Korea expands incentives to attract FDI

The government will expand the amount of cash grants for foreign businesses and temporarily remove the minimum investment requirements imposed on those wanting state subsidies, officials said yesterday.

Currently, foreigners who invest more than $10 million are qualified to receive government cash grants.



"The current cash grant policy has been regarded as insufficient," Lee Dong-geun, a deputy minister at the Ministry of Knowledge Economy, said. The government offers cash grants of around 5-10 percent of foreign investment coming into Korea, officials said.

The government said it will concentrate on putting the country`s green growth-related industries on the forefront.

The government has selected 17 eco-friendly new growth industries that could attract investment by up to 100 foreign companies. Measures were discussed during a presidential meeting on national competitiveness.

The measures come as foreign investment in the first quarter of the year dropped 38 percent to $1.6 billion from the same period last year, the government said. The government initially said it planned to draw $12.5 billion in FDI earlier in the year.

Foreign investment is vital to the nation`s economy as it creates jobs and production.

According to the ministry, foreign firms created 320,000 jobs as of last year, saw 184 trillion won in sales and exported $55.3 billion worth of products.

In a related development, the government will also suspend or scrap a total of 280 regulations on the corporate sector as part of its deregulation drive, officials said.

The government will ease rules for building factories and lower rent for small- and medium-sized enterprises using state-owned facilities or assets.

According to the Prime Minister`s Office, the government will also extend the grace period for small companies to get corporate and income tax exemption until 2010.

The government will also allow construction companies to renovate existing buildings aged 15 years from the current limit of 20 years as well as extending the size of building from 10 percent to 30 percent. Builders are permitted to increase the number of floors when renovating a building.

The government`s easing of the rules in the construction sector will save many builders currently suffering from liquidity. The construction sector accounts for about 18 percent of the country`s GDP.

Also, the new measure will allow foreign-investment companies to form a private contract on land subjected to state-led city development and medical institutions to run accommodation facilities, bookstores and PC rooms for patients and their families.

Of the 280 rules, the government will temporarily ease 140 cases to encourage companies to quickly make investments. The government said the bill will be submitted to the National Assembly next month and will go into effect in July.

By Cho Chung-un



(christory@heraldm.com)