These days, foreign direct investment (FDI) has been acknowledged as one of the requisites for national economic development. According to wellknown reports published by universal organizations, developed countries have enjoyed benefit from FDI already and have utilized FDI as a stepping stone for their economic success nowadays. Hong Kong, Singapore and the U.K. are good examples for beneficiaries of FDI. Witnessing their prosperity, developing countries have started to follow and to benchmark the precedents’ ways towards economic development. Korea, one of the chasers to the developed countries, is also struggling to promote itself as an attractive destination for FDI. However, Korea’s FDI performance has not been in a good mood relative to its size of economy and neighboring nations’ achievements. Now it is impoverish that Korea should find its own ways to gain its FDI competitiveness, or it would fall behind in its goal to be one of the developed in the future.
THE COMPETITIVENESS OF THE INWARD FDI IN KOREA: ANALYSIS OF ITS PERFORMANCE AND POTENTIAL Sooju Lim Master of Arts (International Commerce) GRADUATE SCHOOL OF INTERNATIONAL STUDIES KOREA UNIVERSITY February 2010 THE COMPETITIVENESS OF THE INWARD FDI IN KOREA: ANALYSIS OF ITS PERFORMANCE AND POTENTIAL APPROVED BY EVALUATION COMMITTEE: Jung-Ho Kim, Supervisor Jin-Sang Lee Youn Min Park Abstract These days, foreign direct investment (FDI) has been acknowledged as one of the requisites for national economic development According to wellknown reports published by universal organizations, developed countries have enjoyed benefit from FDI already and have utilized FDI as a stepping stone for their economic success nowadays Hong Kong, Singapore and the U.K are good examples for beneficiaries of FDI Witnessing their prosperity, developing countries have started to follow and to benchmark the precedents’ ways towards economic development Korea, one of the chasers to the developed countries, is also struggling to promote itself as an attractive destination for FDI However, Korea’s FDI performance has not been in a good mood relative to its size of economy and neighboring nations’ achievements Now it is impoverish that Korea should find its own ways to gain its FDI competitiveness, or it would fall behind in its goal to be one of the developed in the future Table of Contents Ⅰ Introduction ··································································································· Ⅱ Foreign Direct Investment: Definition and Characteristics ···························· Definition of FDI ··················································································· Economic Impacts of FDI ······································································· Key Determinants of FDI ······································································· Ⅲ Recent Trends in FDI ·················································································· 11 Global Trends in FDI ··········································································· 11 Current Status of FDI into Korea ··························································· 13 Ⅳ Assessment of FDI performance and Potential ············································· 16 Performances in FDI: the inward FDI performance index ······················ 16 Potentials in FDI: the inward FDI potential index ································· 19 Comparison between the two indices ···················································· 23 Ⅴ Case Studies: Hong Kong, Israel and Croatia ··············································· 25 Hong Kong ··························································································· 26 Israel ····································································································· 32 Croatia ·································································································· 37 VI Conclusion: Lessons to Korea ····································································· 42 Implications from the three cases ·························································· 42 Suggestions to Korea ············································································· 46 References ········································································································· 49 Tables Table Economic outcome of foreign-invested companies in Korea, 2007········ Table FDI inflows by region and economy, 2007 ··········································· 12 Table The ranking of inward FDI performance index, 2005-2007 ·················· 18 Table The ranking of inward FDI potential index, 2005 and 2006 ·················· 21 Table Korea’s row data and scores for variables in the inward FDI potential index, 2004-2006 ················································································· 22 Table Hong Kong’s raw data and scores for variables in the inward FDI potential index, 2004-2006 ··································································· 29 Table Hong Kong’s variables comparison between 1995 and 2005 ················ 30 Table Israel’s