Reduction of Regulatory Restrictiveness in Services Sectors and its Impact on FDI Inflows

3 Pages Posted: 12 Jan 2018

See all articles by Jong Duk Kim

Jong Duk Kim

Korea Institute for International Economic Policy

Bo Young Choi

Korea Institute for International Economic Policy

Moon hee Cho

Korea Institute for International Economic Policy

Min-Chirl Chung

Korea Institute for International Economic Policy

Date Written: January 12, 2018

Abstract

The reduction of regulatory restrictiveness in services sectors in Korea using recent free trade agreements in effect and its impact on FDI inflows are investigated. The research outcomes provide three main findings as follows.

First, FDI inflows of Korea closely follow the trend of global FDI flows. FDI inflows to Korea from developed economies have appeared dominant; FDI inflows from the U.S., Japan and European economies account for the major share. The increase of FDI inflows from China is significant. Moreover, the FDI inflow shares of capital-intensive industries such as electronic, chemical, and machinery in manufacturing and financial, distribution, and business in services are also large. The fact that FDI inflows in services have become two times larger than those in manufacturing since early 2000's is noteworthy. In the meantime, while FDI flows in forms of M&A in most developed economies, M&As as a form of FDI are still less prevalent in Korea.

Second, Korea's services trade restrictiveness indices provided by the OECD are updated and recalculated reflecting the FTAs recently put in force. Further liberalization through recent FTAs in force is identified in legal, accounting and telecommunications services.

Third, the impact of services liberalization on FDI inflows in Korea is analyzed. As suggested in theoretical predictions, further services liberalization through FTAs plays a positive role in FDI inflows in Korea. Such outcomes are derived not only in services sectors but in manufacturing sectors as well.

Keywords: Regulatory Restrictiveness, Services, FDI

Suggested Citation

Kim, Jong Duk and Choi, Bo Young and Cho, Moon hee and Chung, Min-Chirl, Reduction of Regulatory Restrictiveness in Services Sectors and its Impact on FDI Inflows (January 12, 2018). KIEP Research Paper, World Economy Brief 18-02. Available at SSRN: https://ssrn.com/abstract=3100672 or http://dx.doi.org/10.2139/ssrn.3100672

Jong Duk Kim (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Bo Young Choi

Korea Institute for International Economic Policy ( email )

Seoul 137-602

Moon hee Cho

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Min-Chirl Chung

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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