Korean FDI Diversification and Win-win Economic Cooperation between Korea and Mongolia

To utilize FDI (Foreign Direct Investment) for its economic diversification, mining development and infrastructure improvement, at the present day Mongolia pursues a FDI promotion policy that enables foreign investors to make FDI in various sectors and regions of the country through diverse forms and sizes. Such a policy not only represents a diversification opportunity for those who seek to invest in Mongolia, but also provides an opportunity to consider the effectiveness of FDI in more expansive situation. The important point here is the policy includes many incentives for foreign firms to seize the diversified FDI opportunities. These points are particularly decisive for Korean FDI in Mongolia which diversification is strongly recommended. The purpose of this paper is, therefore, to analyze and recommend how Korean FDI can be diversified in Mongolia within the context of the country’s recent policy on FDI promotion. To reach this paper’s purpose, the study highlights an actual situation of Korean FDI in Mongolia in terms of its diversification and examines FDI diversification possibilities within the context of the recent FDI policy of Mongolia. The study finds that Korean FDI in Mongolia can be diversified through four ways: diversification of FDI form, region, sector, and implementation size. First, in terms of form, Korean FDI was found to be possibly diversified through merger & acquisition, concession agreement, product sharing agreement, franchising, licensing, financial leasing and strategic alliance. Second, in terms of region, it was found to be possibly diversified in provinces with high competitiveness and FDI projects, and where Free Zones are developed. Third, in terms of sector, opportunities were found for Korean firms to be diversified in export promotion and import substitution sectors. Fourth, in terms of size, FDI of Korean firms was found to be possibly diversified through the country’s high demand for heavy industry development and financing of mega-projects. The study also expects that a successful diversification of Korean FDI in Mongolia to be a prerequisite of a win-win economic cooperation between two countries and proposes a strategy with fit between two countries on Korean FDI diversification.