raw data and scores for variables in the inward FDI potential index, 2004-2006 ················································································· 35 Table Israel’s variables comparison between 1995 and 2005 ························· 36 Table 10 Croatia’s raw data and scores for variables in the inward FDI potential index, 2004-2006 ················································································· 39 Table 11 Croatia’s variables comparison between 1995 and 2005 ····················· 40 Figures Figure Economic portion of foreign-invested companies in Korea, 2007 ········· Figure Porter’s Diamond Model for national competitiveness ·························· Figure Host country determinants of FDI ······················································· 11 Figure Korea’s ranking in FDI confidence survey of 25 countries, 1997-2007··························································································· 12 Figure FDI inflows: global and by group of economies, 1980-2007 ··············· 12 Figure The inward FDI trend in Korea ··························································· 14 Figure The formula for the inward FDI performance index ···························· 17 Figure The twelve variables for the inward FDI potential index ····················· 19 Figure Matrix of inward FDI performance and potential, 2006 ······················ 24 Figure 10 The three countries’ ranking of the inward FDI potential index ········· 26 Figure 11 Trend of the inward FDI performance index, Hong Kong ················· 28 Figure 12 Trend of the inward FDI performance index, Israel ··························· 32 Figure 13 Trend of the inward FDI performance index, Croatia ························ 38 Figure 14 Implications from the case studies: four factors for FDI competitiveness················································································· 46 I Introduction Just a couple of decades ago, international business has usually been referred to as exports and imports conducted beyond borders, which concerns trade in goods and services Economic policies, at the time, did not have much regards with capital movements between countries, and many countries actually restricted the movements particularly when crossing borders inwardly However, as the global economy has been getting to have closer relationships, capital movements across borders came to be an unavoidable trend In the region of Asia, the significance of foreign investment was recognized after suffering from the 1997 financial crisis Korea was one of the countries that were reluctant to accept foreign investment into its domestic market, but the situation has been changed Although there are still pros and cons confronting on whether foreign investment has positive or negative influences on national economy, many countries and their governments are recognized that foreign direct investment (FDI) is required to attain their economic upgrade It was witnessed globally when Asian countries opened their market to foreign capital and therefore made a quick recovery from the mire or recession in the end of 1990s Korean government also followed the trend introducing FDI promotional policies to attract investment and benefitted from the liberalization In recent, national governments takes FDI as one of important springboards towards their economic prosperity In that sense, they competitively introduce driving policies for FDI inducement and count their annual FDI records comparing to other nations However, nevertheless with a struggle for inviting foreign direct investment, each country has different consequences depending on their different investment environment According to the annual research done by the United Nations Conference on Trade and Development (UNCTAD), many of -1- developed economies showed great performances in FDI, while developing economies still remained behind (UNCTAD 2008, 4) Korea was also considered as a low performer although it had launched plenty of favorable policies and incentives for foreign investors (UNCTAD 2008, 13) A large number of studies have done to find out what the key determinants are and what makes an economy attractive to investors or competitive in FDI Some of successful countries like Singapore and Ireland, and the U.K have been emerged as benchmarking examples and have proposed valuable lessons from their foreseeing investment policies Though, those policy implications cannot be adjusted properly into other economies which have different business environment, and therefore a wide range of variables should be concerned together such as industrial structure, natural and human resources, infrastructure, and so on The composite analysis with diverse variables would provide further precise and accurate implications to upgrade investment environment and national competitiveness of Korea Accordingly, this paper will briefly examine the nature of FDI, observing its major impacts on economies and reviewing former studies on investment determinants After taking a glance at the global and Korean trends of inward FDI in recent, it