7, 2009

Venue: COEX SeoulVenue: COEX Seoul

2009 Job Fair for Foreign Companies2009 Job Fair for Foreign Companies

Venue: COEX, Seoul Venue: COEX, Seoul

Highly effective to recruit qualified employees

Golden opportunity to advertise corporatebrand

2009 CEO Forum2009 CEO Forum

Date: November 25Date: November 25thth 20092009

Venue: Ritz Carlton Hotel, Seoul Venue: Ritz Carlton Hotel, Seoul

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ⅣⅣ Some Cases of Grievance ResolutionsⅣⅣ.. Some Cases of Grievance Resolutions

Blackberry Services Enter Korean MarketBlackberry Services Enter Korean Market

Ombudsman’s ActionsOmbudsman’s ActionsCompany T’s ComplaintCompany T’s ComplaintCompany T’s ComplaintCompany T’s Complaint

Grievance Resolution Cases (1)Grievance Resolution Cases (1)

Ombudsman’s ActionsOmbudsman’s Actions

The regulation was considered a matter of The regulation was considered a matter of unreasonable enforcement of domestic unreasonable enforcement of domestic standards and a typical nonstandards and a typical non--tariff barrier.tariff barrier.

Ombudsman endeavored for almost two yearsOmbudsman endeavored for almost two yearsto bring the matter to the priority attention of to bring the matter to the priority attention of the Prime Minister, Senior Secretaries at Blue the Prime Minister, Senior Secretaries at Blue House, Minister of MOCIE, and the floor leaders House, Minister of MOCIE, and the floor leaders of the National Assembly.of the National Assembly.

Obligatory installation of WIPIObligatory installation of WIPI(Wireless Internet Platform for Interoperability)(Wireless Internet Platform for Interoperability)for every mobile internetfor every mobile internet--capable capable communications device sold in Korea to enhance communications device sold in Korea to enhance competitiveness of Korea’s IT sector.competitiveness of Korea’s IT sector.

Consequently, Blackberry service, with no need Consequently, Blackberry service, with no need for WIPI, was banned from launching its servicefor WIPI, was banned from launching its service

Company T obtained business approval for corporate users of Blackberry servicesCompany T obtained business approval for corporate users of Blackberry services

PDA phones have been granted an exemption from the WIPI requirement.PDA phones have been granted an exemption from the WIPI requirement.

for WIPI, was banned from launching its service for WIPI, was banned from launching its service in Korea.in Korea.

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Most HighMost High--tech Firms Remained in a New City Development (I)tech Firms Remained in a New City Development (I)

Investor Complaints in Investor Complaints in DongtanDongtan New CityNew City

Investor Complaints in Investor Complaints in DongtanDongtan New CityNew City


Ombudsman underwent a series of joint Ombudsman underwent a series of joint meetings with the relevant government meetings with the relevant government authorities including the Prime Minister, authorities including the Prime Minister, Ministry of Land, Transport and Maritime AffairsMinistry of Land, Transport and Maritime Affairsand Korea Land Corporation.and Korea Land Corporation.

Many of the foreignMany of the foreign--invested companies in invested companies in Dongtan City were unexpectedly forced to move Dongtan City were unexpectedly forced to move their plants due to its new city development their plants due to its new city development plan with enlarged residential area.plan with enlarged residential area.

DongtanDongtan New CityNew CityDongtanDongtan New CityNew City Ombudsman’s ActionsOmbudsman’s Actions

The urbanThe urban--type, hightype, high--tech industries were allowed to stay in the area.tech industries were allowed to stay in the area.


NonNon--tax Payment by Foreign Companies reduced substantially (II) tax Payment by Foreign Companies reduced substantially (II)

Additional Investor ComplaintsAdditional Investor Complaintsin in DongtanDongtan New CityNew CityAdditional Investor ComplaintsAdditional Investor Complaintsin in DongtanDongtan New CityNew City

Ombudsman underwent again a series of joint Ombudsman underwent again a series of joint meetings with the relevant government meetings with the relevant government authorities including the Prime Minister,authorities including the Prime Minister,ministers and senior secretaries to the president ministers and senior secretaries to the president to mitigate unexpected tax burden on the part of to mitigate unexpected tax burden on the part of foreign investorsforeign investors

These remaining companies were These remaining companies were subjected to nonsubjected to non--tax payment due to tax payment due to expected capital gains of factory sites as expected capital gains of factory sites as nearby land becomes high rise residential nearby land becomes high rise residential areaarea

in in DongtanDongtan New CityNew Cityin in DongtanDongtan New CityNew CityOmbudsman’s ActionsOmbudsman’s Actions

