Foreign Investment Ombudsman125.131.31.47/Solars7DMME/004/192018Foreign...aftercare services to...

KOTRA자료 19-025

ISBN 979-11-6097-965-7 (95320)

Foreign Investment Ombudsman


2 3

2018 Foreign Investment Ombudsman Annual Report

The Office of the Foreign Investment Ombudsman was established in 1999 to provide aftercare support

and grievance resolution services for foreign investors and foreign-invested companies in Korea. Directly

commissioned by the President, the Foreign Investment Ombudsman works to resolve various grievances

of foreign investors and foreign-invested companies through close cooperation with ‘Home Doctors,’ who

have deep knowledge and expertise in their respective fields of finance, taxation, intellectual property,

construction, labor, environment, etc. as well as with investment cooperation officers dispatched from the

central and local governments.

These efforts have been widely recognized by foreign-invested companies in Korea and is highly regarded by

international organizations including the OECD, the World Bank, and UNCTAD as a best practice for providing

aftercare services to foreign investors. As such, many countries around the world are benchmarking our

Ombudsman system.

Nevertheless, we will not stop here. The Office of the Foreign Investment Ombudsman will continue to

spare no effort in resolving the very last issue faced by foreign investors already doing business here and

potential investors who see Korea as a possible investment destination.

Kim Sung Jin


Our effOrts will nOt stOp“

Ombudsman’s Message

4 5


The Foreign Investment Ombudsman System and the 06

Grievance Resolution Body

Annual Highlights 2018 08

Foreign Direct Investment Volume and Trends 15

1. Global Foreign Direct Investment Trends 16

2. Foreign Direct Investment Trends in Korea 25

The Foreign Investment Ombudsman System and 33

the Grievance Committee

1. Introduction to the Foreign Investment Ombudsman System 34

2. Operation of the Grievance Committee 37

Foreign Investment Aftercare Performance 2018 41

1. Grievance Resolution Activities and Achievements 42

(1) prevention and resolution of foreign-invested

companies’ grievances

(2) reinvestment attraction activities

(3) Aftercare visits to parent companies

(4) Quarterly report on grievance resolution

CONTENTS

4 5


2. Proactive Grievance Procedures 53

(1) in-depth examination of foreign employees’ living condition in Korea

(2) Create job by vocational training

3. Communication Channels for Foreign-Invested Companies 56

(1) roundtable for foreign-invested companies by industry

(2) identify grievances by supporting foreign investment

Caravan events held in different regions

(3) regulatory information service for foreign investors

4. Ombudsman System Promotion Activities 63

(1) Ombudsman Knowledge sharing program (Ksp) for foreign

governments and relevant agencies

(2) Ombudsman system promotion activities

Appendix 71

1. foreign investment Ombudsman’s legal authority and rights 72

2. results and best practices of legislative improvement 73

3. results and best practices of administrative intervention 78

*

CONTENTS

6 7


The Foreign Investment Ombudsman Systemand the Grievance Resolution Body

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: October 26, 1999

- Place of establishment: Korea Trade-Investment Promotion Agency

Purpose

Responsibilities

Legal Basis

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)

Organization


Office of the Foreign Investment Ombudsman

- Executive Consultants (Home Doctors) in the fields of finance, accounting,

intellectual property, labor, construction, etc.

- Employees of KOTRA (team members of the Office of the Foreign Investment

Ombudsman)

Areas of Support

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.

Assign Home Doctors (executive consultants) to each foreign-invested company to

receive and resolve grievances

Request cooperation to the government and relevant organizations and recommend

legislative improvements to resolve grievances

6 7


Tel : +82-2-3497-1821 Fax : +82-2-3497-1699 Website : ombudsman.kotra.or.kr

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

History

June 1991: Establishment of the Office of the Foreign Investment Consultation within the Ministry

of Trade and Industry

Apr. 1996: Restructuring and renaming 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.

Oct. 1999: Dr. Wan-Soon Kim commissioned as the first Foreign Investment Ombudsman

Mar. 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.

Jan. 2002: Office of Foreign Investment Ombudsman included within the KISC

Dec. 2003: Reorganization and renaming of the KISC as Invest Korea

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

May 1, 2006: The Grievance Resolution Body placed under the purview of Foreign Investment

Ombudsman

Apr. 2008: Dr. Choong Yong Ahn appointed as a member of the Presidential Council on National

Competitiveness

Feb. 2010 - May 2011: Dr. Choong Yong Ahn reappointed as member of the Presidential Council

on National Competitiveness

Jan. 2009 - 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

Mar. 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

Apr. 2015: Dr. Jeffrey I. Kim commissioned as the sixth Foreign Investment Ombudsman

Aug. 2018: Dr. Sung Jin Kim commissioned as the seventh Foreign Investment Ombudsman

The Foreign Investment Ombudsman System and the Grievance Resolution Body

8 9


Annual Highlights 2018

1. Foreign Direct Investment (FDI)

Foreign Direct Investment Volume and Trends

(Results) FDI flows into Korea increased by 17.2% to USD　26.9 billion in comparison to 2017,

reaching a record high and continuously increasing.

| FDI flows to Korea (notification) |

(Unit : USD billion)

2013 2014 2015 2016 2017 2018

Notification Basis 14.55 19 20.91 21.3 22.94 26.9

Arrival Basis 9.88 12.08 16.5 10.6 12.82 16.39

* Source: 2018 Foreign Direct Investment Trends, MOTIE (January 2019)

(By region) While traditional flagship industries have seen strong FDI inflows, new growth fields

including bio-pharma and IT also increased highly　due to　the increase in investment from

advanced countries such as the US and EU, and China.

(By industries) The FDI increased by 38.9% in the manufacturing sector due to machines and 1.4%

in the service sector due to information and communications.

(By investment type) Greenfield investment greatly increased by 115.6% in the key manufacturing

industries including automobile, electrical/electronics, and machines/equipment. M&A investment

increased by 10.4% in the service sector.

(Amount of Investment) Reinvestment increased by 68.5% in comparison to 2017, while new

investment slightly declined by 4.1%. For the annual FDI inflows, reinvestment exceeded new

investment by USD 2 billion.

8 9



2. Foreign Investment Aftercare Performance 2018

Prevention and resolution of foreign-invested companies’ grievances

Home doctors made on-site visits to identify problems faced by foreign-invested companies and

provide consultation services. Grievance resolution services are largely divided into three types;

legislative improvement, administrative intervention, and Home Doctor resolution.

The Office of the Foreign Investment Ombudsman received and closed 269 cases of grievances in

2018.

| Grievance Resolution |

(Unit: No. of cases, %)

Year

Grievance Type of Resolution

Total Growth RateLegislative

ImprovementAdministrative Intervention

Home Doctor Resolution

2016 409 △11.5 16 106 287

2017 289 △29.3 12 90 187

2018 269 △6.9 6 108 155

Reinvestment attraction activites

The Office of the Foreign Investment Ombudsman has contributed to improving Korea’s investment

environment through a series of activities such as resolving grievances and holding regular meetings

with foreign investors. Such activities had a direct/indirect impact on increasing reinvestment.

10 11


| Reinvestment attraction 2018 |

Company Business TypeNotified

ReinvestmentGrievances Resolution

Company A DistributionUSD

164,000,000 Support research to select investors

for a new project

Company BElectrical/Electronics

USD133,000,000

Provide help for wastewaterdischarge-related issues

Company CChemical

Engineering USD

57,000,000 Improve the Chemicals Control Act

Company DHotel and Restaurant

USD40,318,574

Provide support to the CEO andemployees regarding visa issues

Company ETransportation

MachineUSD

14,200,000 Support investment incentive and

research on land/site

Company FChemical

EngineeringUSD

10,000,000 Provide support to enter the Free

Economic Zone

Company G R&DUSD

5,432,964 Provide consultation about

employment issues

Aftercare visits to parent companies

The Office of the Foreign Investment Ombudsman visits parent companies of foreign-invested

companies every year to enhance the efficiency of grievance resolution. In 2018, the Ombudsman

visited eight companies and agencies in four European cities (Nov. 20 - 30). These companies

and agencies are expected to expand their businesses in Korea due to the successful resolution of

grievances.

Quarterly report on grievance resolution

In accordance with Article 21-4 (7) of the Enforcement Decree of the Foreign Investment Promotion

Act, the Office of the 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 the Foreign Investment Ombudsman and local governments.

10 11



3. Proactive Grievance Procedures

In-depth examination of foreign employees’ living condition in Korea

For the purpose of establishing an investment-friendly environment in order to increase FDI inflows

to Korea, joint-research with the Korea Productivity Center was conducted of employed foreign

residents regarding their living conditions in Korea for the past 5-12 months.

Based on research, policies will be selected to improve the living conditions of foreign employee

residing in Korea

Create job by vocational training

The Office of the Foreign Investment Ombudsman supported the implementation and promotion

of the Korean-German Chamber of Commerce and Industry’s Ausbildung Program, a system for

professional training and academic education. Further support will be provided so in the long term,

the program can be applied to other foreign companies or sectors including aviation, shipbuilding,

machine, and electric device.

4. Communication Channels for Foreign-Invested Companies

Roundtable for foreign-invested companies by industry

The Office of the Foreign Investment Ombudsman often holds small-scale roundtable by industry,

inviting relevant government bodies, agencies, and companies to respond promptly and effectively

to complaints raised by foreign-invested companies. In 2018, 11 meetings were held in the fields of

chemistry, finance, medicine, etc.

