Korea is the world’s most competitive country in innovation in a variety of areas, including ICT-based and process-innovation capabilities. Korea’s R&D investment to GDP is 4.81 percent (as of 2018), the world’s largest, and its total R&D investment is 85.728 trillion won, the fifth largest worldwide. This is a comprehensive survey of 61,275 domestic research and development activities conducted in Korea last year under the OECD guidelines, including public research institutes, universities and companies, and this innovation culture in Korea is another factor that many companies invest in Korea.
Korea has been ranked as the 5th most convenient country to do business in the world for six consecutive years since 2014 in the World Bank’s “Doing Business 2020” results, and is ranked as the 1st among G20 countries and 3rd among OECD countries. It also has high-speed Internet/mobile networks everywhere in the country, providing the world’s highest level of wired and wireless communications environment that can be activated in just one day.
Testbeds in the Global Market
The high share of the world’s IT, food, household goods, fashion, games and movies used by Korean consumers is an important factor as the Testbed Market. The Korean market has the optimum conditions as a test bed for the global market and a laboratory for the future market, along with 50 million consumers with diverse and dynamic purchasing power.
As of 2019, Korea has a free trade agreement with 55 countries around the world. Korea’s FTA-linked market is 73 percent of the world’s GDP. In particular, Korea is the only Asian country that signed an FTA with the European Union (2011) and the United States (2012). In addition, with the recent FTA agreement with China, Korea has become the only country that can take advantage of Asia’s strengths and make inroads into most developed markets around the world.
Strong government support
The Korean government is actively expanding its benefits to attract more foreign investment. In particular, Korea has decided to permanently maintain the current income tax rate exception, which imposes only 17 percent of taxes on foreign executives and employees working in headquarter in Korea regardless of their income range. This is a measure that gives more than half the benefits to workers in Korea, compared to 38 percent, which is the tax rate applied to other Korean workers. In addition, a number of policies will be expanded, including a policy to increase the residency period for headquarter executives and employees to stay on foreign investment visas (D8) from the current one to three years to up to five years.
Korean companies have a high global market share in such industries as IT products, automobiles, chemicals, steel and shipbuilding. Foreign investment companies that entered the Korean market in the 1960s and 1970s have been the foundation for the growth and competitiveness of Korean companies by supplying parts and transferring technologies. Currently, 259 of Fortune’s top 500 global companies are operating in Korea, and they serve as important partners in each industry to maintain their global market share.