Foreigners May Get 100 Percent Cash Grant for R&D Investment

Foreigners May Get 100 Percent Cash Grant for R&D Investment

Jul 22, 2005

Foreign investors who build research and development (R&D) facilities in Korea may gain a 100-percent cash grant for their investment, the Ministry of Commerce, Industry and Energy (MOCIE) said Tuesday.

"We plan to raise the amount of cash incentives to foreign investors in the R&D sector to 100 percent of the value of their total investment from the current 20 percent," MOCIE director-general Lee Jae-hoon said.

"The plan will be proposed to a foreign direct investment (FDI) committee under the Prime Minister¡¯s Office for final approval as early as August," MOCIE official Kim Ki-joon said.

Under the current law, foreign investors who invest a minimum of $10 million in a high-tech center, or $5 million into R&D facilities are able to apply for the cash incentive.

"The ministry, however, will set a cap on the FDI subject to the 100 percent cash grant."

It is a radical scheme in comparison to countries which have a similar systems such as Britain, Ireland, Israel and China. They provide just 10 to 20 percent of foreign investments in cash grants.

The plan was proposed as part of a roadmap to lure more FDI in the second half of the year.

So far, there has been no foreign beneficiary of the cash grants since the system was introduced in March last year.

The cash incentive expansion plan came after foreign direct investment nosedived 25.2 percent in the second quarter from a year ago.

FDI between April and June dropped to $1.50 billion from $2.01 billion a year earlier. It was the first time observers have seen a fall in FDI attraction since the first quarter of last year.

The ministry selected five strategic industries for attracting FDI in the latter part of the year: auto parts, semiconductor & liquid crystal display (LCD), biotechnology, retail &distribution and culture & tourism.

"We will set up a task force to invite foreign investors in those sectors in cooperation with the private sector. A task manger to lead the task force will be appointed soon," Lee said.

The task force will list 100 target multinationals in those sectors and develop relations with them. The FDI attraction delegation will be dispatched in compliance with the needs of target companies, while inviting them to Korea and introducing them to the nation¡¯s business and investment environment.

The ministry will review the effects of overseas road shows for FDI attraction. It has faced the criticism that many of those events overlapped and wasted time and money.