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KCI등재 학술저널

Role of State in a Global Economy: Re-evaluating Korean Experience in FDI Policies

In the era of globalization role of government is getting more and more limited. Government is to create or sustain conditions necessary for efficient functioning of the market, but should not control or regulate it directly. FDI policies follow these trends. FDI are the major driving force of globalization, so host country government should provide better conditions for foreign investor’s activities while any managerial and control mechanisms are considered to be mostly unacceptable. Author argues that Korean experience in FDI policies proves the idea that government can play a very important role in economic development and provide conditions necessary to get benefits and prevent costs related to FDI. Korean FDI policies were mostly restrictive up until mid 1990s. These policies were aimed to get best out of FDI while avoid getting dependant on them. Government regulation and control, being complemented with strong industrial policy, competition policy, etc., provided necessary conditions for successful economic development. Author argues that FDI liberalization and deregulation in Korea after 1997 caused some negative consequences, mostly related to the problem of M&As. In many cases FDI in Korea during the period of bad liquidity crisis (1997-2000) were driven not by technological or other competitive advantages but mostly by capital advantages. Within this period foreign investors took control over many large, originally profitable and technologically competitive Korean firms and thus gained dominance in many Korean markets. This crisis revealed the ambiguous nature of FDI and proved the fact that less government was not always better, especially when the economy was unstable. Although FDI restrictions and control are not acceptable in a global economy, at present national governments should pay even more attention to their FDI policies to take benefits and prevent costs occurring from FDI and thus make them an effective mean to boost further economic development.

I. Introduction

II. The Changing Role of the State and FDI in a Global Economy

III. Overview of the FDI policy in Korea

IV. Evaluation of Korea’s FDI policy

V. Conclusion

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