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| Roundtable for foreign-invested companies by industry 2018 |

No. Date/Location Industry

1Mar. 6

Sheraton Seoul Palace Gangnam Hotel1st Chemistry Roundtable

(7 companies, 4 grievances)

2Mar. 8

Sheraton Seoul Palace Gangnam HotelMeeting with Chinese companies


3Mar. 16

Sheraton Seoul Palace Gangnam Hotel Roundtable with the finance industry


4Mar. 21

Sheraton Seoul Palace Gangnam Hotel 2nd Chemistry Roundtable


5May 24

Ministry of Environment3rd Chemistry Roundtable


6July 6

Sheraton Seoul Palace Gangnam HotelRoundtable with Chambers of Commerce in Korea


7July 13

Sheraton Seoul Palace Gangnam HotelRoundtable with the pharmaceutical industry


8Sep. 7KOTRA

Roundtable with local governments(13 agencies)

9Oct. 12KOTRA

Roundtable about 3D printer(9 companies, 6 grievances)

10Oct. 23

Grand Intercontinental HotelRoundtable with the labor industry


11Dec. 10KOTRA

4th Chemistry Roundtable(9 companies, 2 grievances)

Identify grievances by supporting Foreign Investment Caravan events

held in different regions

Foreign-invested companies located in regional areas can be easily left out. To support such companies,

Home Doctors participated in Foreign Investment Caravan events that were held in different regions to

understand foreign-invested companies’ grievances. In 2018, Home Doctors participated in four Caravan

events held in Changwon (May 21), Daejeon (Aug. 30), Daegu (Oct. 31), and Yeosu (Dec. 13).

Regulatory Information Service for foreign investors

The Regulatory Information Service for Foreign Investors is provided to seek and consider the opinions

of foreign-invested companies during the legislative process. Government and National Assembly’s

legislative proposals relevant to foreign investment are translated into English and submissions made

by foreign investors are referred to relevant government bodies.

12 13


활동 및 성과 요약

In 2018, 274 government legislation and 363 National Assembly legislation (a total of 637) were

uploaded on the Regulatory Information Service website. The design of the biweekly newsletter

informing regulations has been improved to make it more readable and useful.

5. Ombudsman System Promotion Activities

Ombudsman Knowledge Sharing Program (KSP) for foreign governments and relevant agencies

The Office of the Foreign Investment Ombudsman is actively sharing its Ombudsman system and

know-how with foreign agencies that are trying to attract foreign investment.

| Promotional Activities for Foreign Delegations 2018 |

No. Date Agency Agenda

1Jan. 30 - Feb. 2

Haitian governmentConsultation regarding the implementation

of a similar aftercare service in Haiti

2Feb. 21

- 26Invest India

Establish a strategic plan to develop India’s investment attraction agency and conduct detail research

3 Mar. 23 Invest India Introduce Korea’s aftercare service

4 May 10 Invest IndiaFinal report meeting of establishing a strategic plan to

develop India’s investment attraction agency

5 June 7Council for the Development

of CambodiaIntroduce the Foreign Investment Ombudsman’s role

6 July 24 Ministry of Justice of Paraguay Introduce the Ombudsman system

7 Aug. 7Brazilian Trade and

Investment Promotion AgencyIntroduce the Ombudsman system

8 Sep. 6 Invest India, etc. Introduce the Ombudsman system to officials visiting Korea

9 Sep. 11Economic and Social Commission

for Asia and the PacificIntroduce the Ombudsman system at the

53rd APTA workshop

10 Nov. 13 Invest Mongolia Agency, etc.Support Mongolian National Development Agency (NDA)

and delegations of cabinet secretary to visit Korea

Ombudsman system promotion activities

Through various press channels, the Office of the Foreign Investment Ombudsman is publicizing the

excellence of the Home Doctor system. By writing columns and having interviews with the media,

the Office of the Foreign Investment Ombudsman is enhancing public awareness about foreign

investment.

The Office of the Foreign Investment Ombudsman makes and distributes brochures containing

regulatory information to foreign investors.

Foreign Investment Ombudsman Annual Report 2018


KOTRA자료 19-024

ISBN 979-11-6097-963-3 (95320)

Foreign DirectInvestment Volume

and Trends

1. Global Foreign Direct Investment Trends

2. Foreign Direct Investment Trends in Korea

I

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I Foreign Direct Investment Volume and Trends

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 decreased to USD　1.43 trillion, down by 23% compared to the previous

year. Cross-border M&A and greenfield investment decreased by 22% and 14%, respectively, which

are seen as the main cause for the decline.

| FDI flows by economic group, 2005-2017 |

(Unit: USD billion, %)

2005

3,000

2,000

1,000

2,500

1,500

500

02007 2010 20142009 20132008 2012 2016 20172006 2011 2015

World total

Developed economies

Developing economies

Transition economies

$ 1,430-23%

6710%

47-27%

50%

712-37%

* Source: World Investment Report 2018, UNCTAD (June 2018)

16 17


2018 Foreign Direct

Investment Volume and Trends Ⅰ

Regional FDI volume and trends

(Overall) Countries and regions mostly saw a double-digit drop in the global FDI inflows in 2017.

The main causes are the decline of FDI from advanced economies which account for a huge portion

and regulatory policies carried out by China in order to respond to the massive capital outflow that

occurred in 2015 and 2016.

(Advanced economies) FDI flows to advanced economies fell by 37% to USD 712 billion than the

previous year. Analysts point out that the plummet in global M&As due to the decline in large

megadeals and corporate restructuring is the main factor. Especially, the US and UK saw a huge

decrease by 40% and 92%, respectively.

(Developing economies) FDI inflows to developing economies in 2017 remained stable at USD　671

billion. While the 10% drop in 2016 has not been recovered, developing economies accounted for

47% in 2017 from 36% in 2016 of total FDI.

- Asia saw a stable FDI inflow in 2017 at USD 476 billion, becoming the largest foreign investment

region. Asia accounted for 33% in 2017 from 25% in 2016.

- FDI inflows to Latin America and the Caribbean region increased by 8% to USD 151 billion in 2017.

The increase constituted the first rise in six years but still, inflows are well below the peak reached

in 2011 due to weak demand for raw material.

- Africa is seeing a continuous decrease, down by 21% to USD 42 billion compared to 2016. Larger

the raw material export volume was, so was the decline.

(Least-developed countries) FDI inflows decreased by 17% to USD 26 billion in 2017. Landlocked

developing countries and small island developing countries saw an increase of 3% to USD 23 billion

and 4% to USD 4.1 billion, respectively.

18 19


| 2016-2017 FDI inflows by economic group |



Analysis of the causes of the sluggish global FDI in 2017

Changes in overseas assets operation, decreasing investment in the greenfield and manufacturing

sector, and continuous drop in FDI profit rate are pointed out to be the causes of the FDI decline in

2017.

18 19


2018 Foreign Direct


For changes in overseas assets operation, global companies’ sales largely increased compared to that

of assets and employment growth. The average annual growth of royalties and licensing fee receipts

(around 5%) were higher than that of trade in goods (around 1%).

The asset-light forms of overseas operations are harming the growth of the global value chain. As

international production and value-added creation are shifting from tangible production networks to

intangible value chains, both developed and developing countries are seeing a decrease in greenfield

investment in manufacturing. It is projected that this trend will affect the types of global trade.

Rates of return on inward FDI has declined for five consecutive years to 6.7% in 2017. Rates of return

in developing and transition economies (Southeast Europe and CIS) remained higher on average

while heavily resource-dependent regions including Africa are seeing a decline partly explained by

the fall in commodity prices. The cause of the decline in rates of return in other regions is explained

as the reduced fiscal and labor cost arbitrage opportunities in international operations.

| FDI profit rate by year and economic group |



20 21


| FDI inflows, top 20 host economies, 2016 and 2017 |



20 21


2018 Foreign Direct


| FDI outflows, top 20 home economies, 2016 and 2017 |



22 23


Major Global FDI Trends

Sharp decline in FDI flows to developed economies

- Developed countries still account for the largest share of FDI flows. However, after 2015-2016

when annual flows to developed economies exceeded USD 1 trillion, the FDI recovery sharply

declined.

- In the United States, authorities clamped down on tax inversions, becoming the major factor behind

the decline in new investment. However, reinvestment increased, as the prospect for tax reform

became more certain, United States MNEs postponed the repatriation of overseas earnings,

causing the peak in reinvested earnings.

- In general, FDI inflows to European economies declined. FDI to France and Germany rebounded in

2017, while the United Kingdom saw a sharp decline and Netherlands’s M&As, which accounted

for a large share of FDI, plummeted.

- Japan is continuously expanding its investment mostly in the Asia Pacific region. Sustainable

investment activities among multinational enterprises are notable.

Strengthen monitoring of foreign takeover

- Some economies are suddenly strengthening policies to limit foreign takeovers in order to

strategically safeguard national security and technology.

- According to UNCTAD, 65 economies adopted 126 policy measures related to foreign investment.

Of a total of 126 investment policy measures, 93 liberalized, promoted, or facilitated invested, while

18 introduced restrictions or regulations, and the remaining 15 were of a neutral or indeterminate

nature.

