With President Moon Jaein’s
administration having
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
distribution.
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.