Investing in Busan: A City with Potential and Challenges

Busan, located in the southeast of South Korea, is a city known for its rich cultural heritage, stunning beaches, and its position as a hub for business and trade. The city's strategic location provides it with access to the China Economic Zone, Japan Economic Zone, Yellow Sea Zone, and Trans-Taiwan Sea Zone, making it an ideal location for businesses looking to expand into the Asia-Pacific region.

Investment in Manufacturing : A Growing Manufacturing Industry

Despite the decrease in foreign direct investment (FDI) during the COVID-19 pandemic, Busan's manufacturing industry has seen significant growth in recent years. The transportation machinery, chemical, electronics, mechanical equipment, and medical precision industries have experienced particular growth, with companies such as Taekwang-Fujikin and Pusan Cables & Engineering investing in expanding their production scale.

Investment in the Service Industry: High Share of Investment in Service Industry

In addition to the thriving manufacturing sector, Busan is also attracting investment in its service industry, including information and communication, finance and insurance, wholesale and retail, and real estate. The city has a high share of investment in these industries, making it an attractive location for businesses looking to expand their services.

Limited Investment in Logistics: Addressing the Limitations of FDI in Logistics

However, considering the size of Busan's economy and its level of logistics infrastructure, the level of Foreign Direct Investment (FDI) is not as extensive as expected. The investment in Korea's sales (liaison) offices, technical service centers, and warehouses is limited to short-term employment, and the city needs to focus on attracting companies that provide long-term employment opportunities. To increase investment in the city, Busan needs to focus on attracting companies that provide complex warehouses that support the competitiveness of manufacturing and distribution companies, as well as smart total logistics and fulfillment services based on artificial intelligence (AI) and automation.

Busan's Investment Support System: An Advantage for Businesses

The investment support system for foreign-invested companies in Busan is also an advantage for businesses looking to invest in the city. Foreign-invested companies with a foreign investment ratio of 30% or more or with foreigners as the majority shareholders are eligible for investment in high-tech industries, industrial zones, one-source service industries, and Busan's strategic industries. The city provides support within 30% of the purchase price for investments related to high-tech industries, industrial areas, and strategic industries in Busan.

Recommendations for Attracting More Foreign Investment in Busan

Busan has the potential to attract more foreign investment, but it needs to take fundamental measures, such as reducing taxes and creating a favorable investment environment. The city also needs to focus on attracting companies that provide youth jobs favored by the 2030 generation and offer long-term employment opportunities. Despite the current level of FDI being lower than expected, Busan is still a prime location for businesses looking to expand into the Asia-Pacific region, with its world-class logistics infrastructure, established manufacturing and industrial clusters, and supportive investment climate.