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Guide to Tourism Investment

We introduce materials which give help to investment related to tourism investment.
Main Guide to Tourism Investment Understanding Tourism Investment Introduction of Tourism Investment
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Introduction of Tourism Investment

What is Tourism Investment?

Investment in the tourism industry means the creation of capital or goods capable of producing other goods or services in tourism industry for earning higher profits in the private sector or regional revitalization and economic growth for public purposes.

Who Invests in the Tourism Industry?

Tourism investors include strategic investors (SI), construction Investors (CI), and financial Investors (FI).

Type of investors in the tourism industry
Type of investors in the tourism industry
Strategic Investors (SI)
  • Individual or firm that invests in tourism development projects for the purpose of acquiring the right to manage and taking responsibility for running a company
  • e.g. tourism businesses, real estate developers specializing in planning, financing, or brand possessors
Construction Investors (CI)
  • Individual or firm that invests in tourism development projects for the purpose of taking charge of the construction
Financial Investors (FI)
  • Individual or firm that invests in tourism development projects for the purpose of receiving a dividend
  • e.g. banks, insurance companies, private asset management companies, REITs (real estate investment trusts), PEF (private equity fund)

The status and role of a investor is sometimes confused by the business objectives.

The status and role of the investor is determined by the purpos

Tourism Investment Trends

A. Foreign Direct Investment in Korea

Foreign direct investment in Korea hit a declared USD 16 billion in 2012 and has reached a record-breaking USD 20.9 billion with a received USD 15,9 billion in 2015.

Achievements in Attracting Foreign Investment in Korea
Yearly Achievement of Attracting Foreign Investment
Declared 2011 2012 2013 2014 2015 2016
No. 2,710 2,865 2,608 2,463 2,698 2,987
Million USD 13,673 16,286 14,548 19,003 20,909 21,299
Increase (%) 4.6 19.1 -10.7 30.6 10.0 1.9

Source : Ministry of Trade, Industry and Energy (2017). Trends of Foreign Direct Investment in 2016.

Tourism Investment Trend
    Finance
  • The contract amount of Korea's PEF amounts to 34 trillion won as of March 2012 and it continually increases in both quantity and quality.
  • There emerge abundant investment and experts having GP and the reestablishment of PEF having experienced increases annually. (The scale of Korea's PEF fund increases 37.0% annually and 28.3 billion dollars out of total 175 as of December 2011.)
    Drug/Bio
  • Having infrastructure for global clinical demonstration, abundant R&D, and global cooperation capacity in bio/medical fields.
  • The market scale of medicine/bio industry amounts to 19 trillion won, which is equal to 2.84% in annual average for the current five years.
    Cultural Contents
  • Korea market of cultural contents increased for the past five years since 2005, which is equal to a 4.7% growth in annual average and reached 72 trillion and 120 billion won.
  • Moreover, the rapid growth of the contents solution market which is the foundation of the distribution of digital contents (writing tool, mobile solution, CMS, CDN) seems to be linked not only to the overall growth of cultural contents market but to that of digital contents as well.
    Tourism/Leisure
  • According to 2013 WEF, the competitive edge of Korean tourism industry ranks 25th out of the 140 countries and 6th out of 25 Asian-Pacific countries.
  • Overseas investment businesses in the field of tourism and leisure are divided into hotel, marina investment company, and complex resort investment company.
    Real Estate
  • Real estate investment market tends to change to participate in stable developing markets rather than new developing markets due to global financial crisis.
  • Currently, multi-leveled approaches from foreign investors are made in the field of fluid commercial quarters, office buildings, residential town houses, and SOC business(participation); furthermore, there are trends of cooperation and incorporation methods rather than single or leading development.

Source : Invest Korea(http://www.investkorea.org).

Achievements in Attracting Foreign Investment in Service Industry of Korea
Achievements in Attracting Foreign Investment in Service Industry of Korea
Declared 2011 2012 2013 2014 2015 2016
Service Industry No. 2,042 2,266 2,110 1,906 2,093 2,366
Million USD 7,269 9,602 9,848 11,188 14,729 15,512
% 53.2% 59.0% 67.7% 58.9% 70.4% 72.82%
TOTAL No. 2,710 2,865 2,608 2,463 2,698 2,987
Million USD 13,673 16,286 14,548 19,003 20,909 21,299

Source : Ministry of Trade, Industry and Energy (2017). Trends of Foreign Direct Investment in 2016.