will introduce the UNCTAD’s indices for FDI performance and potential After that, three economies will be chosen with their high performances to conduct case studies, and each country’s variables which determine their potential to invite FDI will examined Those variables include infrastructure, government stability, market openness, technology capability, etc., and they will be analyzed whether and how they contribute to achieve each country’s investment performance The three case studies based on their performances and potentials in FDI would be finalized with suggestions and implications for Korean economy, looking forward Korea to being an attractive destination for FDI -2- II Foreign Direct Investment: Definition and Characteristics Definition of FDI1 According to the world-perceived definition announced by the Organization for Economic Cooperation and Development (OECD), foreign direct investment (FDI) is an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor) in an enterprise resident in an economy other than that of the foreign direct investor (foreign direct investment enterprise) The lasting interest implies that the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on the management of the enterprise Direct investment involves both the initial transaction between the two entities and all subsequent capital transactions between them and among affiliated enterprises, both incorporated and unincorporated (UNCTAD 1996, 7) Different from the ‘direct’ investment, there is a concept of ‘indirect’ investment, which does not have a purpose of a long-lasting relationship and a management control This is a so-called ‘portfolio investment’, chasing a rather short-term interest without any interests in a management control on an enterprise Sometimes the indirect investment possibly turns into ‘speculation’ when an investor’s desire towards high interest gets to an extreme Flows of FDI are recognized by capital provided by a foreign direct investor to a foreign-invested enterprise (either directly or through other related enterprises), or capital received from a FDI enterprises by a foreign direct investor This study regards only ‘inward’ FDI, investment coming from foreign countries -3- (UNCTAD 2008, 249) On the other hand, the OECD specifically recommends counting three components in for FDI flows: equity capital, reinvested earnings and intra-company loans (OECD 1996, 12-26) Although there is such guidance for defining FDI and its components, each country has its own standard different from one another (IMF 2003, 36) Korea admits FDI when a foreign investor acquires equity of a foreign-invested enterprise or provides a long-term debt to get the entity, and the equity should account more than ten percent share of the invested enterprise (Invest KOREA 2008, 6-7) The Foreign Direct Promotion Act does not count reinvested earnings and short-term loans as a FDI amount Despite arguments on the definition of FDI, it is broadly understood that the basic requirements to be foreign direct investment are (1) capital investment across borders; (2) a long-term interest; (3) and a purpose of a lasting management control Economic Impacts of FDI Foreign direct investment (FDI), especially an ‘inward’ investment, has been highlighted globally with its positive economic impacts on a host country, such as production increase, job creation, technology spillover, etc Those impacts proceed a country to developing its economy and furthermore strengthening its national competitiveness The International Trade Administration, U.S Department of Commerce, stresses the importance of foreign direct investment referring to its impacts on the U.S economy In terms of job creation, the government announces that U.S affiliates of foreign companies employ approximately 5.3 million U.S workers, or -4- environment The amount of spending in R&D was considerably huge in the past, and it has been doubled in recent ten years That shows great efforts of Israel’s government and business community to expand its national technology ability, and finally their efforts have taken fruits in inducing foreign investment into their territory The accumulated inward FDI stock is also a good indicator for the market openness and, at the same time, it confirms the grown and now large presence of foreign-invested companies in Israel For the factor conditions of Porter’s Diamond model, Israel has little natural resources, but has technological capability and therefore is equipped with high-tech infrastructure and high-skilled human resources On the other hand, its demand condition is powerful with its always open market and world-class technology-based enterprises operated in the economy Once well-known multinational companies enter into a country with a competitive FDI environment, then the fact that such a world-class company exists in the country comes out to be another contributor to make the country be further competitive in FDI Meanwhile, Israel government’s straight-forward policy for deregulation and disengagement from business activities effects positively on one dimension of the diamond’s corners, ‘strategy, structure and rivalry.’ It does not seem to have rivalry in terms of FDI inducement, different from the Hong Kong’s case The Israel’s powerful technology-based industries hold the last corner of the diamond On the basis of all the four-sided factors, Israel possesses important elements to be competitive to attract foreign investors already, open market, strong government support, and technology-based resources The fourth corner specialize Israel’s FDI competitiveness in its world-best high-tech industries - 36 - Croatia Croatia is rather a strange country hardly heard about in FDI studies This economy actually has just recovered from massive destruction caused by the war in 1991 However, Croatia seems to have successfully settled on the way to expand its economy when recognizing its economic outcomes released in recent According to the country groupings done by the World Bank, Croatia is classified in the high-income economies with most well-known developed countries (the World Bank, www.worldbank.org) The moderate rebound of economy was originally stimulated its tourism industry boost as one of the famous tourist destination in the world, and additional Croatian government’s attempts to place policies have done something to its market expansion In terms of inward FDI, Croatia has pulled its performance up successfully especially after the end of the war in 1995 Its upward investment wave meets an abnormal peak in 2002, when the economy expanded with a credit boom fueled by newly privatized and foreign-capitalized banks (U.S Department of State, www.state.gov) Croatia’s government-led economic policies, mainly by privatization of state-owned corporations, have come to a favorable end in FDI attracting aspect If taking a look inside the economy in detail, however, the investment accomplishment so far has not been because of its fundamental to economic growth but rather because of its temporarily recovery construction and some state-own privatization attempts That is, FDIs to Croatia have been not originated from its own competitiveness, differently from the other two former examples Therefore its performance did not get a momentum to raise its FDI performance after the year of 2004, lagging behind the average of the world FDI performance index Still, the country’s FDI performance has been on the upward - 37 - trends, and it is meaningful to study on this country which is expected to provide unconventional views for FDI determinants Figure 13 Trend of the inward FDI performance index, Croatia 4.0 CROATIA INDEX VALUE 3.5 3.0 2.5 2.0 1.5 AVERAGE 1.0 0.5 0.0 99 99 99 99 99 99 99 99 99 00 00 00 00 00 00 00 19 -1 -1 -1 -1 -1 -1 -1 -1 -1 -2 -2 -2 -2 -2 -2 -2 88 989 990 991 992 993 994 995 996 997 998 999 000 001 002 003 004 19 1 1 1 1 1 2 2 YEAR Source: UNCTAD (www.unctad.org) As done before with the two former examples, a review on the Croatia’s FDI potential index variables will also provides valuable hints for how to increase investment output Different from the other two developed countries studied before, Croatia shows somewhat typical characteristics as a developing country It had rather low scores with R&D expenditures and student numbers in tertiary level, which indicates Croatia’s low capabilities to operate value-added business Moreover, a series of GDP related variables shows the market is rather small and closed The exports amount relative to GDP is also small, based on the weak industrial fundamentals Those somehow negative economic elements are possibly operated as obstacles to investors who are willing to enter into the economy Nevertheless, opportunities still exist Scores regarding information - 38 - and communication infrastructure have exceeded the world average level, backed up by post-conflict reconstruction activity ranging from rebuilding of houses and damaged infrastructure, expansion of nation-wide roads, to upgrading of ports facilities And, according to the score of country risk, investors have no longer evaluated Croatia as a risky and unstable country in politics and business Table 10 Croatia’s raw data and scores for variables in the inward FDI potential index, 2004-2006 Unit Raw data Score 0-1 % 3.6 0.481 GDP per capita Dollars 8,579.4 0.107 Total exports % of GDP 47.1 0.165 per 100 inhabitants 42.0 0.607 per 100 inhabitants 82.2 0.541 Energy use Per capita 1,987.1 0.101 R&D expenditures % of GDP 1.2 0.250 Variables Real GDP growth Telephone mainlines Mobile phones Average 1996-2006 Average 2004-2006 Students in tertiary education 2006 % of total population 3.00 0.445 Country risk As of Dec 2006 Composite risk rating 75.5 0.656 Exports of natural resources % of world total 0.09 0.010 Imports of parts/accessories of electronics and automobiles % of world total 0.05 0.004 Exports of services % of world total 0.395 0.026 Inward FDI stock % of world total 0.2 0.011 Average 2004-2006 Source: UNCTAD (www.unctad.org) - 39 - The score is even higher than that of Israel, which convinces investors that conflicts in Croatia is over and the economy is already on the way to recover and prosper Comparing with performances between 1995 and 