1. Korea International Logistics Council
Investing in Korea as the Gateway to Northeast Asia
KILC
Good morning, ladies and gentleman. I am Woo-won Lee, Head of KILC,KITA. It is a great pleasure to have an opportunity to speak in front of such a wonderful audience. Today, in my presentation, I will talk about investing in Korea as the gateway to Northeast Asia.
광양만권경제자유구역청
Korea International Logistics Council

2. Contents 1. Korea’s Strengths as a Logistics Hub
2. Logistics Investment Opportunities
3. Investment Procedure
My presentation will be divided into 4 sections as shown in the slide.
4. Foreign Investment Trends
광양만권경제자유구역청

3. 1 Korea’s Strengths as a Logistics Hub 인프라 구축-
First, let me discuss Korea’s potential to become the logistics hub.
As previous speakers have already mentioned this quite well, I will simply remind you of Korea’s strengths.
KILC Korea International Logistics Council
광양만권경제자유구역청

4. Geographical Location 인프라 구축-
Located on the truck route connecting
Europe, Asia, North America
Located at the center of NEA between China and Japan
First, Korea has an excellent geographical location. It is located at the center of Northeast Asia with easy access to China and Japan.
Starting and Ending Point of
trans-continental railway
광양만권경제자유구역청

5. KOREA Accessibility to the NEA Market 인프라 구축- JAPAN China
NEA is emerging as a major economic bloc alongside EU and North America
KOREA
JAPAN
Second largest economy in GDP
China
World’s largest manufacturing base
Fastest growing consumer market in the world
The second strength of Korea is easy access to the huge Northeast Asian market.
-25% of World Population
-20% of World GDP
-30% of World Cargo Volume
광양만권경제자유구역청

6. Excellent Logistics Infrastructure
인프라 구축-
1. Incheon International Airport
3rd Largest Cargo handler and 10th Largest passenger transporter in international traffic (2004)
2. Busan Port and Gwangyang Port
- Busan : world’s fifth largest port, handling 11.5 million TEU per year (2004)
- Gwangyang : second largest port in Korea, optimal trans-shipment port for cargo bound for Northeast Asia
3. Land Transportation
Korea’s third strength is its excellent logistics infrastructure. We have Incheon International Airport, which is the third largest cargo handler in the world. And Busan Port is the fifth largest port handling over 11 million TEUs per year. And we also have Gwangyang Port aiming to become the transshipment center for cargo bound for Northeast Asia.
90% of domestic transportation is handled by roads and railways which
link the Eurasian and Pacific Rim economies
-The high-speed Korea Train Express (KTX) network started service in 2004
connecting Seoul with Busan and Mokpo(world’s fifth high-speed).
-Road length : 97,252km, Paved road length : 74,640km (paved road rate:76.7% as of 2003)
광양만권경제자유구역청

7. Incheon International Airport
Unit : Thousand
Unit : Thousand tons
24,080
2,130
19,790
1,840
This is a panoramic view of Incheon International Airport.
2003
2004
2003
2004
Passenger
Cargo
광양만권경제자유구역청

8. Busan Port Number of routes Americas 36 Europe 13 Asia 141 Japan 45
China 23
This is Gamman terminal, one of the busy harbors in Busan.
Source : Ministry of Maritime Affairs and Fisheries
광양만권경제자유구역청

9. Gwangyang Port Number of routes Americas 8 Europe 4 Asia 39 Japan 11
China 15
This is Gwangyang port.
Source : Ministry of Maritime Affairs and Fisheries
광양만권경제자유구역청

10. Great Investment Environment
인프라 구축-
1. Highly educated, highly skilled workforce
2. Huge Consumer Market
3. Strong Industrial Competitiveness
4. FDI Friendly Policies
Korea’s fourth strength is its investment environment. Korea has highly educated, highly skilled workforce, huge consumer market with 48 million consumers, strong industrial competitiveness and FDI friendly policies.
광양만권경제자유구역청

11. 2 Logistics Investment Opportunities 인프라 구축-
Now let us look at the benefits of Korea as an excellent logistics investment destination.
KILC Korea International Logistics Council
광양만권경제자유구역청