Achievements of Attracting Foreign Investment by Service Industry of Korea (2016)
Achievements of Attracting Foreign Investment by Service Industry of Korea (2016)
Declared Wholesale
and
retail
trade
Accommodation
and
food service
activities
Transport
and storage
Information
and
communication
Financial
and
insurance
services
Real estate
activities
Administrative
and support
service
activities
Arts,
entertainment
and
recreation
Other
service
activities
TOTAL
No. 673 91 78 6 77 86 274 36 29 1343
Million USD 1,029 449 351 71 2,343 976 1,628 88 113 7,047
% 14.60% 6.37% 4.98% 1.01% 33.25% 13.85% 23.10% 1.25% 1.60% 100%

Source : Ministry of Trade, Industry and Energy (2017). Trends of Foreign Direct Investment in 2016.

Achievements in Attracting Foreign Investment in Korea by Region
Achievements in Attracting Foreign Investment in Korea by Region
Declared 2013 2014 2015 2016
No. Million USD No. Million USD No. Million USD No. Million USD
TOTAL 2,608 14,548 3,463 19,003 2,698 20,909 2,987 21,299
the Americas 426 4,552 455 5,017 556 8,446 575 5,260
Asia 1,515 5,008 1,495 6,788 1,628 8,355 1,856 8,144
EU 338 4,802 318 6,504 349 2,495 370 7,396
Etc. 337 186 207 695 1,613 5,440 202 499

Source : Ministry of Trade, Industry and Energy (2017). Trends of Foreign Direct Investment in 2016.

B. Major Issues in Tourist Investment Attraction

1) China’s increased investment in Tourism Industry

As the number of Chinese visitors increases, investments targeting for them are increasing, especially on Jeju Island.

Achievements in Attracting Foreign Investment Business of Jeju Island
Achievements in Attracting Foreign Investment Business of Jeju Island
Country Investment Project Investment Company FDI (1,000 USD) Progress Total Cost
(billion KRW)
Declared Received
6 23 23 2,158,436 973,537 144,499
Singapore Polo Club Korea Polo Country Club Inc. 6,500 5,021 Opening of Korea
Polo Country Club
in June 2010
535
Malaysia Yerae Recreational &
Residential Complex
Bujaya Jeju Resort Inc. 343,651 138,856 Under construction
as of 2013
25,144
Japan total 87,642 14,011
Jeju Grand Resort Cheongbong
Investment Inc.
64,449 7,795 In progress 2,000
Lamer Tourist Hotel Riken Korea Inc. 23,193 6,216 Under construction
as of 2015
150
Australia The Cove Tourist Hotel KP Australia Inc. 2,031 1,061 On operation
as of 2014
161
China total 841,107 428,213 88,225
Jeju Bunma Iho Land Jeju Bunma Iho Land Inc. 66,174 59,892 In progress 4,212
Jeju Baektongsinwon
Resort
Baektongsinwon Inc. 174,441 25,248 Under construction
as of 2013
2,432
China Beyond Hill Tourist Complex (Co.) Heungyou Development Ltd. 22,858 21,660 In progress 7,410
Musoocheon Recreational Park Jeju China Development Inc. 29,000 21,510 Starting in 2014 2,537
Ocean Star Osam Korea Inc. 21,405 21,700 Completed in 2014 1,100
Healthcare Town Green Korea Investment
Development Ltd. and
Green Jeju Healthcare
Town Ltd.
159,700 80,700 Under construction
as of 2012
10,130
Topeyong Rural Tourist Complex Victor Investment Development Inc. 7,066 7,868 Under construction
as of 2012
155
Deoklim Hotel Deoklim Inc. 475 143 On operation as of
2014
149
Yeolhaedang Resort Yeolhaedang Resort Inc. 8,812 4,785 In progress 1,300
Sangmo Recreational Park Shinheawon Ltd. 90,808 25,537 In progress 4,327
Rareine Resort Jeju Yongsaeng
Development Inc.
14,075 14,075 The plan was
established
1,000
Teddy Palace China Teddy Inc. 112,860 33,565 Completed in 2015 2,373
Jeju Green Valley Tourist Town Sahap Inc. 22,114 16,170 The plan was
established
600
Huada Tourist Hotel Korea Huada Inc. 5,826 5,812 Under construction
as of 2015
240
Ora Tourist Complex JCC Inc. 105,493 89,548 In progress 50,260
Hong Kong total 877,505 386,375 28,284
Botamedi Botamedi Inc. 6,500 6,500 Functional foods
are in production
60
Shinhwa History Park Ramjeong Jeju
Development Inc.
733,049 308,389 The construction
started in 2015
18,451
Shinhwaryeon Tourist Complex Shinhwaryeon Development Inc. 137,956 71,486 Examining
the location
9,773

Source : Jeju Special Self-governing Province (2015). Foreign Investment in Jeju as of September 2015. Retrieved from http://www.jeju.go.kr

2) The Immigrant Investor Scheme for Public Business

The Ministry of Justice allows foreigners to obtain a resident visa (F-2) to participate in economic activities and to obtain a permanent residency visa (F-5) by investing in public funds.