2005, its income expansion is highlighted with more than one hundred percent increase during the period of ten years Service industry, particularly tourism, has made a significant contribution to the development With the market growth and its infrastructure expansion, mobile phone usage was multiplied more than eight times comparing to the number in 1995 The Croatian government has been focus on setting up its economic fundamental, with building infrastructure throughout all the territory, and the efforts seems to get results these days These government-led drives for Table 11 Croatia’s variables comparison between 1995 and 2005 Variables Unit 1995 2005 Growth rate Real GDP growth % 6.63 4.21 -36.5% GDP per capita Dollars 4,967.96 10,004.25 101.4% Total exports % of GDP 33 43 30.3% Mobile phones per 100 inhabitants 82 8,100.0% Energy use Per capita 1,532 2,005 30.9% R&D expenditures % of GDP N/A 0.87 N/A Students in tertiary education % of total population N/A 23.30 N/A Exports of services % of GDP N/A 22.32 N/A Inward FDI stock Dollars N/A 14.59 N/A Source: The OECD (real GDP growth, GDP per capita, R&D expenditures, students in tertiary education); WTO Statistics database (exports of goods); the World Bank (mobile phones usage and energy use); UNCTAD FDI statistics (inward FDI stock) - 40 - economic development and investment inducement could earn further greater performance, when combined with improvements on restrictions for FDI competitiveness such as low spending on R&D and insufficient skillful workforce In case of Croatia, Porter’s analytical model is proper to be used not for judging its current competitiveness but for guessing its future to be competitive for FDI invitations Croatia is still weak in terms of both factor and demand conditions It does not have enough natural, human and technology resources to produce value added products and services, and even infrastructures are mostly under construction The market has not been mature yet, just recovered from severe conflict and massive destruction The government has shown strong leadership and has introduced driving policies to stimulate its economic development, like a large investment program for infrastructure and some stateowned enterprises privatization Those government’s attempts have not related to strengthen its industries Even the most important industrial sector in Croatia, shipbuilding, is getting to lose its competitiveness, while tourism has been solely flourished A report addressed that in view of its reliance on tourism and the weakness of its merchandise exports the Croatian economy remains vulnerable to external shocks (EIU 2008, www.eiu.com) The country had taken an opportunity to grasp investors’ interests with selling out their state-own enterprises which has led it as a well performing FDI result Still it is necessary to emphasize that Croatia should continue its efforts to establishing fundamentals, enterprise restructuring and trade and investment promotion, with a strong policy support by the government Their doings by far have derived a rather good potential for inviting FDI, but it is still a long way to go to be a competitive economy in FDI - 41 - VI Conclusion: Lessons to Korea These days, foreign direct investment (FDI) has been acknowledged as one of the requisites for national economic development According to wellknown reports published by universal organizations, developed countries have enjoyed benefit from FDI already and have utilized FDI as a stepping stone for their economic success nowadays Hong Kong, Singapore and the U.K are good examples for beneficiaries of FDI Witnessing their prosperity, developing countries have started to follow and to benchmark the precedents’ ways towards economic development Korea, one of the chasers to the developed countries, is also struggling to promote itself as an attractive destination for FDI, but its performance has not been in a good mood relative to other countries The three countries, Hong Kong, Israel, and Croatia, are better performers than Korea, though being in different economic stages each other Findings about their specific conditions or strategies which have derived the countries successful in FDI will provide useful tips which can be implied to Korea’s situation Those lessons will lead Korea to make its potential competitive and further to turn its potential into outstanding performance Implications from the three cases The three economies, Hong Kong, Israel, and Croatia, have had gradually increasing their performance and now are counted as high performers in the world FDI market Because of their different economic conditions, the study on those cases has been worried to have individual outcomes which cannot be narrowed - 42 - down into a common conclusion However, different from anticipated, assessments on each country’s variables of FDI potential index provide some coherence implications that confirm why they have had their FDI performance in growth First, all the three countries have largely relied on their government’s role in FDI That is, government’s leadership or executing policies are proven to be a