With President Moon Jaein’s
just launched on May 10,
foreign investors might be
wondering what will be the major
changes to South Korea’s social and economic
policy—particularly those related
to foreign direct investment (FDI) policy.
Moon has not yet appointed all of his new cabinet members and we cannot tell exactly how different the new policies are going to be. It seems that there may be some changes in priority among the various policies.
During the election campaign, policy advisers in each of the presidential election camps disclose a package of their policy promises. Once their candidate is elected, however, they tend to make reasonable policy adjustments in order to accommodate better plans proposed by other election camps.
The new government will implement a good variety of policies in the areas of diplomacy, security, welfare and the economy. These four areas are all important for the nation as a whole. But ordinary people pay more attention to the issues of welfare and the economy because these issues critically affect their everyday life. So the new administration tends to make greater efforts to design the best possible social policies as well as economic policies.
Social policy refers to guidelines, principles and legislation that affect the living conditions of the people. These policies aim to meet human needs such as education, health care, housing, pensions, child protection, urban development and criminal justice, among others. Compared to the previous governments, the current government places a heavier weight on social policy as it seeks to improve the quality of life for ordinary people. Social policy is usually pursued by the non-economic ministries.
Economic policy, meanwhile, refers
to government actions undertaken in the
economic field. It involves changing taxation
and spending, money supply and
interest rates, trade and market liberalization.
Economic policy aims to attain five
economic goals—three macroeconomic
goals and two microeconomic ones. The
macroeconomic goals refer to full
employment, price stability and sustained
economic growth. The microeconomic
goals are production efficiency and equitable
The government should bear in mind that the pursuit of one goal often restricts attainment of other goals. For instance, policies that promote the microeconomic goal of production efficiency by tightening up the hiring of new workers might obstruct the attainment of full employment which is a macroeconomic goal. By the same reasoning, policies that improve another microeconomic goal of income distribution might interfere with the attainment of higher growth and greater employment.
Again compared to previous governments, the new government would place greater weight on equitable income distribution. So there would be some readjustments to the weights assigned to the five economic goals. But steady growth and greater employment should not be put on the back burner. It would need to strike a balance by setting proper targets for the five economic goals.
These days Korea’s FDI policy has been drawing the world’s attention. International organizations such as the World Bank Group, the IMF and the UNCTAD have long urged that developing countries ought to attract foreign direct investment because it expedites industrialization and enhances their growth potential. They quote Korea as a success story for FDI and advise that the foreign-investment hosting countries provide incentives to the foreign companies that bring in
advanced production technology.
Recently even the advanced
countries are trying to attract FDI to
increase domestic employment.
It may take a while before the new government reveals its entire policy package. So far as economic policy is concerned, basic economy policy would not be drastically different from what they used to be. Senior economic advisers to the president are known to be top-notch economists who have been trained in prestigious universities in the United States. They fully understand the merits of foreign direct investment so the new government is very likely to strengthen FDI policy.
Based on these compelling reasons, the new government would emphasize FDI more than ever before. Therefore, FDI policies should be strengthened to improve the investment environment. More effective FDI incentives, proper reforms and strengthened deregulation will have to be pursued
The Foreign Investment Ombuds-man and his grievance resolution body collect and analyze information concerning problems facing foreign firms, request cooperation from relevant government agencies, propose new policies investment promotion system and carry out other necessary tasks to assist foreign-invested companies in resolving their grievances.