Korea - 4-Industrial Policies Korea - Industrial Policies
Investment IncentivesThe ROK government provides the following general incentives for foreign investors:
- Tax and cash incentives for qualified foreign investments in free trade zones, foreign investment zones, free economic zones, industrial complexes, etc.;
- Tax and cash incentives for the creation and expansion of workplaces for high-tech business plants and research and development (R&D) centers;
- Reduced rent for land and site preparation for foreign investors;
- Grants for establishment of convenience facilities for foreigners;
- Reduced rent for state or public property;
- Preferential financial support for investing in major infrastructure projects; and
- Support from the Seoul Metropolitan government, separate from the central government, for SMEs, high-technology businesses, and the biomedical industry.
Several organizations affiliated with the Small and Medium Business Association (SMBA) support private sector research and development (R&D). The Korea Technology and Information Promotion Agency supports R&D investment, and the Korea Technology Credit Guarantee Fund provides credit guarantees for technology development. The Ministry of Science, ICT, and Future Planning also supports R&D projects. According to the SMBA, foreign companies are eligible to apply for public R&D funds through their South Korean subsidiary.
Research and Development
Foreign Trade Zones/Free Ports/Trade FacilitationThe Ministry of Strategy and Finance (MOSF) administers tax and other incentives to stimulate advanced technology transfer and investment in high-technology services. There are three types of special areas for foreign investment (Free Economic Zones, Free Investment Zones, and Tariff Free Zones), where favorable tax incentives and other support for investors are available. The ROK government announced on December 16, 2015, plans to create 14 “regulation-free zones” (RFZ) outside of Seoul in an effort to develop promising sectors, including bio-health, smart devices, and drones. A bill that would allow the creation of RFZs was submitted to the National Assembly on March 25, 2016. A good source of information on the ROK’s various free trade zones is the government-run "Invest Korea," the inward investment promotion organization under KOTRA. More information is available here: Invest Korea. KOTRA also maintains offices in many countries, including the United States.
The ROK aims to attract more foreign investment by promoting its eight Free Economic Zones: Incheon (near Incheon Airport, to be completed in 2022); Busan/Jinhae (in South Gyeongsang Province, to be completed in 2020); Gwangyang Bay (in South Gyeongsang Province, to be completed in 2020); Yellow Sea (in South Chungcheong Province, to be completed in 2020); Daegu/Gyeongbuk (in North Gyeongsang Province, to be completed in 2022); Saemangeum/Gunsan (in North Jeolla Province, to be completed in 2020), East Sea (in Donghae and Gangneung, to be completed in 2024) and Chungbuk (in North Chungcheong Province, to be completed in 2020). Additional information is available at Korean Free Economic Zones.
As of April 2017, there are also four foreign-exclusive industrial complexes in Gyeonggi Province designed to provide inexpensiveland, with the national and local governments providing assistance for leasing or selling in the sites at discounted rates. In addition, there are 13 Free Trade Zones and seven logistics areas near airports and harbors where companies may pursue their business with government support, but without the usual legal requirements such as approval procedures for exports and imports and customs duties. There are also 25 Foreign Investment Zones designated by local governments to accommodate industrial sites for foreign investors. Special considerations for foreign investors vary among these options.
Performance and Data Localization Requirements
There are no such requirements. Companies should check if candidates of foreign nationality have a valid working permit (VIAS) prior to offering jobs. Anyone who is planning to work during his or her stay in the ROK is required by law to apply for a visa. Work visas can be obtained at the ROK Embassy or Consulate with jurisdiction over the applicant's place of legal residence. Work visas are usually valid for one year, and issuing work visas takes two to four weeks. Changing a tourist visa to a work visa is not possible within the ROK. This must be done at an embassy or a consulate outside the country.
Sectors such as public administration, national defense, and diplomacy are subject to certain restrictions imposed by the ROK government, but there are no government-imposed conditions or restrictions on investing in the ROK in most sectors. The conditions to invest in the ROK are elaborated in the FIPA. Foreign companies are not required to use domestic content or technology, nor are they required to turn over source codes or provide access for surveillance to ROK authorities. The ROK government, however, is implementing policies to foster the domestic software industry, which sometimes creates obstacles for foreign companies pursuing public procurement projects. The ROK ceased imposing performance requirements on new foreign investment in 1989 and eliminated all pre-existing performance requirements in 1992. There are no performance requirements that force foreign companies to ensure a certain level of local content, local jobs, R&D activity, or domestic shares in the company’s capital.
There are no legal requirements for foreign information technology (IT) providers to turn over source codes and/or provide access to encryption. However, there are security certifications for some IT products. These certifications are referred to as “Common Criteria certification” (CC certification), the standards and assessments for which are established and implemented by the IT Security Certification Center. The source code for IT products might need to be submitted to the IT Security Certification Center during the review process to apply for CC certification. In January 2016, the ROK government announced guidelines stating that the CC certification is a requirement for cloud computing services to be provided to ROK government agencies or public institutions.
There are similar requirements for a data controller to transfer the personal information of end-users to a third party within the ROK. To transfer the personal information of end-users to a third party, a data controller must obtain each end-user’s consent. In addition, regulations prohibit financial companies in the ROK from transferring customers’ personal information and related financial transaction data overseas. As such, this financial transaction data cannot be outsourced to overseas IT vendors, and financial companies in the ROK must store customers’ financial transaction data in the ROK. The Financial Supervisory Service is the authority that regulates financial companies in the ROK.