12. Logistics Investment Opportunities
Free Economic Zones
Free Trade Zones
Foreign Investment Zones
Korea has some major logistics investment destinations for foreign investors with great government incentives and benefits.
In today’s presentation, due to time constraints, I will talk about the FEZs and FTZs as these are the main targets of investment promotion today.
KILC Korea International Logistics Council
광양만권경제자유구역청

13. Free Economic Zone (FEZ)
인프라 구축-
Concepts of the FEZ and FTZ
FEZ : Free Economic Zone
FTZ : Free Trade Zone
Free Trade Zone (FTZ)
Free Economic Zone (FEZ)
Industrial Park A …
Support Functions B N
Distripark
PORT
The government designated 3 Free Economic Zones in 2003 based on the FEZ Special Act to promote foreign investment.In a Free Economic Zone, foreign investors will enjoy exceptional investment incentives and high quality living environment.
A Free Trade Zone or FTZ is a type of bonded area where companies doing logistics,manufacturing, and distribution activities can get favorable tax and customs duty incentives. In the slide, you can see the general relationship between the FEZ and FTZ.
광양만권경제자유구역청

14. Locations of FEZs and FTZs 인프라 구축-
Incheon FEZ
Incheon International Airport
Incheon Port
Free Economic Zone
Iksan
Gunsan
Free Trade Zone
You are looking at the locations of FEZs and FTZs. There are three FEZs in Korea- in Incheon, Busan, and Gwangyang.. And 7 FTZs , 4 of which are located in the FEZs.
Busan-Jinhae FEZ
Masan
Gwangyang Bay Area FEZ
Gwangyang Port
광양만권경제자유구역청

15. 인프라 구축- Development Plans of the FEZs Incheon FEZ Incheon
Songdo
Yeongjong
Cheongna
IT, BT, international business
air logistics, tourism, IBC
leisure, int’l finance
Now let me briefly explain the development plans of the three FEZs. All three areas have strong infrastructure and are well equipped with international airports and ports which are easily accessible to large neighboring markets.
Under the government’s plan, Incheon FEZ will be developed to become the air logistics hub of Northeast Asia. Busan-Jinhae FEZ to become the maritime logistics hub and Gwangyang FEZ to become the maritime transshipment hub covering Northeast Asia.
Busan
Busan-Jinhae FEZ
maritime logistics hub
manufacturing & industrial parks, R&D
Gwangyang
Gwangyang FEZ
NEA maritime transshipment hub
Industrial clusters for oil and steel businesses
광양만권경제자유구역청

16. (minimum amount of investment)
인프라 구축-
Tax Incentives
Type of Tax
Exemption Period Rate
Requirements
(minimum amount of investment)
National Tax
Tariff,
Value-added Tax
100% for 3 years
All imported capital goods
Corporate tax,
Income tax
100% for 3 years,
50% for the following 2 years
US$ 5 million for Logistics
US$ 10 million for Manufacturing
Local Tax
Acquisition tax,
Property tax,
Registration tax,
Aggregate land tax
100% for 3 yeas,
50% for the following 2 years (Incheon)
100% for 7 years,
50% for the following 3 years (Busan-Jinhae)
100% for 15 years
(Gwangyang)
This table shows the tax incentives for foreign investors offered by FEZs and FTZs. Investors can get 100% tax exemption on tariffs, corporate tax, and income tax and also many local taxes for the first 3 years when they invest at least 5 million USD in the logistics business.
광양만권경제자유구역청

17. ▶ Rental reductions for using land
인프라 구축-
Other Incentives
▶ Rental reductions for using land
▶ Financial support for establishing
facilities for the convenience of foreigners
인프라 구축-
Employment,
Labor Management
▶ Initiating unpaid weekly holidays
▶ Not applying compulsory hiring system
(I.e. employing national war heroes,
the disabled, and the aged)
And there are many more incentives that are already mentioned by the Busan-Jinhae FEZ Authority.
광양만권경제자유구역청

18. 3 Investment Procedures 인프라 구축-
After deciding to invest in Korea with all these great incentives, the next step is to set up an FDI company.
Next, I will explain the investment procedure in more detail -how to set up an FDI corporation in Korea.
KILC Korea International Logistics Council
광양만권경제자유구역청