- While economies’ new investment policies are favorably open to foreign investment, the share of

restrictive or regulatory investment policies significantly increased in a short period. 30% of the

measures introduced from October 2017 to April 2018 were restrictive or regulatory, compared to

that of 2017, which was 14%.

- Such measures are to limit (entirely or partly) foreign investors from taking over companies dealing with

national security or strategic assets or technologies, or to strengthen investment screening mechanisms.

22 23


2018 Foreign Direct


Pursue gender balance in corporate boards

- At the end of 2017, women held an average of 22% of board seats in the top 100 multinational

enterprises, and five corporations had a female CEO.

- Although companies have a long way to go to improve gender balance, the top 100 multinational

enterprises are making great efforts to bring gender balance at the top.

- Some European countries have introduced quotas and targets, followed by America, where the

appointment of women is not regulated. Having more board seats held by women is important as

the market is becoming more sophisticated, which is why governments and the financial sector

are carrying out related research with great interest.

- Among developing countries, South African corporations have a comparable share of women

on their boards of directors. Companies in other developing countries, along with Japanese

corporations, lag significantly behind their Western and South African counterparts.

Investment agreement reaching a turning point

- In 2017, 18 new international investment agreements were concluded. The year marks the lowest

number of international investment agreements concluded since 1983, and for the first time,

effective treaty terminations (22) exceeded the number of new treaty conclusions.

- The total to international investment agreements by the end of 2017 was 3,322 (2,946 bilateral

investment treaties and 376 treaties with investment provisions), of which 2,638 were in force at

the year-end.

- Most of today’s new international investment agreements include a sustainable development

orientation, preservation of regulatory space, and improvements to or omissions of Investor-

State Dispute Settlement. Modernizing existing agreements than concluding new ones are more

preferred.

24 25


| Trends in International Investment Agreements signed, 1980-2017 |


Financial market investing in sustainable development

- Policies designed to promote investment in sustainable business and to support the achievement

of the SDGs are an increasingly important feature of the investment landscape. Efforts should be

made to set criteria of environmental, social, and governance issues for the assessment of long-

term investment.

- 54 exchanges have in place professional policies or systems for dealing with governance issues in

a systematic manner, and 40 of them provides substantiality indices.

- When a sustainable investment environment is established and expanded, the relationship

between multinational enterprises and shareholders, corporate policies, and practices can have a

more positive impact.

24 25


2018 Foreign Direct


2. Foreign Direct Investment Trends in Korea

Overall

(Results) FDI flows into Korea increased by 17.2% to USD 26.9 billion in comparison to 2017, reaching

a record high and continuously increasing.

| FDI flows to Korea by year (notification) |


2013 2014 2015 2016 2017 2018

Notification Basis 14.55 19.00 20.91 21.30 22.94 26.90

Arrival Basis 9.88 12.08 16.50 10.60 12.82 16.39


(Notification basis) In the first half of the year, FDI flows into Korea recorded the highest of USD 15.75

billion. Despite the decrease during Q3 and Q4, the annual FDI inflows reached a record high.

| 2018 FDI flows to Korea by quarter (notification) |

(USD billion, year-on-year, %)

Year

Q1 Q2 Q3 Q4 Annual

AmountGrowth Rate

AmountGrowth Rate

AmountGrowth Rate

AmountGrowth Rate

AmountGrowth Rate

2017 3.86 -9.0 5.74 △9.1 3.99 -11.2 9.36 +49.8 22.94 +7.8

2018 4.93 +27.9 10.82 +88.5 3.45 -13.6 7.70 -17.8 26.90 +17.2


(Arrival Basis) FDI inflows to Korea showed a stable increase to USD 10.2 billion during the first half

of the year. Despite the decrease during Q3 and Q4, the annual FDI inflows reached the second

highest to USD 16.39 billion.

26 27


| 2018 FDI flows to Korea by quarter (arrival) |

(USD billion, year-on-year, %)

Year

Q1 Q2 Q3 Q4 Annual

AmountGrowth Rate

AmountGrowth Rate

AmountGrowth Rate

AmountGrowth Rate

AmountGrowth Rate

2017 3.05 +45.1 2.40 -21.0 3.43 +49.2 4.68 +39.7 13.56 +25.7

2018 3.10 +1.7 7.10 +195 1.99 -42.1 4.20 -10.2 16.39 +20.9


Trends by region/economy

While traditional flagship industries have seen strong FDI inflows, new growth fields including bio-

pharma and IT also increased highly　due to　the increase in investment from advanced countries

such as the US and EU, and China.

Investment from Japan decreased due to the investment cycle (3-5 years) of traditional fields

including chemical engineering and electrical/electronics. Japanese investors are recently focusing

on the ASEAN region which is another factor explaining the decrease.

2018 FDI inflows to Korea by region/economy on notification basis

(Unit: USD 1million, %)

2017 2018

Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 AnnualGrowth

Rate

US 365 2,081 458 1,805 4,710 738 2,276 1,081 1,784 5,879 24.8

Japan 407 412 867 156 1,842 368 504 96 333 1,301 -29.4

E U 881 1,339 932 3,878 7,030 1,875 2,695 563 3,789 8,921 26.9

Asia 1,935 928 782 972 4,617 1,521 1,803 1,335 1,318 5,977 29.5

China 163 315 130 201 809 1,048 1,154 186 354 2,743 238.9

Others 268 980 953 2,550 4,749 432 3,541 375 475 4,822 1.5

Total 3,856 5,740 3,992 9,361 22,948 4,934 10,820 3,449 7,698 26,901 17.2

* Asia : China, Hongkong, Singapore, Malaysia, Taiwan


26 27


2018 Foreign Direct


2018 FDI inflows to Korea by region/economy on arrival basis


2017 2018


Rate

US 231 420 334 223 1,208 899 932 248 1,673 3,752 210.5

Japan 246 336 515 170 1,267 327 337 143 216 1,022 -19.3

E U 1,129 633 1,508 3,278 6,547 1,118 2,230 163 1,427 4,938 -24.6

Asia 1,035 609 443 685 2,772 377 1,070 1,019 587 3,054 10.2

China 42 67 22 71 202 25 696 27 33 781 287.3

Others 408 402 631 326 1,768 378 2,534 416 299 3,628 105.3

Total 3,049 2,401 3,431 4,682 13,562 3,100 7,102 1,988 4,203 16,394 20.9

* Asia : China, Hongkong, Singapore, Malaysia, Taiwan


Trend by business type

In 2018, chemical engineering and electrical/electronics FDI decreased among the traditional process

industry, while machines increased by 38.9% compared to the previous year (notification basis). In

addition, global value chain investment via investing in related industries is increasing.

For the service sector, FDI inflows to information & communications and business support /rental

grew rapidly due to a paradigm shift in the industry, while real estate and distribution saw a decrease

due to a sluggish economy and consumer sentiment drop. The total FDI increased by 1.4% compared

to the previous year.

* business support /rental: facility maintenance, guards, travel agency,

rental of machines and equipment

28 29


| 2018 FDI inflows to Korea by business type on notification basis |


2017 2018


Rate

Manufacturing 971 1,855 1,327 3,084 7,237 1,540 5,667 1,171 1,671 10,049 38.9

Parts & Materials

525 844 1,173 1,302 3,844 1,458 1,663 1,036 1,201 5,358 39.4

Services 2,822 3,866 2,605 6,076 15,369 3,341 5,032 2,271 4,938 15,583 1.4

Others 63 18 60 201 342 53 121 6 1,089 1,269 270.8

Total 3,856 5,740 3,992 9,361 22,948 4,934 10,820 3,449 7,698 26,901 17.2

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


| 2018 FDI inflows to Korea by business type on arrival basis |


2017 2018


Rate

Manufacturing 535 938 1,116 2,863 5,451 604 4,733 290 1,226 6,853 25.7

Parts & Materials

357 531 817 1,237 2,943 350 1,001 176 1,066 2,594 -11.9

Services 2,461 1,452 2,260 1,767 7,939 2,486 2,363 1,696 2,962 9,507 19.7

Others 53 11 55 52 171 10 6 2 15 34 -80.1

Total 3,049 2,401 3,431 4,682 13,562 3,100 7,102 1,988 4,203 16,394 20.9

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


28 29


2018 Foreign Direct


Trend by investment type

In 2018, greenfield investment greatly increased by 115.6% in manufacturing of key industries

including automobile, electrical/electronics, and machines/equipment. M&A investment increased

by 10.4% in the service sector (notification basis).

Greenfield investment is expected to increase mostly in new growth industries. Also, it is projected

that M&A will increase more in the service sector than in the manufacturing sector.

| 2018 FDI inflows to Korea by investment type on notification basis |


2017 2018


Rate

M&A 793 912 1,089 4,449 7,243 1,379 1,541 1,402 2,569 6,891 -4.9

Greenfield 3,063 4,828 2,903 4,911 15,705 3,555 9,279 2,046 5,129 20,009 27.4

Total 3,856 5,740 3,992 9,361 22,948 4,934 10,820 3,449 7,698 26,901 17.2


| 2018 FDI inflows to Korea by investment type on arrival basis |


2017 2018


Rate

M&A 1,155 925 1,363 3,189 6,632 801 1,527 605 1,960 4,893 -26.2

Greenfield 1,894 1,476 2,068 1,493 6,931 2,299 5,575 1,383 2,244 11,501 65.9

Total 3,049 2,401 3,431 4,682 13,562 3,100 7,102 1,988 4,203 16,394 20.9


30 31


Trend by fund

In 2018, reinvestment increased by 68.5% in comparison to 2017, while new investment slightly

declined by 4.1% (notification basis).