The nonThe non--tax payment imposed on the remaining companies was tax payment imposed on the remaining companies was reduced by 89%(April 15reduced by 89%(April 15thth 2009 by MOSF), which they could pay 2009 by MOSF), which they could pay in installmentsin installments

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Verdict of the first trial overturned to get refund Verdict of the first trial overturned to get refund

Company O’ Complaint Company O’ Complaint Company O’ Complaint Company O’ Complaint Ombudsman’s ActionsOmbudsman’s Actions

Following the bankruptcy of an importer that Following the bankruptcy of an importer that rented liquid cargo storage tanks, foreign rented liquid cargo storage tanks, foreign companies in the storage tank industry were companies in the storage tank industry were sued for compensation in the amount of 9 billion sued for compensation in the amount of 9 billion KRWKRW

OIO collected extensive evidence on OIO collected extensive evidence on international cargo transportation customs and international cargo transportation customs and practices through a series of interviews with practices through a series of interviews with companies in the relevant industries, research of companies in the relevant industries, research of overseas cases, and visits to Japan, HK, overseas cases, and visits to Japan, HK, Netherlands and Singapore.Netherlands and Singapore.

Published a policy report on international best Published a policy report on international best practicespractices

KRW 9 billionKRW 9 billion

The High Court has taken the publication as admissible evidence and overturned the judgment of the first trial based on international customs and practices.

9 billion KRW was refunded9 billion KRW was refunded

KRW 9 billionKRW 9 billion

The tariff exemption system on capital goodsThe tariff exemption system on capital goods

Grievance Resolutions Cases (5)Grievance Resolutions Cases (5)

PostPost--Imposition of Tariffs on TariffImposition of Tariffs on Tariff--exempted Capital goods was cancelledexempted Capital goods was cancelled

Company T’s ComplaintCompany T’s ComplaintCompany T’s ComplaintCompany T’s ComplaintOmbudsman’s ActionsOmbudsman’s Actions

Ombudsman argued that the incentive system Ombudsman argued that the incentive system was misinterpreted to the point of incoherence to was misinterpreted to the point of incoherence to the Custom Appeal Committee and high level the Custom Appeal Committee and high level government authoritiesgovernment authorities

The tariff exemption system on capital goods The tariff exemption system on capital goods purchased within 3 years up to registered purchased within 3 years up to registered capital amount from the date of bringing in the capital amount from the date of bringing in the investment capital is allowed as an incentive for investment capital is allowed as an incentive for FDI promotionFDI promotion

This system was interpreted contrary to its This system was interpreted contrary to its original objective on the grounds of a high court original objective on the grounds of a high court verdict applied to an M&A caseverdict applied to an M&A case

Seoul Main Customs Office decided in the capital Seoul Main Customs Office decided in the capital

The foreign company got the refund for the tariff paidThe foreign company got the refund for the tariff paid(Dec. 30th 2008)(Dec. 30th 2008)

goods purchased even in the case of green field goods purchased even in the case of green field FDI should be excluded from tariff exemption.FDI should be excluded from tariff exemption.Hence, Customs imposed a tariff of 3.7 billion Hence, Customs imposed a tariff of 3.7 billion KRW, which was originally exempted (Oct. 2008)KRW, which was originally exempted (Oct. 2008)

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Fingerprinting Required in Accusation Cases Filed by Labor Unions Fingerprinting Required in Accusation Cases Filed by Labor Unions



Company M’s ComplaintCompany M’s ComplaintCompany M’s ComplaintCompany M’s Complaint

When labor law violation cases are filed by labor When labor law violation cases are filed by labor unions, nonunions, non--Korean CEOs are required to have Korean CEOs are required to have all their fingerprints taken every time they're all their fingerprints taken every time they're called in for investigation while Koreans are not. called in for investigation while Koreans are not.

☞☞ If a labor union files several cases against its If a labor union files several cases against its nonnon--Korean employer, abusing this law, the Korean employer, abusing this law, the employer would be subject to fingerprinting employer would be subject to fingerprinting numerous times, leading to a violation of numerous times, leading to a violation of human rights as well as a negative influence human rights as well as a negative influence on FDI attractionon FDI attraction

The Ombudsman proposed revision of The Ombudsman proposed revision of the practice to relevant agencies the practice to relevant agencies including the Korean National Policy including the Korean National Policy Agency. Agency.

Ombudsman s ActionsOmbudsman s Actions

With the Ombudsman's proposition accepted, now fingerprinting With the Ombudsman's proposition accepted, now fingerprinting would take place only once.would take place only once.

on FDI attraction.on FDI attraction.