19. Investment Procedure Investment Inquiry
Defining your investment requirements
Confirm foreign investment
One-Stop Service
Legal procedures for corporation establishment
This is the general investment procedure. Before deciding to make, for example, logistics investment in Korea, you would want to make further inquiries and collect more information. The easiest way to find logistics investment assistance is to contact KILC. Our government organization, Invest Korea is also very useful. With one-stop assistance, you decide to make an investment and then start the legal procedure to establish a foreign invested company. Let me go into more detail about the legal procedure.
FDI corporation established
KILC Korea International Logistics Council
KILC Korea International Logistics Council
광양만권경제자유구역청

20. FDI Notification Business Registration
인프라 구축-
Process for Establishing a Corporation
FDI
Notification
Carrying-in of
FDI Capital
Registration of
Incorporation
FDI Company
Registration
Account Transfer
Of Investment
Capital
Business
Registration
Here you see the flow chart of the legal procedure for establishing a corporation.
Except for FDI notification and FDI company registration steps, other steps are the same as setting up a company by Koreans. As a corporation is the most common form for foreigners to engage in business in Korea, in this presentation I will focus on how to establish a corporation.
광양만권경제자유구역청

21. 1. FDI Notification Notification by the foreign investor or proxy
Notification at Korea Trade Centers at home and abroad, foreign exchange banks designated to accept notification
Required Documents : FDI notification form (provided) and documents verifying the nationality of investors (Individual investors shall submit a copy of passport)
Processing Period : On-the-Spot
The first step to establish a corporation in Korea is filing the FDI notification. You can do this at Korea Trade Centers at home and abroad, and designated banks.
광양만권경제자유구역청

22. 2. Carrying-in of FDI Captial
Ways to carry in investment capital
- FDI capital may be remitted to domestic banks from overseas
- FDI capital may be hand-carried through the customs
After Investment capital is remitted from overseas to a foreign exchange bank in Korea, the capital shall be converted into Korean won and be deposited into a temporary account
Later, the capital will be transferred to a “share subscription account”
The second step is carrying-in the FDI capital. You may remit the capital to domestic banks in Korea or hand-carry it through the customs. Then the capital is deposited at a temporary account.
광양만권경제자유구역청

23. 3. Registration of Incorporation
Types of Business Establishment
- By promotion : the promoters subscribe for all shares issued at the time of establishment
- By public offering : the promoters subscribe for part of the shares issued at the time of incorporation and the remaining shares publicly offered
Categories of companies as stipulated in the Commercial Law
- Unlimited partnership company
- Limited partnership company
- Limited Liability company
The next step, the process of incorporation registration may seem a little complicated but I’d like to remind you that we will guide you throughout the registration of incorporation.
- Corporation ← the most commonly selected form
광양만권경제자유구역청

24. Registration of Incorporation
Procedures for Incorporation
Organizing Promoters
Holding inaugural meeting of promoters and preparing minutes
Preparing and notarizing the articles of incorporation
Deciding matters concerning the issuance of shares
Subscription of shares by promoters of company (for incorporation through promotion) / Subscription of shares by promoters; joining of shareholders; and distribution of shares (for incorporation through subscription)
Capital contribution
Reporting the inspection on the incorporation process by directors and auditors
Inaugural general meeting (not inquired in incorporation through promotion)
Meeting of the board of directors
Registration of incorporation
Notification of incorporation and business registration
This slide shows the steps for incorporation in Korea.
광양만권경제자유구역청

25. Registration of Incorporation
Place of registration : Commercial Registry Office, Local District Court
Period of registration
- By promotion : within 2 weeks after completing the inspection
on incorporation process
- By public offering : within 2 weeks after closing
the inaugural general meeting
Pre-registration decisions
- Organizing promoters
- Checking up similar trade names
Registration of incorporation is handled by the commercial registry office at the local district court.
광양만권경제자유구역청