For the annual FDI inflows, reinvestment exceeded new investment by USD 2 billion, showing that

reinvestment is growing.

| 2018 FDI inflows to Korea by fund on notification basis |


2017 2018


Rate

NewInvestment

1,372 3,147 1,765 6,236 12,521 2,135 5,022 779 4,075 12,010 -4.1

Reinvestment 2,053 1,957 1,466 2,848 8,324 2,658 5,629 2,563 3,173 14,024 68.5

Long-termLoan

430 636 761 277 2,104 141 169 106 450 867 -58.8

Total 3,856 5,740 3,992 9,361 22,948 4,934 10,820 3,449 7,698 26,901 17.2


| 2018 FDI inflows to Korea by fund on arrival basis |


2017 2018


Rate

NewInvestment

925 806 1,587 2,103 5,421 552 2,082 437 817 3,888 -28.3

Reinvestment 1,589 1,223 1,057 2,331 6,200 2,242 4,854 1,420 3,000 11,515 85.7

Long-termLoan

535 372 787 248 1,941 306 166 132 386 991 -49.0

Total 3,049 2,401 3,431 4,682 13,562 3,100 7,102 1,988 4,203 16,394 20.9


30 31


2018 Foreign Direct

Investment Volume and Trends ⅠMEMO



KOTRA자료 19-024

ISBN 979-11-6097-963-3 (95320)

The Foreign Investment Ombudsman System and the

Grievance Committee

1. Introduction to the Foreign Investment

Ombudsman System

2. Operation of the Grievance Committee

Ⅱ

34 35


Ⅱ The Foreign Investment Ombudsman System and Grievance Committee

1. Introduction to the Foreign Investment Ombudsman System

(Purpose) The Foreign Investment Ombudsman system was introduced on October 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 |

Article 15-2 (1), (2), (10) 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.

Article 21-4 (2) 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 the Article 27-2 (1), (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.

34 35

The Foreign Investment Ombudsman

System and the Grievance Committee Ⅱ

(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.

(Improvement) In particular the Foreign Investment Promotion Act, partly revised on December 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.

| Legal Basis for the Function of the Office of Foreign Investment Ombudsman |

Article 15-2 (3) to (6) 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) (sub-mit unfulfilled recommendation as Agenda for the foreign investment Committee) of Article 15-2, the foreign investment promotion Act

36 37


Article 21-3 (2) to (6) 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.

(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) A foreign investment ombudsman may verify and inspect the performance of the details

of recommendations for corrective measures.

36 37



2. Operation of the Grievance Committee

(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 |

Article 21-4 (2), (3), (5) to (8) 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.

38 39



Kim, Sung Jin

DATE OF BIRTH March 20, 1951

EDUCATION Feb 1974 B.A. in Business Administration, Seoul National University, Korea

Aug 1977 M.S. in Industrial Science, KAIST, Korea

June 1986 M.A. in Economics, University of Washington, Seattle, Washington, U.S.A.

Aug 2002 Ph.D. in Economics, Kyunghee University, Korea

CAREER Dec 1976 Passed the High Civil Service Examination

Aug 1983 - Aug 1984 Deputy Director, Foreign Capital Policy Division,

Ministry of Finance and Economy (MOFE)

Mar 1991 - Jun 1993 Dispatched to UNCTC and UNDESD (New York, U.S.)

Jan 1995 - Feb 1996 Director of Administrative Coordination, Office of the Prime Minister

Feb 1996 - Nov 1999 Director of International Investment Division, Director of Securities

Policy Division, Director of Financial Policy Division, MOFE

Nov 1999 - May 2001 Assistant Secretary to the President for Civil and Legal Affairs,

Office of the President

May 2001 - Aug 2003 Deputy Director General of International Finance, Director General

of Economic Cooperation, Spokesperson, MOFE

Aug 2004 - Sept 2005 Senior Advisor to the Chairperson for Finance and Economy, Uri Party

Sept 2005 - July 2007 Deputy Minister for International Affairs, MOFE

July 2007 - Mar 2008 Administrator, Public Procurement Service

July 2008 - May 2013 Advisor and Visiting Fellow, Korea Capital Market Institute

Mar 2009 - present Adjunct Professor, Soongsil University, Seoul, Korea

Aug 2018 - present Foreign Investment Ombudsman

AWARDS Dec 2006 Awarded the 1st EU-Korea Awards

CERTIFICATIONS Sept 1978 - present Certified Public Accountant (CPA)

38 39



F A Q

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.



KOTRA자료 19-024

ISBN 979-11-6097-963-3 (95320)

ForeignInvestment Aftercare

Performance

1. Grievance Resolution Activities and Achievements


3. Communication Channels for Foreign-Invested

Companies


Ⅲ

42 43


Ⅲ Foreign Investment Aftercare Performance 2018

1. Grievance Resolution Activities and Achievements

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

Overall

Home doctors assigned to each company made on-site visits to identify problems faced by foreign-

invested companies and provide consultation services.

Grievances are handled in three ways; legislative improvement including Act amendment by

cooperating with relevant agencies and local governments, administrative intervention that requires

procedural interpretation or measures, and Home Doctor resolution.

The Office of the Foreign Investment Ombudsman provides a one-stop service that includes all types

of grievance resolution services such as providing information that foreign-invested companies need

via consultation or written documents.

Grievance settlement by resolution type

In 2018, the Office of the Foreign Investment Ombudsman handled a total of 269 grievances from

foreign-invested companies. Compared to last year (289 grievances), it decreased by 6.9%.

By resolution type, 6 cases were resolved through legislative improvements, 108 were resolved

through administrative intervention and 155 were resolved through the help of Home Doctors.

Legislative improvements and Home Doctor resolution decreased than the previous year while

administrative intervention increased.

42 43

Foreign Investment

Aftercare Performance Ⅲ

| Grievance resolution by year 2008-2018 |


Year

Field Grievance Resolution Type*

No. of Cases Growth RateLegislative

ImprovementAdministrative Intervention

Home Doctor Resolution

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 5 98 280

2014 437 14 9 112 316

2015 462 5.7 14 112 336

2016 409 △11.5 16 106 287

2017 289 △29.3 12 90 187

2018 269 △6.9 6 108 155

Total 4,103 - 138 957 3,008

* ‘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.

Grievances by area

Grievances related to labor/human resources were submitted to the Office of the Foreign Investment

Ombudsman the most, followed by visa/immigration, investment incentives, investment procedure,

and standards/certification/inspection. These five areas accounted for almost 50% of all (Others

were not included).

Grievances related to labor/human resources and investment incentives accounted for a large share

due to the increase in the minimum wage and abolition of tax exemption or reduction.

44 45


| Grievance resolution by area 2018 |

Labor relations & HR

Visa & immigration

Others

Investment incentives

Investment procedure

Standards, certification & inspection

Finance & foreign exchange

Intellectual property

Environment

Taxation

Customs & trade

Plant site

Insurance & welfare

Sales, distribution & advertisement

Construction & land

R&D

Civil disputes

Living environment

Road & transportation

Electricity & water supplies

Civil disputes

Labor disputes

The proportion of each area is similar to that of the previous year. The ratio of finance/foreign exchange

increased by 90% while grievances related to environmental issues, which had the largest share last

year, sharply decreased by 71%.

Most of the grievances from the environment area were submitted by chemical-related companies.

As the industry is highly swayed by legislation and regulations, the Office of the Foreign Investment

Ombudsman is paying keen attention to the moving trend and is helping foreign investors through

various activities such as holding regular roundtable by industries.

44 45

Foreign Investment


| Annual record of grievance resolution by area 2014-2018 |


구분 2014 2015 2016 2017

2018 Growth Rate

(‘18/’17)No. of Cases

Ratio

R&D 0 0 3 1 2 0.74 100

Construction & land 9 10 13 5 6 2.23 20

Plant site 14 12 9 16 10 3.72 -37.0

Customs & trade 37 37 17 19 10 3.72 -47.37

Finance & foreign exchange 11 11 16 10 19 7.06 90

Standards, certification & inspection 26 41 24 20 20 7.43 0

Labor relations & HR 28 24 27 20 35 13.01 75

Labor disputes 2 0 1 2 0 0 -100

Road & transportation 1 2 2 4 1 0.37 -75

Civil disputes 7 6 7 1 0 0 -100

Insurance & welfare 1 5 2 7 9 3.35 28.57

Visa & immigration 46 37 34 31 34 12.64 9.68

Living environment 2 6 3 1 1 0.37 0

Sales, distribution & advertisement 12 11 8 4 7 2.60 75

Electricity & water supplies 1 3 2 1 0 0 -100

Taxation 30 52 28 11 10 3.72 -9.09

Intellectual property 0 0 19 17 15 5.58 -11.76

Unfair treatment 1 4 4 0 1 0.37 N/A

Investment incentives 56 51 58 29 25 9.29 -13.79

Investment procedure 55 58 42 18 20 7.43 11.11

Environment 9 14 29 38 11 4.09 -71.05

Others 89 78 61 34 33 12.27 -2.94

Total 437 462 409 289 269 100 △6.9

46 47


Other activities to prevent grievances

The Office of the Foreign Investment Ombudsman and Home Doctors are making on-site visits to

foreign-invested companies and foreign chambers of commerce in Korea and are providing walk-in

consultation at the Ombudsman’s office. As an active troubleshooter and the main communication

channel, the office and Home Doctors endeavor to build a mutually constructive relationship with

foreign investors.