significant factor for FDI competitiveness Hong Kong has an independence governance system apart from the mainland China, and, therefore, this kind of economic governance with a “high degree of autonomy (Wikipedia, www.wikipedia.com)” can be linked to strong leadership and policies exercised Israel, in addition, has undoubtedly a centralized government, in particular with its situation in time of war against Palestine Backed up by their government’s utmost support, the two economies have promoted the significance of FDI for economic development and have opened their markets far earlier than other economies Also, Croatian government has led its economy to recover from massive damage after war, introducing driving policies to absorb foreign investment The roles of each government have been different with their own political and economic status, though the three governments prove that a government should take a national initiative to improve FDI competitiveness Another factor which has brought the case countries into top rankers of the world FDI performance is the three economies’ fundamental that has enabled them to accept and attract investment To induce investment from investors, there should be something to take their interests Human resources, technology capability, and infrastructure are usually considered as prerequisites to be attractive Hong Kong and Israel has their own distinguished resources and those have improved continuously Especially, Israel’s technology and skilled labor are reaching at the best in the world To attain such competitive advantages, Israel - 43 - has long been made huge investment in research and development And the foreseen investment in the past has turned into attracting foreign investment in the present World-class resources cannot be gained easily, of course, but it is possible to be reached when a strategic continuous investment is accompanied To be competitive to others, bigger and more focused investment should be conducted than others Industrial structure is the third factor that should be pointed out As mentioned, Israel has achieved competitiveness in high-tech industries, and the strength has invited investment of world-famous IT companies’ research centers and operating entities in Israel Those kinds of investment are extended continuously and the expansions of foreign investment call other investors entering into the market Hong Kong also has its strength in finance industry, so that it has focused on developing itself as a financial hub in Asia and the efforts has reached at the goal somehow The industrial strength in finance makes its inward investment flow into the sector and the trend has drawn improvement of the industry again There exists a virtual circle between a nation’s competitive industry and foreign investment in the industry An economy can multiply its development by the circular interactions, and it surely has occurred in the two former examples And the last fourth factor is an open market with an open mind There are numerous countries insisting that they have open markets And it is certain nowadays that nobody can survive with its door closed because of insufficient resources, products, services, and so on However, there are not many countries which have an open mind to accept foreign companies and their capital According to reports on each country’s commercial status by the Economic Intelligence Unit (EIU), Hong Kong’s government, local business, media, and the public have hold a favorable view on FDI (EIU 2009a, www.eiu.com), and - 44 - Israel’s those have increasingly shown strong supports for globalization in general and foreign investment in particular (EIU 2009b, www.eiu.com) Their governments not need to emphasize the importance of FDI against the public, but rather they get strong supports from it That makes each country’s market to be really open and to be ready to get FDI, and furthermore to be competitive in FDI Figure 14 Implications from the case studies: four factors for FDI competitiveness Firm strategy, structure & rivalry Strong government leadership and driving policies Factor conditions Distinguished resources (based on strategic investment) Demand conditions Real open market with an open mind Related & supporting industries Major industries with competitiveness All these four factors come out to match with the dimensions consisting of Porter’s diamond model, which implies requirements to have FDI competitiveness And all those factors can be compared once again to Korea’s FDI condition, measuring its competitiveness Korea has had its own strategies led by the government’s strong willingness to induce more investment into Korea And it is also in a good condition with highly educated human resources and high-tech technologies somehow Several multi-national companies have contributed to - 45 - develop its competitive industries, such as semiconductor, shipbuilding, automobiles, etc Moreover, Korea has a wide-open market with around tenth ranked amount of exports in the global economy Considering all these conditions, the economy seems to have all the factors well satisfied to be