26. Registration of Incorporation
Documents required for registration
6. Urban rail bond
7. Supreme Court revenue stamp
8. Registration tax receipt; issued by the ward office exercising jurisdiction over the head office
9. Seal of each officer and promoter
10. Corporate Statue : notarized
11. Share subscription certificate
12. Application for shares
13. Organization report
14. Consent to shortening the inaugural meeting period
15. Minutes of the inaugural meeting : notarized
16. Minutes of the board of directors’ meeting : notarized
17. Common seal notification and application for common seal card
18. Register of shareholders
19. Consent to issuance of shares
1. Foreign investment notification form
2. Power of attorney
▶If applied for by the representative director:
The representative director must be the appointee in all powers of attorney
▶If applied for by a judicial scrivener:
The scrivener must be the appointee in the powers of attorney regardless of promoters or officers
3. Acceptance of appointment of officer
▶Korean nationals : Each acceptance must be sealed, to which a seal impression certificate and a resident registration certificate must be attached.
▶Foreign nationals : Each acceptance must be signed to which an original copy of signature notarization and a photocopy of the passport must be attached.
4. Custody certificate of paid-in capital
5. Common seal of the company
Assistance
Prepared by applicant
This is the list of the documents required for the registration. It may seem complicated to prepare all the documents but KILC will fully assist you in preparing the documents you need.
광양만권경제자유구역청

27. Registration of Incorporation
Business establishing expenses
Approximate amount
(Korean won)
Items to be paid
935,000
Total
150,000
Notarization fee (Corporate Statute, etc.)
15,000
Supreme Court revenue stamp (registration application fee)
50,000
Purchase of urban rail bond : 0.1% of the paid-in capital
120,000
Local education tax : 20% of the registration tax
600,000
Registration Tax : 0.4% of the paid-in capital
(3 times as much if the company is to locate in a large city)
※ Approximate cost of establishing a corporation(with the capital of 50 million won)
This slide shows the business establishing expenses you pay during the incorporation registration. For a company with minimum investment capital of 50 million won -about 50,000 US dollars, the cost is $940. But the expense will be different depending on tax incentives you get.
광양만권경제자유구역청

28. 4. Notification of Incorporation and Business Registration
Place of Notification / Registration
- the competent tax office which has jurisdiction over the company headquarter
Notification / Registration Period
- within 20 days from business commencement for business registration
- within 2 months from the date on which incorporation registration was made
for notification of incorporation
Required Documents
• Application form (available at tax office)
• Articles of incorporation
• Copy of business permit
(if the business requires a permission from the government authority)
• Copy of lease contract
• Notification of designating a tax manager
(in case where a company representative is a foreign national
and where there is no resident employee to received document delivery)
• Copy of FDI notification
• Certificate of foreign currency exchange
• Certificate of foreigner registration (where a representative of company is not a resident of Korea)
The forth step for establishing a corporation is the notification of incorporation and business registration process. This is done at the tax office.
광양만권경제자유구역청

29. 5. Account Transfer of Investment Capital
After procedures for the registration of incorporation and business registration, the remitted capital, which is deposited in a temporary account, will be transferred to the company account.
Next, the remitted investment capital, which was deposited in a temporary account, will be transferred to the new company account.
광양만권경제자유구역청

30. 6. FDI Company Registration
Registration Period
Within 30 days from the date on which the payment required was completed
Place
Institution where the FDI notification was filed
Required Documents
• Application form for FDI company registration
• Certificate of exchange / deposit of foreign currency
• Transcript of incorporation registration
※A certificate of FDI notification shall be issued on the spot, and this certificate is required in following cases:
- When making an overseas remittance of the profits made by an FDI company
- When making an application for D-8 visa
The last step is FDI company registration. This registration must be filed within 30 days after the capital contribution was completed. After preparing and submitting the required documents, on the spot, you will receive a certificate of FDI notification proving that you are an FDI company. And then all the procedure is finished.
광양만권경제자유구역청

31. 4 Foreign Investment Trends 인프라 구축-
Now let me briefly go over the FDI trends in Korea just to give you an idea how much FDI has been attracted.
KILC Korea International Logistics Council
광양만권경제자유구역청

32. Foreign Investment by Country
인프라 구축-
Foreign Investment by Country
unit : USD 1 million
This graph shows the countries that have made the most foreign direct investment into Korea over the last 3 years. The US, Europe and Japan have steadily increased their FDI into Korea. And more recently, we have increased FDI from China, India and other countries.
Source : Ministry of Commerce, Industry and Energy
광양만권경제자유구역청

