Foreign Invested Companies, 13% of Production of Manufacturing Industry

Foreign invested companies (‘foreign companies’) have undertaken approx. 30% of production (based on sales) of a domestic medical industry and oil refinery industry. In the oil refinery industry, foreign companies have undertaken over 30% of total employments. It was investigated that there was increasing parts of foreign companies in the domestic economy.

As the results of investigation for 1423 foreign companies which have been advanced to the domestic market conducted by the Ministry of Commerce, Industry and Commerce (MOCIE) on September 11, the foreign companies had the sales of 73.5 trillion on manufacturing industry and occupied 13.0% of total production of the domestic manufacturing industry in 2000. There were 30.5% for medicine, 29.4% for oil refinery and 17.9% for electron & electricity in order.

There were approx. 193000 employees who worked for foreign companies as 7.3% of total manufacturing industry. There were 30.6% for oil refinery industry, 22.0% for medicine and 14.4% for electron and electricity in order.

Foreign companies occupied 13.2% and 13.8% for Korean exports and imports respectively. In terms of a balance of payments, there were US$22.7 billion on exports and US$22.2 billion on imports. There were profits of US$0.5 billion.

Jang Yun-Jong, a vice-president of Korea Institute for Industrial Economics and Trade (KIET) said “There were 33.3% of exports out of sales of foreign companies. The analysis showed that foreign companies have focused on exports over the domestic market, higher than 24.6% in Japan and 10.6% in US.”

The net profit margin of foreign companies was 1.12% on average of manufacturing industry higher than –1.97% of domestic companies. It showed good management performance. However, in the field of medicine, precision, optical equipment, chemistry, machinery and food & beverage, the net profit margin of foreign companies was higher than domestic companies, but in the field of office supplies, computer, electric equipment and communication equipment, the net profit margin of domestic companies was higher than foreign companies.

The debt ratio of foreign companies was the average 149.3%, lower than 210.6% of domestic companies. Also, the capital adequacy ratio was 38.2%, higher than 32.2% of domestic companies. It showed a strong financial structure of foreign companies.

In terms of types of company establishment, there were 68.4% for the establishment of new company and 23.1% for stocks acquisition and 8.5% for assets acquisition in order. In terms of an equity structure, there were △ 39.8% for single investment, △31.0% for small equity investment of less 50%, △17.2% for large equity investment of over 50%, and △12.0% of the equal investment of 50% equity.

Companies which foreigners own a right of management or ‘equity per one foreigner’ is over 10% on the law of foreigner investment promotion. However, companies which ‘equity per one foreigner’ is less 10% in spite of over 50% of total equities owned by foreigners are classified as the domestic companies.

Ja-Ryong Koo bonhong@donga.com