CRI

 [ABSTRACT]

This study aims to develop plans for the expansion and advancement of foreign direct investment (FDI) in Chungbuk Province. It is widely recognized as a common phenomenon that the global activities of companies—the direct agents of FDI—have significantly evolved. The specific motivations for FDI are diverse, reflecting a wide range of factors, and it remains a phenomenon driven by multiple causes.

Despite some side effects associated with FDI, its overall utility is generally acknowledged. In South Korea, FDI serves as a cornerstone for domestic economic growth. In Chungbuk, where the manufacturing sector represents the largest share of the industrial structure, much of the sector relies on the international division of labor, directly and indirectly impacting the global market. This aligns with Chungbuk's FDI specialization in industries focused on materials, parts, and equipment.

Since 1948, FDI has grown alongside global economic expansion. However, its growth has stagnated due to the COVID-19 pandemic. While debates continue over the persistence of geoeconomic risks, which have intensified in recent years, it is increasingly expected that these

risks may prolong for the next 30 years. Consequently, FDI stagnation is anticipated to persist for some time. Nonetheless, FDI is expected to continue playing a positive role at both the national and regional levels by expanding public demand through investment inflows and revitalizing and upgrading local economies.

Despite the emergence and expansion of FDI regulatory measures during the pandemic, competition to attract investment remains intense. Notable trends include:

1. Expansion of Friend-shoring and Near-shoring:

As a result of deepening geoeconomic risks, many companies are reshoring operations to their home regions or relocating to neighboring countries if reshoring is not feasible.

2. Dismantling and Reconstruction of Global Value Chains (GVC):

Investments by global companies in China, driven by its resources, domestic markets, and low wages, have fueled the Chinese economy but also raised concerns about free-riding on future growth engines. As U.S. regulations on China intensify, Chinese companies are increasingly redirecting investments toward Korea to circumvent these restrictions.

Chungbuk’s FDI has distinct characteristics, such as a focus on advanced countries, small-scale manufacturing, and one-time investments. Most FDI inflows to Chungbuk are linked to high-tech industries and facilities investments, often involving advanced economies. This contrasts with the greater proportion of FDI in the metropolitan areas, which tends to focus on the service sector.

Strategies for Attracting FDI to Chungbuk

The following strategies are proposed to enhance Chungbuk's FDI performance:

1. Short-term Strategies:

Given the dominance of small-scale manufacturing in Chungbuk's FDI, it is practical to attract investments focusing on upstream and downstream industries related to existing manufacturing sectors.

2. Medium-term Strategies:

Chungbuk should work to attract future-oriented growth industries, such as biotechnology, by building a robust industrial ecosystem and encouraging investments in these sectors.

3. Long-term Strategies:

The development of differentiated service industries in Chungbuk and attracting FDI in these sectors could provide a sustainable path for economic growth.

To further boost FDI in Chungbuk, it is essential to strengthen regional governance. This includes fostering interrelationships between stakeholders by establishing private research centers and forming consultative bodies centered on foreign enterprises.