Difficulties in Importing Food Product Materials Newly Subject to InspectionDifficulties in Importing Food Product Materials Newly Subject to Inspection

Grievance Resolutions Cases (7)Grievance Resolutions Cases (7)

Ombudsman’s ActionsOmbudsman’s ActionsCompany A’s ComplaintCompany A’s ComplaintCompany A’s ComplaintCompany A’s Complaint

As part of an effort to curb the spread of footAs part of an effort to curb the spread of foot--andand--mouth disease, the National Veterinary mouth disease, the National Veterinary Research and Quarantine Service (NVRQS) Research and Quarantine Service (NVRQS) announced all imported food product materials announced all imported food product materials containing egg content would be subject to containing egg content would be subject to inspection by the Korean Customs Service upon inspection by the Korean Customs Service upon entry into the country.entry into the country.

As a result, a foreignAs a result, a foreign--invested company invested company importing premix containing egg flour importing premix containing egg flour

Ombudsman brought the issue to the Ombudsman brought the issue to the attention of relevant government officials. attention of relevant government officials.


PrePre--pasteurized premix was made an exception to the inspection pasteurized premix was made an exception to the inspection requirement, allowing the company to obtain its shipment on requirement, allowing the company to obtain its shipment on time.time.

faced a possible suspension of production faced a possible suspension of production due to the lengthy delay in receiving the due to the lengthy delay in receiving the shipment.shipment.

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Grievance Related to Introduction of New Grievance Related to Introduction of New HaechiHaechi Taxis by City of SeoulTaxis by City of Seoul



Automaker’s ComplaintAutomaker’s ComplaintAutomaker’s ComplaintAutomaker’s Complaint

The Seoul Metropolitan Government announced The Seoul Metropolitan Government announced its plan to change the color of commercial taxis its plan to change the color of commercial taxis to orange starting Feb. 1, 2010 as part of its to orange starting Feb. 1, 2010 as part of its initiative to transform Seoul into a global design initiative to transform Seoul into a global design city.city.

Unlike local automakers, foreign automakers Unlike local automakers, foreign automakers would require at least one year of preparation to would require at least one year of preparation to introduce the new color. introduce the new color.

Therefore, they requested postponing theTherefore, they requested postponing the

In an effort to resolve the issue, the In an effort to resolve the issue, the Ombudsman organized a meeting Ombudsman organized a meeting between relevant automakers and the between relevant automakers and the Seoul Government.Seoul Government.⇒ ⇒ The Ombudsman also requested The Ombudsman also requested

the cooperation and support of thethe cooperation and support of theSeoul Metropolitan Government andSeoul Metropolitan Government andPrime Minister's Office. Prime Minister's Office.


The introduction date of new taxis was postponed to after August The introduction date of new taxis was postponed to after August 2010 for Automaker R.2010 for Automaker R.

e e o e, t ey equested postpo g t ee e o e, t ey equested postpo g t eintroduction date of new taxis. introduction date of new taxis. However, the request was rejected by the However, the request was rejected by the city of Seoul.city of Seoul.

Difficulties in Constructing Oil Tank FacilitiesDifficulties in Constructing Oil Tank Facilities

O b d ’ A tiO b d ’ A ti


Company O’s ComplaintCompany O’s ComplaintCompany O’s ComplaintCompany O’s Complaint

YeosuYeosu Regional Maritime Affairs and Port Regional Maritime Affairs and Port Office requested the project plan of oil tank Office requested the project plan of oil tank storage and jetty facilities to shift near to the storage and jetty facilities to shift near to the coast, leading to increased costs on the part coast, leading to increased costs on the part of the foreignof the foreign--invested company invested company constructing the facilities.constructing the facilities.

The Ombudsman visited the Ministry of The Ombudsman visited the Ministry of Land, Transport and Maritime Affairs Land, Transport and Maritime Affairs (MLTM) and Yeosu Regional Maritime (MLTM) and Yeosu Regional Maritime Affairs and Port Office to discuss the Affairs and Port Office to discuss the issueissue. .


An agreement was made to conduct a maritime transport safety An agreement was made to conduct a maritime transport safety evaluation to finalize the plan for the facilities. evaluation to finalize the plan for the facilities.

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Delay in Launching Factory ConstructionDelay in Launching Factory Construction

O b d ’ A tiO b d ’ A ti


Company E’s ComplaintCompany E’s ComplaintCompany E’s ComplaintCompany E’s Complaint

A foreignA foreign--invested company faced difficulties invested company faced difficulties in launching the construction of a factory site in launching the construction of a factory site faced a refusal of the expropriation of private faced a refusal of the expropriation of private land, leading to the delay by the city of land, leading to the delay by the city of Cheonan to grant permission for the factory Cheonan to grant permission for the factory construction. construction.

