Korean Investment Research Articles

Korean Investment in EU through Holding Companies: A Case Study

When transnational enterprises set subsidiary companies in certain area, their major aim is to invest indirectly through the holding companies which hold invested share. Especially, because of the geographical neighborhood and economic integration, investing by holding companies is common in Europe. In Europe, taking full advantage of holding company is out of the following two reasons. Firstly, the efficiency and flexibility of the manage strategy of a group could be elevated by making full use of the holding company. Secondly, the transnational enterprises have the possibility of flexible management at the tax strategy level. Recently, the Korean companies are making the best use of holding companies when they are Marching into the EU. In the year 1996, group K purchased 8 enterprises of a certain industry section of B, a German company, setting holding companies in Germany. The analysis result of the case shows that the manage efficiency could be risen and the taxation could be reduced by way of making use of holding companies. As to the Korean investment efficiency of overseas indirect investment in EU, this thesis brought forward a blueprint about integrating the local companies.

Korean Investments in Latin America: Current Status and Prospects

This thesis first took an overall look at the relationship between Asia and Central and South America. Meanwhile, this thesis studied the growth potential of these two continents and the rapid growth trend compared with other areas. Based on these, this thesis emphasized the necessity of the cooperation between Asia and Central and South America, which has been alienated for a long period. Upon studying of this thesis, the reader will track the connection of the overseas investment strategy of Korea to the domestic and overseas economic factors while analyzing its motivation and feature, etc. Also, it analyzes Korea's future investment in Central and South America as comparing with the strategies of Japan and Taiwan. Besides, in this thesis the author is trying to get future-oriented experiences from the analyses in areas such as trade, investment experience, culture difference and personnel exchange, and the prospect of the relationship between Korea and Central and South America. This thesis brought forward the 'blueprint' about promoting the cooperation between Asia and Central and South America, such as to organize the meeting for the new setting summit conference of Asian and Central American leaders, to add members from Central and South America countries to the MERCOSUR of APEC, to expand items in order to promote mutual-communication.

Korean Direct Investment in Indonesia in the 1990s: Dynamics and Contradictions

Abstract: The case of Korean investment in Indonesia in the 1990s, particularly in the manufacturing industries, provides important insight into the current trend of intra-Asian capital flows. This article argues that the analysis of super-exploitation of cheap Indonesian labor by Korean manufacturing firms as a sole determinant of causing industrial relocation may serve to neglect more critical contributing elements. These include non-wage factors such as time coincidence, the active role of the state, socio-political and institutional conditions of the host country, and cultural similarities between the host and home countries. A critical analysis of Indonesia’s institutional and political structures may provide important insight into the way in which Korean manufacturing firms are successful in the Indonesian market despite mounting labor disputes among Korean-owned manufacturing firms in recent years.

South Korean Economic Relations with Russia

The paper examines the changing relationship between political and economic factors that have influenced economic relations between the Republic of South Korea and Russia from 1992 through Korea's financial crisis in late 1997. Also presented is a historical account of evolving political interaction and bilateral trade between South Korea and the Soviet Union. Much of the trade and investment data is derived from statistical reports furnished by the Bank of Korea and the Korean Foreign Trade Association. Selected data on Korean investments in Russia are tabulated by sector and corporate origin, with special attention devoted to trade and projects involving the Russian Far East. Journal of Economic Literature, Classification Numbers: F14, F21, N15,052,053. 3 figures, 7 tables, 36 references.

Toward Korean unification: A policy proposal for investment in North Korea*

South Korea became a net‐provider of foreign direct investment in the late 1980s, and is now emerging as a major source of foreign direct investment in ASEAN and China. In general, the economic gains that the host country realizes from foreign direct investment are not a factor that the home country should take into account in deciding its policy on outward investment. The case of South Korea is, however, an exception to this general principle because of the possibility of the eventual unification of the two Koreas. Given that the unification cost borne by South Korea will decrease as the North Korean economy improves, the South Korean government should actively encourage South Korean investment in North Korea by offering appropriate incentives. The rationale for this policy is that the beneficial effect of investment on the North Korean economy is not a factor taken into account by private investors. Policy measures in this direction include the provision of a corrective subsidy for North Korea‐bound investment.

