Global Players from Emerging Markets: Strengthening ... - Unctad

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94 Outward Foreign Direct Investment by Enterprises from the Republic of Korea Number of cases Amount ($ millions) �� Sources: Figure 1-1, 1-2, and 1-3 complied from the Export-Import Bank of Korea (www.koreaexim.go.kr) and Figure 1-4 from UNCTAD (2004). cent of 21,911 Korean overseas subsidiaries were in manufacturing activities (2004a). 68 Until the early 1990s, labour intensive industries such as textile and clothing accounted for the largest share of the Korean manufacturing OFDI. More recently, however, Korean OFDI covers a wider range of manufacturing industries including high-tech electronics. While OFDI to the service and wholesale/retail industries have been increasing, they remained at low level. Size of enterprises. About 80 per cent of Korean OFDI value in the mid-1990s came from large transnational corporations (TNCs). These Korean TNCs that have actively invested abroad include Daewoo Corporation, Hyundai Engineering & Construction, SK Corporation, POSCO, LG Electronics, Samsung Electronics, Samsung Corporation and Hyundai Motor. The recent years have, however, witnessed a gradual increase in OFDI by Korean small- and 68 Newly established Korean overseas subsidiaries in manufacturing activities grew annually by 19.2 per cent, while those in all industries grew by 7.8 per cent. Figure 1. Korean OFDI: flows and stocks (Number and millions of dollars) Figure 1-1. OFDI projects, 1981-2004 Figure 1-2. OFDI flows, 1981-2004 � �� Year Figure 1-3. Average value of OFDI per project, 1981-2004 �� Year Amount ($ millions) Amount ($ millions) �� Year Figure 1-4. OFDI stock, 1980-2003 �� Year medium-sized enterprises (SMEs). 69 OFDI by SMEs started as early as in the 1980s, with investment in labour intensive manufacturing activities (e.g. sewing, wigs, bags, and toys) in Indonesia and the Philippines. Since the formalization of diplomatic ties with China in 1992, manufacturing OFDI by Korean SMEs to China, has been increasing. There are more than 2,500 Korean SMEs in Quingdao and Tianjin area and more than 1,000 Korean SMEs are in Darian, China. 70 Korean SMEs accounted for 37 per cent of the OFDI in 2004, while the large firms accounted for 54 per cent and the remaining 9 per cent by individual investors. Investment abroad by individuals increased rapidly and focused on real estate (KCCI 2005). 71 OFDI by SMEs had increased at a faster pace than by large firms. OFDI by SMEs accounted for the largest share of manufacturing activities, while large Korean 69 The firm is classified as SME if it has employment of less than 300 or asset of less than $8 million in the manufacturing industry. The criteria for classification vary slightly across industries (Korea Federation of Small and Medium Business). 70 According to a report by KOTRA Shanghai Branch Office (Donga Newspaper, 15 September 2003). 71 The rise was due to the increase of the investment ceiling for individual investors (www.mofe.go.kr) .
Amount ($ millions) Amount ($ millions) �� Figure 2. Korean OFDI flows, by region, industry and firm size, 1981-2004 Figure 2-1. Amount by region ($ millions) Figure 2-2. Amount by Industry ($ million) � �� Sources: Figure 1-1, 1-2, and 1-3 complied from the Export-Import Bank of Korea (www.koreaexim.go.kr) and Figure 1-4 from UNCTAD (2004). firms invested more in services, wholesale/retail and mining activities (figure 3). About 40 per cent of the Korean SMEs have specific plans for OFDI in the near future as compared with only 15 per cent for large Korean firms (table 1). Cross-border merger and acquisition (M&A) is not a major market entry mode in the internationalization activities of Korean firms. There are, however, some prominent cases of M&A purchases made by Korean firms and most relate to access to natural resources and technology. For instance, Korea’s leading Internet company, Daum Communication Corp., bought Lycos Inc. (United States) for $100 million in 2004 to access its technology. 72 C. Drivers and motivations General Trend. Export promotion and cheap labour factors were major motivations for Korean OFDI (figure 4). Saturated market at home, cost disadvantage and competition were among the key drivers. Korean firms also invested abroad to access 72 Hankyoreh Newspaper, 30 August 2004. �� Year Figure 2-3. Amount by firm size ($million) �� Year Asia North America Central & Latin America Europe Large TNCs S-M TNCs Etc Amount ($ millions) No.ofcases �� Year Figure 2-4. No. of projects by firm size �� Year �� CHAPTER VIII 95 Manufacturing Wholesales /Retail Service Mining to natural resources (POSCO, Samsung Corporation), markets (Woori Bank) and strategic assets through M&As (LG Electronics, Hyundai Electronics, Samsung Electronics). 73 OFDI motivations in terms of region and firm size vary (figure 5). Korean firms that invest in Asia tend to seek low cost labour to reduce production cost (MOCIE 2002). Korean OFDI to North America and Europe were generally either market-seeking, which includes supporting trade channels, overcoming trade barriers and strategic assets-seeking, such as technology and R&D. There are interesting differences in investment behaviour and motivations between large firms and SMEs. The latter are more concerned with reducing production costs to maintain competitiveness while the former are more market-seeking (figure 5-2). This difference can be explained by the fact that most of the large firms have already invested abroad to reduce production costs and the recent trend is to seek new markets to sell their products. 73 Samsung Electronics Co. (http://www.sec.co.kr); LG Electronics (http://www.lge.com); POSCO (http://www.posco.com); Samsung Corporation (http://www.sams.com). �� Large TNCs S-M TNCs Etc
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United Nations Conference on Trade
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Preface The landscape of internatio
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Acknowledgements This publication i
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Global Players from Emerging Markets: Strengthening ... - Unctad

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