The Ombudsman discussed the issue The Ombudsman discussed the issue with the acting governor of Chungnam with the acting governor of Chungnam ProvinceProvince. .


Taking into account the planned expropriation of land, the city of Taking into account the planned expropriation of land, the city of Cheonan granted permission to launch the construction. Cheonan granted permission to launch the construction.

VV U d t th O b d S tU d t th O b d S tV.V. Upgrades to the Ombudsman SystemUpgrades to the Ombudsman System

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Strengths of the Ombudsman SystemStrengths of the Ombudsman System

Credibility and Facility : Civilian status of Foreign Investment Ombudsman and Home DoctorsImplementation of a friendly, objective approach Strict confidentiality of sensitive information concerning grievances

Objectivity and Flexibility :Bridging the gap between government bodies responsible of granting permissions and licenses and foreign investors who often have a tendency to avoid direct contact with government

Operation of Home Doctor System :One-on-one, one-stop services provided by Home Doctors

Expertise : Home Doctors with expertise in various fieldsKnow-how and expertise accumulated over past 10 years

Development of network with foreign investors through continuous contacts and communication

Recognition of the Ombudsman's Office by the Recognition of the Ombudsman's Office by the International Community International Community

WAIPA Award 2007 Presented to KOTRA for Excellence in Aftercare Service at the Annual World Investment Conference

WAIPA Award 2007 (March 9th 2007, Geneva, Switzerland)WAIPA Award 2007 (March 9th 2007, Geneva, Switzerland)

World Association of Investment Promotion Agencies European Union Chamber of Commerce in Korea

Investment Ombudsman was honored with the Responsible Partner Award,presented by the EUCCK at the Chamber’s 2008 Korea/EU IndustrialCooperation Day awards ceremony for his efforts in assisting Europeancompanies pursue business in Korea.

Responsible Partner Award given by the EUCCK (December 8Responsible Partner Award given by the EUCCK (December 8thth 2008)2008)

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Ombudsman has made presentations on the Ombudsman System atvarious global conferences and meetings.

- UNCTAD Meeting Geneva Switzerland (November 23rd~24th 2006)

Ombudsman System is Emulated by a Number of Foreign CountriesOmbudsman System is Emulated by a Number of Foreign Countries

Global Benchmarking of Korea’s Global Benchmarking of Korea’s Ombudsman System (1)Ombudsman System (1)

UNCTAD Meeting, Geneva, Switzerland (November 23rd 24th, 2006)- OECD Conference , Paris, France (March 27th , 2008)- APEC Seminar, Lima, Peru (May 19th , 2008)- Turkey Investment Forum (February 11, 2009)

Latin American countries, especially, Latin American countries, especially, Argentina and Brazil plan to adopt a Korean Argentina and Brazil plan to adopt a Korean type model.type model.

Central Asian countries, including Central Asian countries, including Uzbekistan & Kazakhstan, have invited the Uzbekistan & Kazakhstan, have invited the Ombudsman and Home Doctors to give a Ombudsman and Home Doctors to give a presentation to benchmark Korea’s presentation to benchmark Korea’s Ombudsman system.Ombudsman system.

World Bank has also expressed interest in World Bank has also expressed interest in the Korean Ombudsman system as a success the Korean Ombudsman system as a success storystory

Study Tour on FDI Aftercare Service by UNCTAD/WAIPA Study Tour on FDI Aftercare Service by UNCTAD/WAIPA

The study tour group, composed of 12 relevant personnel fromthe investment promotion agencies of 11 countries, visited toK t i i i ht i t th t ’ FDI ft i i

Global Benchmarking of Korea’s Ombudsman System(2)Global Benchmarking of Korea’s Ombudsman System(2)

An UNCTAD/WAIPA study tour group visited the Ombudsman’s Office, March An UNCTAD/WAIPA study tour group visited the Ombudsman’s Office, March

30th to April 3th 2009, to benchmark Korea’s successful ombudsman system.30th to April 3th 2009, to benchmark Korea’s successful ombudsman system.

Korea to gain insight into the country’s FDI aftercare service indepth through presentations on actual grievance cases

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ⅥⅥ Projects in Progress on behalf of Foreign Projects in Progress on behalf of Foreign ⅥⅥ. . Projects in Progress on behalf of Foreign Projects in Progress on behalf of Foreign

InvestorsInvestors

To request the relevant authorities to submit internal data and provide To request the relevant authorities to submit internal data and provide

cooperation for oncooperation for on--site visits. site visits.