(2) Reinvestment attraction activities

Reinvestment in Korea

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

operating in Korea. Reinvestment is continuously increasing along with the total amount of FDI.

The amount of reinvestment (notification basis) in 2018 increased by 69.5% to USD 14 billion than

the previous year. The share of reinvestment ratio in 2018 increased to 52.1% from 36.1% in 2017.

| 2018 FDI by investment type |

(Unit: USD million, %)

2017 2018 Growth Rate

(‘18/’17)Amount Ratio(%) Amount Ratio(%)

Notification

New investment 12,568 54.8 12,010 44.6 -10.2

Reinvestment 8,271 36.1 14,024 52.1 16.0

Total 22,943 100 26,901 100 -

Arrival

New investment 5,228 40.8 3,888 23.7 -17.1

Reinvestment 5,949 46.4 11,515 70.2 23.8

Total 12,819 100 16,394 100 -

* Long-term loan is included in total

** Source: Foreign Direct Investment Trends 2018, MOTIE (January 2019)

46 47

Foreign Investment


Reinvestment has accounted for nearly half of Korea’s total FDI for the past 18 years (notification

basis). This has raised the significance of reinvestment attraction which includes providing investment

aftercare services to existing foreign-invested companies.

Aftercare service 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 investor satisfaction, which in turn, draws reinvestment from existing

companies as well as new investment from potential investors.

| Reinvestment in Korea (notification basis) 2001-2018 |

(Unit: USD million, %)

Year Total FDIReinvestment

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

2018 26,901 14,024 52.1

* Source: Investment Consulting Center, KOTRA

48 49


Reinvestment attraction activities

The Office of the Foreign Investment Ombudsman has 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.

The Office of the Foreign Investment Ombudsman is searching for new reinvestment attraction projects

from foreign companies and is providing support through Invest Korea’s industrial project PM.

| Reinvestment through grievance resolution 2018 |

Company Business TypeNotified

Reinvestment($)Grievances

Company A Distribution 164,000,000 Support research to selectinvestors for a new project

Company B Electrical/Electronics 133,000,000 Provide help for wastewater

discharge-related issues

Company C Chemical Engineering 57,000,000 Improve the Chemicals Control Act

Company D Hotel and Restaurant 40,318,574 Provide support to CEO and

employees regarding visa issues

Company E Transportation Machine 14,200,000 Support investment incentive and

research on land/site

Company F Chemical Engineering 10,000,000 Provide support to enterthe Free Economic Zone

Company G R&D 5,432,964Provide consultation about

employment issues

(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 once or 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.

In 2018, the Foreign Investment Ombudsman visited European companies that are expected to

expand their businesses in Korea thanks to successfully solving their grievances.

48 49

Foreign Investment


| Visits to parent companies of foreign-invested companies 2018 |

Tuev Sued Wacker Chemie

Intercos Italian Trade Agency

Volvo Trucks BioSystems

Befesa Mango

50 51


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

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

companies, and the Office of the Foreign Investment Ombudsman.

Visits 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.

| Visits to parent companies of foreign-invested companies 2018 |

Location (Period) Company (City) Agenda

Europe

(Nov. 20-30)

Tuez Sued(Munich)

· Satisfied with investing in Korea and is considering additional investment

· Interested in talent recruitment, Korea’s regulation, and the Fourth Industrial Revolution

Wacker Chemie (Munich)

· Planning for reinvestment by expanding production factories

· Grievances regarding certification delay and amendment to incentive regulation

Intercos(Milano)

· Continuously expanding its market share in Korea

· As a newly entering foreign-invested company to Korea, requests for support if needed

· Explained the Ombudsman system

Italian Trade Agency/

ICE-Agenzie (Milano)

· Investment between the two countries is relatively low than others

· Agreed on the need for establishing communication channels

· Explained the Ombudsman system

Volvo Trucks(Goteborg)

· Grievances related to issues of expanding distribution and vehicle maintenance centers

· Provide long-term support with local governments and relevant agencies

BioSystems(Barcelona)

· Cost burden of renewing certification of medical devices

· Consultation about shortening the time of acquiring medical-related certification

· Introduce programs that can be supported when acquiring certification

Befesa(Barcelona)

· Requests continuous support when there are grievances due to new regulations

Mango(Barcelona)

· Hopes to strengthen the partnership

· Requires long-term support and care for improving the investment environment

50 51

Foreign Investment


(4) Quarterly report on grievance resolution

[Quarterly Report]

The quarterly report is published every quarter by the Office of the Foreign Investment Ombudsman and is distributed by the Ministry of Trade, Industry and Energy and local governments.

The followings are included in the report

· Performance of the grievance committee

· Local government aftercare service

· Reinvestment attraction

· Grievance prevention activities

· Others (small-scale roundtable, etc.)

In accordance with the Article 21-4 (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.

* Article 21-4 (7) 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 Committee

every quarter as well as local government aftercare services for foreign companies. In addition, to

promote the Foreign Investment Ombudsman system, the report introduces meetings with foreign

delegations, roundtables for foreign-invested companies, and media activities.

By distributing the quarterly report to local governments and major institutions, the Office of the

Foreign Investment Ombudsman shared the grievance resolution cases of the Grievance Committee

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.

52 53


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 the 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 Office of the Foreign

Investment Ombudsman have held discussions for improving the assessment index with MOTIE

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

| Legal Basis for Grievance Resolution Activities by Local Governments |

☞ The Office of the Foreign Investment Ombudsman publishes the ‘Report on Grievance Resolution

for Foreign-Invested Companies’ within ten days of the end of every quarter by compiling cases of

foreign-invested companies’ grievances or suggestions that were submitted or resolved by each

local government. The purpose is to strengthen cooperation with 17 local governments, including

Sejong City and to provide aftercare services to foreign investors.

(Enforcement Decree of the Foreign Investment Promotion Act Article 22 (2))

| Legal Basis for Grievance Resolution Activities by Local Governments |

Foreign Investment Promotion Act, Article 16 (1)

(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.


(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.


(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 (1) subparagraph 4, cooperate with the head of the grievance committee by submitting it within ten

days after the end of every quarter.

52 53

Foreign Investment



(1) In-depth examination of foreign employees’ living condition in Korea

For the purpose of establishing an investment-friendly environment to increase FDI inflows to Korea,

research was conducted on foreign employees’ living conditions in Korea. Issues that require policy

improvement will be preemptively dealt with in 2019.

Most of the grievances that were handled as an aftercare service for foreign-invested companies

were civil petitions. Korea’s ratio of FDI to GDP is relatively lower than that of other OECD member

countries.

The Office of the Foreign Investment Ombudsman is seeking policies that need improvement

for foreign employees working in Korea to build an investment-friendly environment for foreign

companies.

| Process of in-depth examination of foreign employees’ living condition |

CR-01. Analyze subjects

CR-02. Analyze field

CR-03. Analyze current state

Research current state

CR-04. Analyze policies

CR-05. Analyze foreign cases

Analyze policies

CR-06. Examine current state

CR-07. Develop agenda

CR-08. Assess agenda

Develop agenda

CR-09. Improve agenda

• Classify research subjects• Collect research data

• Develop research• Conduct survey

• In-depth interview(FGI, IDI)• Analyze Big Data

• Review related laws and regulations• Review implemented policies• Review policies that are planned to

be implemented

• Select sample countries• Benchmark

• Combine the research results of the current state and policies

• Select issues that need improvement• Analyze the possible expected effect

• Assemble Evaluation Committee• Establish standard and assess the

agenda

• Seek advice from experts• Improve agenda

54 55


| Foreign employees’ living condition in Korea |

Classification

Ⅰ. Demographic factor

· Gender

· Age

· Length of stay in Korea

· Nationality

· Type of visa

· Region of residence

· Accompanied family

· Occupation

Ⅱ. General evaluation of living condition

· Satisfaction level of living condition

· Important areas related to living condition

· Issues that should be settled first to improve the living condition

Ⅲ. Evaluation of living condition by area

Satisfaction level or grievances regarding

· Child’s educational environment

· Healthcare

· Residential environment

· Visa/immigration service

· Leisure/culture

· Telecommunication/finance

· Language barrier

With the Korea Productivity Center, the Office of the Foreign Investment Ombudsman conducted

an in-depth examination of six areas including education, residence, health care, transportation,

immigration, and culture. 21 issues were selected for the policy agenda.

| Policy agenda by area and term |

Education Residence Health care Transportation Immigration Culture Total

Short Term 1 2 - 1 1 1 6

Middle Term 2 2 1 - - 1 6

Long Term 1 1 - - 4 3 9

Total 4 5 1 1 5 5 21

Among the agendas that are listed in the final report, core agendas will be selected after discussing

with relevant government bodies and agencies. Such agendas will be handled by legislative

improvement and administrative intervention in 2019.

