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The Korean government has doubled the investment requirement for foreigners who wish to set up a business in the Republic of Korea under the D-8 investment visa.

Foreign entrepreneurs and investors will now have to invest more capital in order to establish a company in the Republic of Korea under the revised investment visa rules. Foreigners who wish to set up a Korean company and relocate to the Republic to run their business must apply for an investor visa, also known as the D-8 visa.The D-8 visa that is usually issued for up to one year mandates a minimum investment of KRW50 million (USD41,239). However, Korean authorities have announced changes in the minimum investment requirement, raising the minimum limit from KRW50 million to KRW100 million (USD82,467). The revision is to ensure that this visa is made available only to those foreign entrepreneurs who are serious about starting and growing their business in the Korean Republic.

The increased investment limit has sparked concerns about Korea s attractiveness to foreign investors. According to Korean daily Joong Ang, an official from a foreign chamber of commerce said,

Raising the minimum investment amount isn t the right message Korea should be giving foreigners when it is trying to attract foreign investment. Why should investors be penalized for the illegal entry of some foreigners?

Although the Korean authorities reckon that the increased ceiling will not have a significant impact on foreigners, the move comes at a time when Asian economies are turning increasingly competitive and are introducing measures to woo foreign investment – be it lowering taxes, easing immigration policies, lowering entry barriers for foreign investors, or enhancing company incorporation procedures. Take Singapore for instance. Under the Singapore EntrePass visa scheme, foreign entrepreneurs are required to make a minimum investment of SGD50,000 (USD36,150). The capital requirements under the Singapore EntrePass Visa scheme is significantly lower as compared to Korea s investment visa. Moreover, Singapore poses a more business friendly environment. Singapore company incorporation can be completed within a day s time while it takes approximately 2-3 weeks to incorporate a company in Korea. Furthermore, Singapore s corporate tax rate of <9% on profits up to SGD300,000 and 17% on profits above SGD300,000 is way below S. Korea s corporate tax rate of 13% on profits up to KRW100 million and 25% on profits above KRW100 million.

The graph below indicates that there has been a steep decline of foreign direct investment in Korea in recent times. It is estimated that FDI inflows have fallen by 6.7% during the first half of 2010. FDI inflows during 2009 was down 57.6% as compared to 2008. By contrast FDI inflows into Singapore have been steadily rising since 2003.

With western economies suffering from a public debt crisis and raising taxes, foreign investors are turning towards business friendly and economically strong Asia. Among the Asian economies, Singapore and Hong Kong are likely to emerge as popular investment destinations owing to their pro-business climate. With Korea raising the investment ceiling, it is possible that businesses might turn towards other low-cost jurisdictions for doing business.

Singapore was ranked as the World s easiest place to do business in the World Bank s Ease of Doing Business Report, 2010, while Korea was ranked as #19.

Watch this video to gain insight into South Korea as a place to do business.

Thinking about doing business in Singapore? Learn more about Singapore Incorporation.