Reinforcement of the Reach of the Ombudsman

Foreign Investment Promotion Act has been newly amended (April , 2010) Foreign Investment Promotion Act has been newly amended (April , 2010)

To recommend system improvements.To recommend system improvements.

☞ Effective from October, 2010

The amendment helps the Ombudsman’s office effectively execute the grievance resolution processes, on-site. The amendment helps the Ombudsman’s office effectively execute the grievance resolution processes, on-site.

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Grievance resolution performance has been added to the evaluation criteria Grievance resolution performance has been added to the evaluation criteria

for local governments' foreign investment promotion activities for local governments' foreign investment promotion activities

Reinforcement of NationReinforcement of Nation--wide Foreign Investment Aftercare Serviceswide Foreign Investment Aftercare ServicesThrough Joint Efforts With Local GovernmentsThrough Joint Efforts With Local Governments

Reinforcement of the Reach of the Ombudsman(2)

for local governments foreign investment promotion activities. for local governments foreign investment promotion activities. ⇒⇒ BeginningBeginning inin 20102010,, jointjoint evaluationevaluation ofof locallocal governments'governments' grievancegrievance resolutionresolution

performanceperformance isis toto bebe conductedconducted basedbased onon thethe previousprevious year'syear's recordsrecords..

☞ The law in force :Foreign investment promotion offices of local governments submitquarterly reports on grievance resolution performance to the ForeignInvestment Ombudsman.

V V C l di R kC l di R kV. V. Concluding RemarksConcluding Remarks

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StillStill--existing Caveats for Korea’s FDI Environmentexisting Caveats for Korea’s FDI Environment

To realize the goal of becoming a business hub, Korea still needs to address:

X h bi li Xenophobic mentality High wages

Occasionally militant and unlawful labor activitiesNeed to enhance various absorptive capacities to move toward advanced open-economy status

EFTAEFTA KoreaKorea USAUSA

CanadaCanadaRussiaRussia

FTA networkFTA network

ASEANASEAN

ChileChile

USUSIndiaIndia

MexicoMexicoSingaporeSingapore

Why do Grievances Continue to Rise Why do Grievances Continue to Rise Despite Proactive Aftercare Services?Despite Proactive Aftercare Services?

Like many other countries, Korea’s legal system is not able to embrace "Real World Problems" due to rapid change in business environment

Both institution-building and legal enactment require a timeconsuming consensus building process

In-depth research on international best practice requiresa comprehensive and comparative analytic studies

There exist Acts, Enforcements, Rules and Ordinances, There exist Acts, Enforcements, Rules and Ordinances, which are inconsistent with each other, and inconsistencies between ministries, creating a “gray area” subject to arbitrary interpretation by public officials

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MNCs’sMNCs’sFirm Specific Firm Specific Advantages (FSA)Advantages (FSA)

Korea’s Future FDI PolicyKorea’s Future FDI Policy

Rugman’sRugman’s FSAFSA--CSA MatrixCSA Matrix

Most desirable Most desirable FDI policy for FDI policy for

StrongStrongWeak

Korea’sKorea’sCountry Specific Country Specific Advantage (CSA)Advantage (CSA)

-R&D

-Global Best Practices

-Tech Transfers

FDI policy for FDI policy for KoreaKorea

Weak

g ( )g ( )- Location- Logistics- IT- Skilled Labor Force

New financial architecture and IMF reformPromotion of trade and investment liberalization and facilitation

☞ Korea emphasized “Standstill” on protectionist measures and roll-backto pre-crisis period at the G-20 meeting

☞ Push toward the completion of DDA

Korea will host and Chair GKorea will host and Chair G--20 Leaders’ Summit 20 Leaders’ Summit Meeting, November 2010Meeting, November 2010 to address “TILF”to address “TILF”

☞ Push toward the completion of DDAGreen growth initiatives to address Climate ChangeKnowledge sharing programs : Sharing development experiences with developing economiesReflection of Non G-20 members’ views

☞ Korea aims to become a world class FDI destination

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Concluding Remarks to Foreign Investors

The Ombudsman Office as a trustworthy advocate and dedicated supporter of foreign investors, always considers the interests of foreign invested companies as the top priority, attending to each

Knock on the Door of the OFIO Anytime

Your Reliable Your Reliable HighHigh quality FDIquality FDI

difficulty from their perspective.

Your Reliable Your Reliable Partner:Partner:The OmbudsmanThe Ombudsman

HighHigh--quality FDIquality FDIbyby Multinational Multinational

CompaniesCompanies

ombudsman services for foreign investors as a dispute...

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