54 55

Foreign Investment


(2) Create job by vocational training

By supporting the vocational training program, lead by the Korean-German Chamber of

Commerce and Industry, the Office of the Foreign Investment Ombudsman contributed to

job creation.

The Office of the Foreign Investment Ombudsman supported the implementation and promotion

of the Korean-German Chamber of Commerce and Industry’s Ausbildung Program, a system for

professional training and academic education.

* As a form of dual vocational training where a student attends school and works simultaneously, students can be hired by companies after finishing their training. Currently, lead by the Korean-German Chamber of Commerce and Industry, German companies (Mercedes-Benz, BMW, etc.) and Korean universities are providing dual vocational training.

The Office of the Foreign Investment Ombudsman will provide its service to resolve grievances that

might occur while implementing the Ausbildung Program and contribute to domestic job creation.

* (Example) Set agreements with relevant agencies regarding university degree/credit or military service (delaying the date of enlistment, working in related industries as an alternative to military service, etc.) and support system improvement.

The Office of the Foreign Investment Ombudsman aims to expand the program from the German

automobile industry to others including aviation, shipbuilding, machine, and electronic devices. In

addition, other global companies will be encouraged to participate in the program. The purpose is to

diversify business sectors and to that end, the Office of the Foreign Investment Ombudsman will

provide its unwavering support.

56 57


3. Communication channels for Foreign-Invested Companies

(1) Roundtable for foreign-invested companies by industry

The Office of the 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.

Starting from the third quarter of 2016, the Office of the Foreign Investment Ombudsman has held

approximately ten small-scale conferences per year for foreign investors. In 2018, eleven meetings

were held in the fields of chemistry, finance, medicine, etc.

Officials from foreign-invested companies/governments/relevant agencies, Foreign Investment

Ombudsman, and Home Doctors gather to discuss complex issues, share opinions, and seek

solutions.


No Date/Location Agenda

1Mar. 6

Sheraton Seoul Palace Gangnam Hotel1st Chemical Roundtable


2Mar. 8

Sheraton Seoul Palace Gangnam HotelRoundtable with Chinese companies


3Mar. 16

Sheraton Seoul Palace Gangnam HotelRoundtable with the financial industry


4Mar. 21

Sheraton Seoul Palace Gangnam Hotel2nd Chemical Roundtable


5May 24

Ministry of the Environment3rd Chemical Roundtable


6July 6

Sheraton Seoul Palace Gangnam HotelRoundtable with the chambers of commerce


7July 13

Sheraton Seoul Palace Gangnam HotelRoundtable with the pharmaceutical industry


8Sep. 7 KOTRA

Roundtable with local governments(13 agencies)

9Oct. 12 KOTRA

Roundtable with the 3D printer related companies(9 companies, 6 grievances)

10Oct. 23

Grand Intercontinental HotelRoundtable with the labor industry


11Dec. 10KOTRA

4th Chemical Roundtable (9 companies, 2 grievances)

56 57

Foreign Investment



Chemical Chinese Companies

Finance Chambers of Commerce in Korea

Medicine Labor

58 59


(2) Identify grievances by supporting Foreign Investment Caravan events

held in different regions

Foreign-invested companies located in regional areas can be easily left out. To support such companies,

the Office of the Foreign Investment Ombudsman has held conferences by cooperating with local

governments. In 2018, Home Doctors participated in Foreign Investment Caravan events that were held

in different regions, to understand foreign companies’ grievances.

Since 2017, the Office of the Foreign Investment Ombudsman has collaborated with local governments

and held conferences for foreign enterprises in local areas to ensure that their grievances can also

be well heard. Officials of foreign-invested companies in local areas, local governments, related

agencies, Foreign Investment Ombudsman, and Home Doctors gather all together and hold small-

scale conferences in various regions.

In 2018, a series of ‘Foreign Investment Caravan/ Foreign-Invested Companies Conference’ has

been held in conjunction with other investment attraction events to avoid the redundancy of holding

similar events. Home Doctors participated in such events to hear and support foreign investors’

grievances.

| Foreign Investment Caravan by region 2018 |

No. Date Region (city) Agenda

1 May. 21Busan-Ulsan-Gyeongnam

(Changwon)

· 16 companies related to petrochemistry, auto-component,

machines/equipment, plant, etc.

· Discuss policy support and deregulation to overcome

manufacturing recession.

2 Aug. 30 Chungcheong (Daejeon)

· 10 companies related to electrical/electronics, machine/

automobile

· Grievances regarding the increase in the minimum wage,

abolition of tax exemption or reduction, etc.

3 Oct. 31Daegu-Gyeongbuk

(Daegu)

· 11 companies related to mechanical equipment, metal,

electrical/electronics, chemical engineering, etc.

· Discuss how to improve settlement conditions and to

resolve the difficulties faced by local companies when

hiring young talent.

58 59

Foreign Investment


No. Date Region (city) Agenda

4 Dec. 13 Honam (Yeosu)

· 11 companies related to chemistry, electrical/electronics,

eco-friendly products, distribution of consumer goods, etc.

· Issues related to the increase in the minimum wage.

Request for improvement in the Act on Registration,

Evaluation, Etc. of Chemicals and the Occupational Safety

and Health Act.

After the conference, Home Doctors review the grievances and provide aftercare services such as

handling legislative improvement or administrative intervention.

| Foreign Investment Caravan by region 2018 |

Busan-Ulsan-Gyeongnam Chungcheong

Daegu-Gyeongbuk Honam

60 61


(3) The Regulatory Information Service for foreign investors

The Regulatory Information Service for Foreign Investors is provided by the Office of the 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 National Assembly’s legislative proposals relevant to foreign investment 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.

| Regulatory Information Service for Foreign Investors |

English version of the Regulatory Information Portal Ombudsman website

(http://ombudsman.kotra.or.kr)

60 61

Foreign Investment


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

for Government Policy Coordination upload regulatory information after translated into English. In

addition, newsletters are distributed via email twice a month.

A total of 461 government legislation and 1,336 National Assembly legislation have been

translated into English and posted on the website from 2015 to 2017. In 2018, 637 legislation (274

government legislation and 363 National Assembly legislation) have been translated and posted.

The newsletter’s design has been improved to make it more readable and a ‘Submit Opinion’ link is

added so users can directly open web pages and write comments.

62 63


| Updated version of the Newsletter |

62 63

Foreign Investment



(1) Ombudsman Knowledge Sharing Program (KSP) for foreign governments

and relevant agencies

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 publicized

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 is actively sharing its Ombudsman system and

know-how with foreign agencies that are trying to attract foreign investment.

In 2018, delegations from India, Cambodia, Brazil, Mongol, etc. visited the Office of the Foreign

Investment Ombudsman to learn the Ombudsman system, aftercare services, etc., and agreed to

actively continue cooperation in the future.

| Ombudsman system promotion activities 2018 |

Haitian government workshop & consultation Invest India

64 65


Invited by Haiti, India, Paraguay, ESCAP, etc., the Office of the Foreign Investment Ombudsman

participated in local events, introduced its aftercare services as well as preemptive actions taken

for grievance resolution, and discussed and promoted Korea’s exceptional investment environment.

The Office of the Foreign Investment Ombudsman provided in-depth consulting service to ‘Invest

India’ regarding strategies of growing as a specialized foreign investment attraction agency.


No Date Agency Agenda

1Jan. 30 ~

Feb. 2Haitian

government

· Interview local Korean companies and participate in a

workshop

· Introduce Korea’s aftercare service

· Consultation regarding the implementation of a similar

aftercare service in Haiti

2 Feb. 21-26 Invest India

· Establish a strategic plan to develop India’s

investment attraction agency and conduct detail

research

3 Mar. 23 Invest India · Introduce Korea’s aftercare service

4 May 10 Invest India· Final report meeting of establishing a strategic plan to

develop India’s investment attraction agency

5 June 7Council for the

Development of Cambodia· Introduce the Foreign Investment Ombudsman’s role

6 July 24Ministry of Justice

of Paraguay· Introduce the Ombudsman system

7 Aug. 7Brazilian Trade and

Investment Promotion Agency

· Introduce the Ombudsman system

8 Sep. 6 Invest India, etc.· Introduce the Ombudsman system to officials visiting

Korea

9 Sep. 11Economic and Social

Commission for Asia andthe Pacific

· Introduce the Ombudsman system at the 53rd APTA

workshop

10 Nov. 13Invest Mongolia

Agency, etc.

· Support Mongolian National Development Agency

(NDA) and delegations of cabinet secretary to visit

Korea

64 65

Foreign Investment



Council for the Development of Cambodia Ministry of Justice of Paraguay

Brazilian Trade and Investment Promotion Agency Workshop in India

53rd APTA workshop Mongolian Delegation

66 67


(2) Ombudsman system promotion activities

Through various press channels, the Office of the Foreign Investment Ombudsman is publicizing the

excellence of the Home Doctor system and enhancing public awareness about foreign investment.

The Office of the Foreign Investment Ombudsman is actively engaging in promotion activities such

as having interviews with major domestic and foreign newspapers.

