<대외硏> "FDI Attraction and Domestic Strategic Asset Protection Require a 'Two-Track' Strategy"

"World Tightens Foreign Investment Controls" Warning
"Send Industry-Academia-Research Experts to Korea-Germany Energy Transition Cooperation Committee
Invest in M&A for Indian Retail Startups
Actively Pursue 'Hydrogen Economy Partnership' with Australia"

The photo shows Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, speaking at a meeting held last year after his inauguration, where he invited foreign business executives in Korea for the first time. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] The Korea Institute for International Economic Policy (KIEP), a government-funded research institute, has analyzed that South Korea needs to devise a well-balanced 'two-track' strategy to both attract foreign direct investment (FDI) and protect domestic strategic assets. This is because countries worldwide are increasingly tightening controls on foreign investment.

In a report titled "Strengthening of Foreign Investment Screening by Major Countries Amid the COVID-19 Crisis and Its Implications," released on the 21st, KIEP made these recommendations.

According to KIEP, major countries including the European Union (EU) are announcing measures to strengthen pre-screening of FDI. The EU has enhanced pre-screening of FDI in assets critical to health infrastructure and public order and has called for cooperation among member states.

France has erected barriers through measures focusing on bio sectors, Italy on water resources, health, and broadcasting, and Spain requires prior approval for FDI involving acquisitions of 10% or more equity stakes. Germany is refining laws related to strengthening FDI screening for companies holding core technologies.

India, which had previously granted automatic approval to seven neighboring countries sharing land borders including China, recently shifted to a pre-screening system. Australia announced the "Foreign Acquisitions and Takeovers Act," regulating all FDI.

Canada announced policies to strengthen FDI screening related to public health, strategic goods, and service supply during the COVID-19 pandemic.

KIEP explained that since 2018, FDI screening for national security purposes has been strengthened. It predicted that concerns over foreign capital acquiring companies and assets with strategic value will intensify due to COVID-19.

KIEP advised that South Korea should ▲ promote cooperation in future innovative technology sectors with trusted strategic partners ▲ establish a balanced and differentiated strategy between attracting FDI and protecting domestic strategic assets ▲ exercise caution regarding strengthened regulatory requirements when investing in overseas mergers and acquisitions (M&A).

KIEP argued that international cooperation in disease control and health sectors, overseas expansion, and overseas M&A investments should be actively supported.

It recommended considering participation from government, public institutions, as well as representatives and experts from industry, academia, and research through the "Korea-Germany Energy Transition Cooperation Committee and Working Group (WG)."

KIEP encouraged M&A investments in competitive startups in India's retail distribution, e-commerce, pharmaceutical, and insurance sectors.

It also advised forming a "hydrogen economy partnership" with Australia.

KIEP viewed FDI as playing an important role in nurturing future new industries, while emphasizing the need to protect South Korea's core industries and technologies.

KIEP stated, "Alongside attracting FDI, it is necessary to consider legal measures to prevent the outflow of our country's core industries and technologies overseas."

KIEP judged that a cautious approach is needed toward the 'investment protectionism' of various countries.

KIEP advised, "As major countries are strengthening investment restrictions on strategic assets, it is necessary to some extent to protect our country's strategic assets and technologies."

This content was produced with the assistance of AI translation services.