A hub of innovation lacking foreign direct investment . . .
South Korea was lauded earlier this week as an innovation leader, taking first place in Bloomberg’s Innovation Index. But according to a report by the Korea Economic Research Institute released on Wednesday, South Korea ranked 28th out of the 37 OECD countries for inbound foreign direct investment (FDI) in 2020. The COVID-19 pandemic played a part in South Korea’s innovation and FDI rankings. The United Nations Conference on Trade and Development found that in the first half of 2020, global FDI flows fell 49 per cent due to COVID. Meanwhile, the strains on global supply chains caused by demands for medical supplies and other goods spurred innovative digital and medical practices in South Korea.
Innovation the primary focus of Korea New Deal . . .
Last July, the Korean government announced its COVID-19 economic recovery plan, known as the Korea New Deal (KND). The KND consists of three pillars: the Green New Deal, the Digital New Deal, and Stronger Safety Net. The green and digital pillars encourage the development of innovative products by focusing on developing cutting-edge technology in these fields. The Digital New Deal, for example, is centred on the integration of DNA (data, network/5G, and artificial intelligence) so that both government and the general public can harness big data to prepare the country for the needs of the 21st-century economy. The Stronger Safety Net, in contrast, is designed to reduce unemployment that might occur as a result of the structural re-orientation towards green and digital jobs. It provides citizens with job training and other re-employment supports.
Implications for Canadian investors . . .
Canadians seeking investment opportunities in the green and digital sectors should take a closer look at the South Korean market. Although there are some barriers to entry, such as restrictions on foreign investment in select sectors and the opacity of regulations surrounding investment, Canadians are in a strong position to expand their presence in South Korea. In 2020, Canadians were granted tariff-free access to the information and communication technology and cleantech sectors through the Canada-Korea Free Trade Agreement (CKFTA). The CKFTA also permits Canadian professionals to remain in South Korea for up to five years, providing Canadian businesses with the opportunity to develop professional relationships and contacts in South Korea.
- Asia Pacific Foundation of Canada: Canadian opportunities in the South Korean new deal
- Bloomberg: South Korea leads world in innovation as U.S. exits top ten
- The Korean Herald: Korea below OECD average as FDI recipient: think tank