Kim Sung-jin, the seventh foreign investment ombudsman of Korea who was appointed in August

2018, expressed his plans to the Seoul Economic Daily, Korea Herald, and Korea Times that he

will get rid of unnecessary regulations that do not align with international standards to build an

investment-friendly environment for foreign investors.

| Foreign Investment Ombudsman Articles 2018 |

No Date Publication Title

1 Aug. 31, 2018Maeil Business

Newspaper, etc.Inauguration of the 7th Ombudsman

2 Oct. 4, 2017 Seoul Economic DailyWill get rid of unnecessary regulations that doesn’t

align with international standards

3 Oct. 10, 2018 Korea Herald Korea should be more foreign investor friendly

4 Oct. 29, 2018 Korea JoongAng Daily Investment arbiter sees potential in Pyongyang

5 Jan. 4, 2019 Korea Times Foreign companies feel unwelcome in Korea

Korea Times published the article in Jan. 2019, but since the interview was done in December 2018, the article is included in this year’s annual report.

66 67

Foreign Investment


| Foreign Investment Ombudsman Articles |

68 69


The Office of the Foreign Investment Ombudsman is also providing brochures to foreign investors

that introduce the Ombudsman system, regulatory information service, etc.

| Brochure |

Foreign Investment Ombudsman Regulatory Information Service

68 69

Foreign Investment

Aftercare Performance ⅢMEMO



KOTRA자료 19-024

ISBN 979-11-6097-963-3 (95320)

Appendix

1. Foreign Investment Ombudsman’s legal

authority and rights

2. Results and best practices of legislative

improvement

3. Results and best practices of administrative

intervention

72 73


Appendix 1. Foreign Investment Ombudsman’slegal authority and rights

Article 15-2 (4) 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.

Article 21-3 (4), (5), (6) 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.

72 73


Appendix 2. Results and best practicesof legislative improvement

A total of 269 grievances were reported to the Office of the Foreign Investment Ombudsman in 2018,

and six cases were resolved through legislative improvement.

The Ombudsman’s Office made efforts to improve unfair systems through close cooperation with

relevant agencies for the following grievances.

| Grievances resolved through legislative improvement 2018 |

No Agenda

1Request to improve the policy that lists 3D printer on the 2019 competing products among SMEs

2Request to improve guidance regarding the application of permanent residence of corporation representatives

3Request to acknowledge the legal effect of a digital signature of cargo transportation

4Request to add an administrative appellate procedure when reexamining customs

5

Request amendment for the Act* to exempt certification for parallel importers

*Enforcement Rule of the Electrical Appliances and Consumer Products Safety

Control Act

6Grievance regarding the registration system of a small volume of new chemicals

74 75


1. Request to improve the policy that lists 3D printer on the 2019 competing products among SMEs

Contents

Agency Ministry of SMEs and Startups

Related ActAct on Facilitation of Purchase of Small and Medium Enterprise-Manufactured Products

and Support for Development of their Markets Article 6

Grievance

- The Korea Electronic Industries Cooperative is planning to list 3D printer on the 2019

competing products among SMEs. When public organizations buy the listed products,

they have to buy them from Korean SMEs who produce their products in Korea.

- It is expected that around 600 SMEs who distribute 3D printers manufactured overseas

will be affected by the designation. During the first three years after implementation,

sales and employment are expected to decrease by 35 billion won and 30 percent,

respectively.

- This could greatly hinder the development of the 3D printer industry which is in its early

stage of development.

Resolution

and

Results

- Regarding the 2019-2021 designation of competing products among SMEs, the

Foreign Investment Ombudsman sent the following opinions to the Ministry of

SMEs and Startups.

- It would be better to delay the time of implementation to enhance its effectiveness

by taking enough time to consider the issues and possible effects that might

follow.

- If the designation of 3D printers as a competing product among SMEs is inevitable,

then 3D printers should be classified into groups. Since there are various types

of 3D printers, they should be classified depending on their process, material,

and price, instead of seeing all 3D printers as one, and decide which group to

implement the regulation.

- On December 5, 2018, the Ministry of SMEs and Startups limited its scope of

designation to only 50 percent of the total Fused Deposition Modeling (FDM) 3D

printers.

74 75


2. Improve guidance regarding the application of permanent residence of corporation representatives

Contents

Agency Ministry of Justice

Related Act Immigration Act, standards on permanent resident (F-5) visa

Grievance

- According to the standard, in principle, a permanent resident visa is only issued to

‘individual’ foreign investors. Regardless of the amount of investment, CEOs of the

headquarters of foreign-invested companies or the Korean branch cannot apply for the

visa.

- According to a permanent resident visa (F-5), foreign investors who invest USD 500,000

or more and hire five Korean citizens in accordance with the Foreign Investment

Promotion Act, can apply for the visa.

- Foreign investors are seen as individual investors so the investment should be made

under their names to be qualified to apply for the visa. In this sense, CEOs are not

qualified for the application.

Resolution

and

Results

- Raised the issue to the immigration office at the Ministry of Justice through an official

from the same ministry who is currently working at IKP Foreign Investor Support Office.

After several meetings (June-Sep. 2018), the needs were understood to amend the

statement and an agreement was reached on other details.

- Immigration Act and standards on permanent resident (F-5) visa were amended.

Officers (executives, auditors) who stay in Korea for three or more years are qualified to

apply for the visa.

76 77


3. Acknowledge the legal effect of a digital signature of cargo transportation

Contents

Agency Ministry of Land, Infrastructure and Transport Ministry of Science and ICT

Related Act Trucking Transport Business Act Article 11-3

Grievance

- According to the Digital Signature Act Article 3 (Effect, etc. of Digital Signature) (3),

a digital signature other than a certified digital signature shall have such an effect of

a signature, signature and seal, or name and seal, as is agreed between the parties

concerned. ‘Certified digital signature’ and ‘general digital signature’ both have a legal

effect but ‘general digital signature’ does not have a legal effect on a third party.

- Companies that use a general digital signature or paper receipt might find it costly

to adopt a certified digital signature system, as they have to link their system with a

certification agency, install ActiveX, and hire experts.

- Request to revise the Digital Signature Act Article 3 so the general digital signature can

have equal legal effects as the certified digital signature.

Resolution

and

Results

- Revised the Act so the general digital signature will have the same legal effect as the

certified digital signature when cargo waybill is submitted to check the management of

the entrusted cargo defined by the Trucking Transport Business Act Article 21-6.

- Trucking Transport Business Act Article 11-3 has been deleted on March 21, 2017, to

ease regulation such as resolving dual obligations, and the related provision (Enforcement

Rule Article 21-6) that has been delegated to subordinate laws has also been deleted.

* The subordinate law has been revised and promulgated (June 2018) after pre-announcement of legislation (Nov. 2017), regulation examination (Apr. 2018), and legislation examination (May 2018).

76 77


4. Request to add an administrative appellate procedure when reexamining customs

Contents

Agency Ministry of Economy and Finance

Related Act Customs Act, Framework Act on National Taxes

Grievance

- For national tax, not only administrative litigation but also a request for examination or

a request for adjudication of the ruling agency may be filed against the dispositions

issued by a disposition agency regarding the decision of re-investigation of request for

examination or a request for adjudication.

- For customs, however, only administrative litigation is possible and can not file against

the dispositions regarding the decision of re-investigation of request for examination or

a request for adjudication.

Resolution

and

Results

- Request to add an option to file against the dispositions regarding the decision of re-

investigation of request for examination or a request for adjudication.

- Home Doctors raised this issue to relevant agencies and received a reply from the

Ministry of Economy and Finance that it will amend the Customs Act in line with the

Framework Act on National Taxes (June 2018).

- As a result, a request for examination or a request for adjudication of the ruling agency

can be filed prior to administrative litigation.

78 79


Appendix 3. Results and best practices ofadministrative intervention

In 2018, a total of 269 grievances were submitted to the Office of the Foreign Investment

Ombudsman. 108 cases required administrative intervention involving administrative or public

agencies and accounted for 40.1% of the total grievances.

The Office of the Foreign Investment Ombudsman aimed to preemptively address the grievances by

working with relevant administrative agencies.

| Grievances resolved through administrative intervention 2018 |

No. Grievances

1 Tax deduction or exemption related issues

2 Designate Dongbu Mt. tourism complex Aqua World as individual-type foreign-invested sites

3 Designate business related to aircraft parts as individual-type foreign-invested sites

4 Tax deduction or exemption for reinvestment in foreign-invested sites

5Request to delete the reasons for exclusion regarding issues related to the drug patent-approval linkage system

6 Drug patent-approval linkage system (specify the approval requirements of priority sale items)

7 Request to modify the Geoje Seaworld concession agreement concluded with Geoje-si

8 Submission of written confirmation of investment by the Bank of Singapore

9 Rejection of entry visa issuance

10 Request to newly insert regulations related to the installation inspection period

11 Request to inform about alternative sites and land

12 Request for support to resolve issues related to factories and urban development plan

13 Designation of 3D printers as competing products among SMEs

14 Legislative improvement such as expanding the scope of the minimum wage

15 Rejection of D-8 visa renewal

16 Airport duty-free shops patent renewal application

17 Designation of individual-type foreign-invested sites and tax reduction and exemption

18 Unfair ROK-EU FTA regarding KCs certificate

19 Control parallel import of fake cosmetic products

20 Preferable open bidding to certain regions

78 79


No. Grievances

21 Free contract related to a patent renewal of Gimhae International Airport’s duty-free shops

22 Request support to decide investment site for a new project

23Issues related to the regulation that requires companies to hire five Korean citizens to hire one foreigner

