As a government official with responsibility to attract foreign investment into one of Korea’s free economic zones, I made an official trip to Hong Kong and Singapore a few months ago to meet and exchange ideas with prospective investors. Foreign capitalists I had meetings with shared their opinions on and insights into investing in Korea. The very first thing they mentioned was Korea’s stubborn regulatory burdens for capital investment.

According to an indicator of government regulatory burdens published in the Global Competitiveness Report 2013-2014, the flagship report of the World Economic Forum, Korea ranked 95th out of 148 countries surveyed. Singapore had the least heavily regulating government, while Hong Kong came in fifth according to the report. Among 58 nations surveyed for the OECD’s FDI regulatory restrictiveness index 2013, Korea came in 44th.

It is my view that Korea’s foreign trade and real economy have enjoyed ever increasing openness through policy initiatives like free trade agreements, but it’s been disproportionately less so for foreign direct investment. Although there might be a number of other factors that spur FDI, it is evident that government regulations and foreign direct investment have a negative correlation.

In 2012, Korea had inward FDI flows of approximately $9.9 billion while Singapore and Hong Kong were raking in nearly $57 billion and $75 billion worth of inward FDI flows, respectively, according to data by the United Nations Conference on Trade and Development. It is known that availability of and access to abundant financial resources are integral parts of economic growth and for thriving businesses. Finance matters ever more in the modern economy, and FDI plays a pivotal role by funding projects and business developments when domestic financial markets cannot meet the demand. The success of Silicon Valley has partly been possible thanks to venture capitalists who provided the funding to make ideas into real-life products.

I’m not suggesting, however, that Korea should relax financial regulatory burdens recklessly to the advantage of rogue investments. Instead, Korea needs to make the current financial regulations more open, transparent and sophisticated so that foreign investments can more easily flow into firms and business projects in Korea, where capital is most needed, while protecting the financial system from ill-intended foreign capital. This would benefit the Korean economy, allowing FDI to maximize its utility and generate wealth.

President Park Geun-hye recently said venture firms would be a leading force in making the Korean economy more creative. However, the reality is that Korea ranked 115th among 148 countries on a survey evaluating how easy it is for entrepreneurs with innovative ideas to find venture capitalists. Making it easier for foreign money to flow into Korea can serve as an important tool for Korea’s idea-rich domestic venture companies, small and medium-sized companies that need financial resources. A less onerous financial system has a role to play in the creative economy.

By Um Tae-won

Um Tae-won is a project manager of the Daegu-Gyeongbuk Free Economic Zone Authority. He can be reached at umtaewon@gmail.com. The views expressed here are the author’s, and do not reflect those of his employer. ― Ed.