Foreign Direct Investment (FDI) indicates the net inflows of foreign investment, which aims to building long lasting relationship with domestic corporations. Target of evaluation was enterprises of which foreign investors acquire 10 percent or more than that of voting stock. It is evident that the FDI has played a pivotal role in production and employment in domestic economy. Therefore, with the aim of attracting foreign investment into Korea, the government has operated financial programs, tax cuts and institutional supports to assist FDI and foreign investment enterprises. This report analyzes the current status of FDI and evaluates the effectiveness of financial support programs.

  As a result of evaluation, there are mainly three findings. First, inward FDI record was significantly below expectation. The investing amounts in a domestic market has decreased and net inward which contain FDI withdrawal has rapidly dropped for last 5 years. Second, financial support programs for foreign investment enterprises include foreign enterprise complex, infrastructure setting, training programs, cash grant etc. More than 100 million USD has been allotted to assist foreign investment enterprise since 1994 and 70 percent of the investing amount was used to the foreign enterprise complex that did not result in insufficient performance in spite of public financial aid. This is because the occupying rate of the complex was relatively low and outcome from enterprises in the complex was below the ones outside in terms of output, employment and R&D level. Finally, tax cut for foreign investment enterprises are on the rise, and the amount is much bigger than that of financial programs. Nevertheless effort to evaluate tax cut has been neglected.

  Therefore, it is recommended to establish the performance evaluation system in order to attract more and better FDI, and eventually, to set in a motion of virtuous cycle between domestic and foreign enterprises.