Korean and Japanese foreign direct investment in Europe: an examination of comparable and contrasting patterns

Korean and Japanese foreign direct investment in Europe: an examination of comparable and contrasting patterns

Korean foreign direct investment in Europe: The determining forces

Abstract Korea's more complete integration into the world economy has been stunted by past government policies aimed at preserving comprehensive control over the domestic economy. This situation has recently changed owing to prevailing structural weaknesses in the Korean economy and the dictates of the global competitive environment. Consequently, the level of Korean overseas investment has escalated, particularly in Europe — the Triad region which has traditionally attracted limited inward FDI from Korea's large chaebol companies. This paper examines the determining forces that lie behind this trend. It is recognized that early Korean investments in the EU were principally driven by reactionary motives when confronted by actual or anticipated policy threats. While it is argued that the pretext for such investment has not significantly diminished, the imperatives of globalization together with emerging economic conditions in both east and west Europe have provided considerable incentives for more proactive FDI strategies to be adopted. The recent announcements by senior chaebol of intended large‐scale investments in Europe suggest that this new pattern is becoming increasingly apparent.

Korean direct investment in Southeast Asia

Abstract One of the most conspicuous developments in recent years in the Korean political economy is the enormous increase of Korean investment in Southeast Asia, especially Indonesia. In particular, since the appreciation of the Korean currency (won) in 1987 and the rapid increase of industrial action by Korean workers, more Korean foreign direct investment (FDI) has been carried out by small-and medium-sized firms, particularly in the manufacturing sector. However, many of the Korean firms in the region have already experienced various problems. This article examines the determinants of the new phase of Korean FDI. It also discusses the possible consequences of Korean FDI in Indonesia.

Korea’s Direct Foreign Investment in Southeast Asia

This article presents an analysis of the theoretical relationship between a country's economic development and its investment position, and applies it to Korean investment in three industries ?footwear, apparel, and consumer electronics ? in Southeast Asia. It is argued that Korean investment was motivated by rapid wage increases at home, substantial currency appreciation, and trade restrictions on its exports in Korea's major trading partner countries. Foreign investment has helped Korean exporters to remain internationally competitive, and the Korean economy has gained by transferring abroad some of its labour-intensive industries in which it was losing its comparative advantage. Korean investment in Southeast Asia has had the beneficial effect of creating employment in the host countries. However, it has had little linkage effect since most of the machinery and equipment as well as materials and parts were brought over from Korea. Also, there seems to have been little transfer of technology to the host countries. It is, however, expected that with time linkages will develop and technologies and know-how will be transferred to the host countries.

Risk, return, and equilibrium in the emerging markets: Evidence from the Korean stock market

This study examines, with the methodology of Fama and MacBeth ( Journal of Political Economy 71: 607–636, 1973), whether the capital asset pricing model (CAPM) is applicable to the Korean stock market, which is small and relatively underdeveloped in comparison with the U.S. and other advanced nation stock markets. Our empirical findings indicate that the Sharpe-Lintner-Mossin CAPM paradigm is not adequate in the Korean stock market. First, the critical condition of the CAPM, a positive trade-off between market risk and return, is rejected. Second, we find that residual risk played an important role in pricing risky assets. The inadequacy of the CAPM in the Korean stock market may be attributed to market inefficiency and the highly undiversified portfolios held by the Korean investors.

The Korean experience in FDI and Sino-Korean relations

The possibility of regional cooperation in the Yellow Sea Rim (YSR) area has been discussed since the early 1980s. In recent years, Korean outbound foreign direct investment (FDI) has increased rapidly and it will be growing much further. In the new phase of the global economy and the post-cold war political environment, Korean firms consider the socialist countries, especially China, to be attractive new partners for trade and investment projects. Foreign investment contributed to economic growth in developing countries. In the early stage of industrialization in the 1970s, the share of foreign firms amounted to about one-tenth of the total manufacturing employment in Korea. Similarly, outbound Korean FDI could also play an important role in the industrialization of the LDCs in Southeast Asia and China. A case study of a Korean multinational corporation reveals that the direct employment effect of Korea’s FDI is extensive in terms of money invested. In spite of the complementarity in economic structure and the phase of development between Korea and China, the prospect of Korea’s outbound FDI is not all clear. However, one can safely assume that the unit scale of FDI projects will increase. Unlike in the past, the large Korean corporations are now preparing more than a few fair-sized projects in China. The positive impact of those FDI will be significant. The YSR cooperation, if successful, could create efficient economic cooperation based on complementarity between Korea and China. The Korean outbound FDI would pave a road to such regional cooperation.