33. Foreign Investment Proportion by Country (2004)
인프라 구축-
Foreign Investment Proportion by Country (2004)
This slide shows the breakdown of the 2004 FDI by country. The US ranks the first by accounting for 37% of total FDI, followed by the EU and Japan saw large scale investments by the US with Citigroup and GE capital acquiring Koram Bank and Hyundai Capital, respectively.
Source : Ministry of Commerce, Industry and Energy
광양만권경제자유구역청

34. FDI Amount by Year and Accumulated FDI
인프라 구축-
FDI Amount by Year and Accumulated FDI
This shows the FDI inflows since 1962, when foreign investment was first allowed. By 2004, FDI accumulation reached 100 billion dollars. You can see that after the financial crisis in 1997, FDI inflows have greatly increased.
Regarding FDI for logistics, accumulated FDI in logistics from 1962 to 2004 was over 1.7 billion dollars. Logistics FDI in 2004 was 372 million dollars. This was more than double the logistics FDI of 116 million dollars in And we expect to see more increase in the future.
Source : Ministry of Commerce, Industry and Energy
광양만권경제자유구역청

35. Current Status of Foreign Investment in the FEZs
인프라 구축-
Current Status of Foreign Investment in the FEZs
As of June 2005, investment MOUs of over $18.9 billion established
Investor
Business
Agreed Investment amount
Investment Project
Incheon
Gale(US)
FEZ developer
$12.7 billion
-Songdo International Business District Development
Convention center(05.5)
AMEC(UK)
Engineering,
Second Incheon bridge $1.2billion
IIA IBC-2 $2billion
Second Incheon bridge construction
(09’)
- IIA IBC-II development(04.4 MOU)
Pyne(US)
Port facilities
$1.5 billion
Songdo New Port Construction
DHL(US)
LSP
$ 20million
IIA freight terminal construction
TNT(Netherlands)
$ 10million
As I believe many of you today are more interested in investment opportunities in the FEZs, this table would be of interest to you. The FEZs have been doing a good job in promoting foreign investment. To point a couple of foreign investment statistics in logistics, Incheon has attracted investment of 20 million dollars from DHL and 10 million dollars from TNT to construct freight terminals.
Source: Ministry of Finance and Economics
광양만권경제자유구역청

36. Major Foreign Investment in the FEZs
Investor
Business
Agreed Investment
Investment Project
Busan Jinhae
Dubai port Int’l( UAE)
Port facilities
$300 million
Busan New Port phase 1 development
Renault-Samsung
(France)
Automobile
$600 million
Engine manufacturing plant
Gwang-yang
Hutcheson
(HK)
$100 million
-Gwangyang Port operation
Mitchui(JP))
Logistics
TBA
-MOU to construct logistics center in Gwangyang port(04’.10)
Busan Jinhae FEZ attracted 300million dollars in investment from Dubai port international. And in Gwanyang, Hutcheson is a major operator of the Gwangyang Port and agreed to invest 100million dollars. And there are many more logistics investment opportunities for you to take advantage of.
Source: Ministry of Finance and Economics
광양만권경제자유구역청

37. Conclusion Korea, the Ticket for Your Success 1. Strong Economy
2. Excellent Location as a Logistics Hub
3. Ideal investment Spots
4. Attractive Incentives
I hope my presentation has been useful. Before I conclude, I want to stress that Korea is geographically positioned as an excellent Northeast Asian logistics hub. And we offer attractive incentives for foreign investors, and will continue to improve on our FDI friendly environment. Korea is a perfect location for you to invest in as the gateway to Northeast Asia.
5. FDI Friendly Environment
Korea, the Ticket for Your Success
광양만권경제자유구역청

38. Contact Us … Korea International Logistics Council (KILC)
Korea International Trade Association (KITA)
Republic of Korea
Tel: ~8
Fax:
This concludes my presentation. If you have questions about my presentation, please me. And for more detailed information on logistics investment opportunities in Korea, please feel free to contact KILC. We have prepared brochures introducing KILC outside, so please take one when you leave. Thank you for your time and attention.
KILC Korea International Logistics Council
광양만권경제자유구역청