Immigrant investors should invest about USD 450,000 or more in public investment projects while an investor aged 55 or older invest should invest about USD 247,000.

As of November 26, 2014, total foreign direct investment was USD 16,831,000 and the number of investment projects was 45. China mainland born investors constituted the majority followed by US (1), Japan (1), Hong Kong (1), Syria (1), Iran (1), and Russia (1).

3) The Extension of Deregulation for the Activation of Tourism Investment

The Designation of the Minimally Regulated Zone

This system aims to develop the rundown residential areas downtown or the areas surrounding the station into a place with multiple functions of residence, commerce, and entertainment to revitalize local economy.

A designated zone can break free from strict building standards like floor area ratio or the height of building, and then a developer can develop it as he wants.

A designated zone requires a minimum of 10,000 ㎡ and a development plan should consider more than three functions; residential, tourism, social and cultural, or business.

An applicant can be a prospective or current land owner, a firm that is built for this system, business operators, public organizations, local companies, and others.

The Amendment of the Enforcement Decree of the Tourism Promotion Act (Into effect on November 19, 2015)

Recreational condominium companies are allowed to deal with a room in the way they want (sharing, membership, or sharing and membership) to guarantee their autonomy in operation.

A recreational condominium that has a communal kitchen on the premises is allowed not to make up to 30% of total rooms have its own kitchen.

A corporation that runs one or more recreational condominiums can integrate the organizations representative of sharers and members of each condominium to improve organizational and operational efficiencies.

The Immigrant Investor Scheme for Real Estate for the Tourism Complexes

The scheme that was enacted in 2010 has contributed much to attracting foreign investments, but there have been also problems like the projects heavily weighted toward constructing condominiums and the rapid increase in the number of accommodation establishments.

For Jeju Special Self-Governing Province the scheme amended on November 1, 2015 limits the areas that fall under the scheme to the tourism complexes located in Jeju Province.

Regions that fall under the Immigrant Investor scheme for Real Estate are Jeju-do, Gangwon-do Pyeongchang, Jeollanam-do Yeosu, Incheon Free Economic Zone, Busan Haeundae area and the East Busan Tourism Complex.

The Designation and Operation of Mountain Tourism Promotion Zone Act

October 20, 2015 the State Council voted favorably to enact the Act in order to introduce a successful mountain tourism development model.

The Act is expected to help ease restrictions on developing mountains and construct and promote environment-friendly tourism recreation facilities under a systematic development plan

KINTEX and Lake Park Area in Goyang Designated as a Special Tourism Zone

The city of Goyang, Gyeonggi Province designated the area of KINTEX (Korea International Exhibition) and Lake Park as a Special Tourism Zone to promote businesses, conventions and exhibitions, and Korean Wave tourism on August 6, 2015.

A Special Tourism Zone is a designated place where the application of relevant laws and regulations is ruled out or mitigated to attract more foreign tourists and tourism promotion activities are encouraged under the law.

The Amendment of the International Conference Industry Promotion Act

On March 3, 2015 the Parliament passed the amendments of the International Conference Industry Promotion Act to introduce “International Conference Complex” and “International Conference Support Business Facilities”.

“International Conference Complex” consists of international conference facilities and support business facilities while “International Conference Support Business Facilities” composed with accommodations, stores, auditoriums and others in an international conference complex.

The amendment is expected to help promote a cluster of the MICE facilities through reducing levies charged on development, alternative forest resources, agricultural land conservation, congestion, etc. and relaxing restrictions on the floor area ratio.

The Relaxation of Restrictions on Tourist Accomodations Location in Residential Area

Since November 29, 2014 tourist accommodations in residential areas secure only 15 percent of garden of land area, changed from 20 percent before the relaxation while hostels are under the construction codes.

The Permission of Domestic Tourists in Downtown B&B Establishments

Downtown B&B establishments had accommodated only foreign tourists, but on November 29, 2014 it was allowed for the community-run B&Bs to accommodate tourists.