24 Issues related to the implementation of the 52-hour workweek

25 Issuance of C4 visa for service engineers

26 Delay in entering factory sites

27 Ease regulation regarding mandatory occupational safety and health education

28 Flexibility of non-regular workers

29 Limiting monetary compensation for paid-leave

30Abolishing agreement obligation when unfavorable changes of employment rules to the workers are made

31 Redundant process of requiring materials by the Ministry of Employment and Labor

32 Re-examination of the workplace child care center policy and ease businesses’ obligation

33 Lump-sum refund of national pension for Japanese employees in Korea

34 Examine cases of foreign countries to attract foreign investors

35 Improve benefit for innovative pharmaceutical companies

36 Ease regulation regarding the application of KC certificate exemption

37Provide support regarding an official letter to the Korea Workers’ Compensation and Welfare Service to request cooperation

38 Unfair business practice in the Korean tobacco industry

39 Risk sharing agreement, refund, and double taxation

40 Limiting risk sharing agreement

41 Issues related to the sunset date and tariff exemption for a drug for clinical trial purpose

42 Concerns about the increasing boycott against foreign products

43 National pension application exemption of foreign employees

44 Polices preferable to OECD member states

45 Issues related to bonded factories’ products for export and waste management

46 Changes in the investment plan of Dongbu Mt. Aqua World

47 ROK-EU FTA revision

48 Full implementation of the ROK-US FTA competition provision

49 Issues followed by land subsidence

50 Entering the FEZ by changing business type

51 Issues related to the patent term extension and clinical trial period

80 81


No. Grievances

52 Scope of effect in extended patent

53 Patent term extension

54 Period of response to the reason for rejection of a patent application

55 Stipulate the exercise of patent right regarding export items

56 Purchasing lease sites inside foreign-invested sites

57 Visa extension for service engineers

58Improve the regulation that requires Japanese products to submit samples for import clearance

59 Issues related to Japanese Pharmaceutical excipients (JAPE)

60 Issues related to clinical trial material that is required to designate orphan drugs

61 Expand the scope of preview for medicines (RMP)

62 Financial Stability Contribution policy abolishment

63 Accept foreign currency loan for foreign currency demand

64 Ease regulation on foreign exchange transaction bank designation

65 Ease regulation on outward and inward remittance management standard

66 Chose English as an option when writing BEPS report

67 Improve tax authorities’ tax investigation 1

68 Improve tax authorities’ tax investigation 2

69 Request enough consideration when modifying the classification

70 Streamline annexed paper regarding international transaction

71 Issues related to the roads inside the industrial complex and purchase of sites

72 Issuance of entry visa

73 Issues related to a person performing public duties under the anti-graft law

74 Expand the scope of indirect infringement of a patent

75 Protect a computer program under the Patent Act

76 Economic value gained by protecting intellectual property rights

77 Exemption of economic evaluation for children’s orphan drugs when filing for an application

78 Establish a general principle for the scope of medical care benefit

79 Regarding the Korea Credit Guarantee Fund, exempt obligations to donate fund and lower its rate

80 Lower the rate of deposit insurance

81 Ease regulation on the upper limit for the trading of OTC derivatives

82 Ease regulation on FX derivatives risk management

80 81


No. Grievances

83 Improve risk sharing agreement

84 Limit evidence supplement during trial for patent invalidation

85 Accept patent application written in a foreign language

86 Delete ‘prohibition from displaying products’ of the partially revised National Health Promotion Act

87 Issues related to electrical/electronics recycling performance

88 Certification of pet foods imported from Japan

89 Ease regulation on import and examination of pet foods

90 Business difficulties due to the lack of new permits for petrochemical waste sites

91 Improve discrimination against foreign companies when bidding on military supplies

92 Re-examine the notification of the types of toner cartridge subject to remanufacturing

93 IFEZ investment approval process support

94 Finding sites to build general maintenance office

95 Request to extend the investment performance period

96 Specify the regulations regarding the amendment of the Wildlife Protection and Management Act

97 Issues related to R&D facilities due to the Chemicals Control Act

98 Issues related to wearing helmets when riding bicycles

99 Issues related to raising fine for drunk driving and unlicensed driving

100Excluding insurance companies’ reasons for imputation when supervisory authorities report civil complaints

101 Issues related to the introduction of IFRS 17 and K-ICS at the same time

102 Heat-using machinery examination

103 ABTC early issue support

104 Protect the cost of relocating factories due to unfair administrative measures, etc.

105 Heat-using machinery examination

106 Issues related to wastewater discharge

107 Holding Gyeonggi-do industrial complex plan Deliberation Committee

108 Safety management of elevators in multi-family housing

82 83


1. Refusal to renew D-8 visa

Contents

Agency Ministry of Justice

Related Act Immigration Act

Grievance

- The CEO of foreign company A received a notice that the D-8 visa renewal was

denied and the CEO had to leave Korea within a week.

- The CEO was an outside director of three companies and received payment without

the required E-7 visa, which is a violation.

- A visa can be issued or extended after paying fine, but as the administrative

proceedings take a week or more, the CEO was in a difficult position.

Resolution

and

Results

- The CEO acknowledged his violation and expressed his commitment that he will

serve as an outside director only under legal basis and will immediately resign from

the three companies.

- The CEO asked if it is possible to pay fine and apply for visa extension without

leaving Korea.

- Home Doctors received help from an official from the Ministry of Justice who is

currently working at Investment Consulting Center to see if the investor’s requests

are acceptable.

- The Ministry gave a positive reply that the individual can stay for humanitarian

reasons and it will decide the scope of fine as soon as possible.

- The CEO’s visa was extended after dealing with the violation before the visa

expiration date.

82 83


2. Entering the FEZ by changing business type

Contents

Agency OO Free Economic Zone

Related Regulation

Plan to develop a knowledge and information industrial complex

Grievance

- Reinvesting in facilities, foreign company A planned to enter the FEZ and submitted

its business plan. However, the FEZ authority replied that company A has to modify

its implementation plan to enter the FEZ.

- Company A requested the FEZ authority to carry out administrative procedures that

are required to change business type. However, officials replied that the company

has to carry out the procedures by itself.

- For smooth and quick progress without any setbacks, company A requested the

Office of the Foreign Investment Ombudsman’s help.

Resolution

and

Results

- The Office of the Foreign Investment Ombudsman saw that there are no problems regarding

tax or KCIS and saw that the issue can be solved by cooperating with the relevant agency.

- The business plan included only the current business type because of miscommunications

between officials as it included a transfer plan.

- If a company is not included in the business type available to enter the FEZ and is also not a

restricted one, that it can apply for entering the FEZ after going through the implementation

plan modify procedure. It will take about 20-30 days to complete the process.

- Carried out a modification procedure to include the company’s business type in the

implementation plan and closed the case.

84 85


3. Issues related to R&D facilities due to the Chemicals Control Act

Contents

Agency Related local governments, regional environmental office

Related Act Chemicals Control Act, OO district unit plan

Grievance

- As the Toxic Chemicals Control Act has been fully amended to the Chemicals Control

Act, regulations were strengthened and an existing R&D facility in OO region had to

receive a permit by the regional environmental office.

- Officials of the related city said that businesses dealing with toxic chemicals cannot

enter the region due to the district unit plan, and the regional environmental office

is refusing to give a permit to use toxic chemicals as the company cannot enter

the region.

- As a result, the existing R&D facility is facing a difficulty that it can no longer stay

in the region.

Resolution

and

Results

- After understanding the issues and regulations, Home Doctors organized four

meetings for the Ministry of Environment, Ministry of Land, Infrastructure and

Transport and the company. Home Doctors also researched similar cases and

shared the information with the company.

- Later Home Doctors requested a pre-examination of the regional and basic local

government’s administrative act, visited the facilities, and provided support.

- The related self-governing province submitted its opinion to the related city

regarding the pre-examination of the company and its unique circumstance. The

opinions of the related city and self-governing province were submitted to the

regional environmental office.

- After a final examination, the company was able to receive a permit by the regional

environmental office to continue its business legally inside the region.

- 담당 홈닥터는 관련사항 및 규정을 파악한 후 환경부와 국토부의 투자 협력관과 신고기업간의

면담을 주선(4차례)하고, 동시에 관련 유사사례를 조사하여 신고기업에게 전달함.

- 이후 관련 청과 지자체가 필요로 하는 신고기업의 시설방문 및 실사를 지원하였으며, 소관 시

청의 의견 공문을 관할도와 한강유역환경청에 전달하고 설명함.

이에 최종적인 판단을 거쳐 해당기업은 한강유역환경청으로부터 영업허가서를 취득함.

84 85


MEMO

Foreign Investment Ombudsman / Kim Sung-jin

Publisher / KOTRA

Date of issue / April, 2019

Address / 06792) 13, Heolleung-ro, Seocho-gu, Seoul, Korea

Tel / +82-1600-7119

Website / www.kotra.or.kr · ombudsman.kotra.or.kr

Printed by / Kumkang Communication&Print +82 2 2266 6753

ISBN / 979-11-6097-965-7 (95320)

Copyright ⓒ 2018 by KOTRA. All rights reserved.

KOTRA자료 19-025

ISBN 979-11-6097-965-7 (95320)



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