competitive, and that might be the reason why the UNCTAD’s FDI potential index has evaluated Korea as one of the high-potential countries throughout the world Nevertheless, Korea has always categorized in low performers especially in relative value when comparing its investment volume to the economy size Korea’s problems and suggestions to solve the problems are continued from now on Suggestions to Korea Looking back to the history of FDI in Korea, Korea’s investment inducement policies have been focused on how much is invested in Korea Therefore, the foreign investment has been expanded in terms of quantity, not in quality However the quantity has been a small amount comparing to the nation’s market size and neighboring countries’ achievements, and it can be noted by its low performance index Korea needs government’s proper leadership for advancing FDI, and now is the time for that The leadership for FDI should not be as same as it has been until now, which means that the leadership should not be strapped only in FDI itself or its amount and turn its concerns into industrial aspects in terms of the nation’s economic development In addition, Korean government and industries need to make investment in Korea for themselves It does mean not only capital investment but also any possible resources investment When looking at the example of Israel again, it has been concentrated on R&D development and poured its money in the sector - 46 - The investment is different from Korea’s money spending for FDI Israel’s spending fertilizes its industry and technology which has resulted in strengthening FDI competitiveness and finally further national competitiveness However, Korea’s money spending for FDI looks somewhat different from the example country A lot of public spending for FDI is mainly conceptualized as subsidies, which are useful to attract investment in terms of quantity Korea should focus its concern and spending more on developing industries which are predicted to have a global competitiveness Investor incentives are necessary, of course, but it should be used both to support investors’ entrance and to fatten Korea’s industry Then, Korea can enjoy both bigger and better investment for enhancing its economic prosperity And lastly and urgently, Korean government, business community, media, and the public have to have an open mind to FDI without any preconception Korea has an open market to foreign products, services and also capitals However, Koreans does not open their minds fully to those Protests against foreign-invested enterprises frequently burst out and those events easily form a widespread negative sentiment towards something from overseas no matter what it is beneficial or not Some government officials, even those who are in charge of FDI invitation, question the necessity of FDI for Korean economy’s development A mindset is harsh to make a change in a short term, but an open mind is a very first step to have a real open market It should be recognized that an open mind is one of prerequisites for upgrading Korea’s FDI competitiveness and performance With some interesting indices for measuring FDI performance and potential, three economies were chosen to research on and Korea finally got some implications and suggestions for its current FDI condition Everyone knows that Korea has strong potential to invite far more investment than now and to make a - 47 - leap to the economic level of developed countries If taking the measures as suggested, Korea will have its own competitive advantage distinguished from others soon Korea has competed well against others until now, but it is time to be competitive to invite investment in Korea is not a long way behind to gain its FDI competitiveness and to achieve a powerful national competitiveness - 48 - References 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(http://www.eiu.com) Country Commerce Israel 2009b (http://www.eiu.com) Country Profile Croatia 2008 (http://www.eiu.com) International Trade Administration, US Department of Commerce (http://trade.gov/investamerica/impacts.asp) Ministry of Knowledge Economy (MKE) FDI Statistics (http://www.mke.go.kr) Organization for Economic Co-operation and Development (OECD) Statistics (http://www.oecd.org) United Nations Conference on Trade and Development (UNCTAD) FDI Statistics (http://www.unctad.org) Wikipedia (http://www.wikipedia.org) World Bank World Development Indicators (http://www.wordbank.org) World Trade Organization (WTO) Statistics Database (http://www.wto.org) - 50 - ... inward FDI performance index FDIi / FDIw INDi = -GDPi / GDPw INDi = The Inward FDI Performance Index of the ith country FDIi = The FDI inflows in the ith country FDIw = World FDI inflows... Performances in FDI: the inward FDI performance index The Inward FDI Performance Index is simple that compares a country’s FDI performance relative to its market size (GDP) and the world’s FDI performance... of FDI performance and Potential ············································· 16 Performances in FDI: the inward FDI performance index ······················ 16 Potentials in FDI: the inward FDI