Google will set up a research and development centre in South Korea, under an agreement announced yesterday with the country's government. 

The search giant, which has had a minimal official presence in Korea to date despite the popularity of its search engine, will spend at least $10m on the facility over the next two years.

Google's Korean lab will employ more than 130 researchers. South Korea is one of the world's most wired nations, with heavy adoption of mobile and fixed line data services.

However, there are fears that Google will tempt too many researchers away from local businesses.

"Our greatest concern is that Google will lure away competent research personnel in the domestic internet industry by using its global fame," said Choi Whee-young, chief executive at Korea's largest local internet portal, Naver. 

Google currently has a small Korean office at which around 10 employees handle the firm's local online ad business. Most of Google's Korean language services are created and maintained by engineers at its US headquarters.

The announcement of the new research facility had been long expected. But Google's plans have been delayed by difficulties in finding a suitable local manager for the project and other local staff, according to the Korea Times.

"The Google R&D centre in Korea enables us to recruit local computer scientists to further develop innovative search technologies for Korean users and users around the world," senior Google vice president Alan Eustace told a press conference.

"[Investment] will depend on our performance later, but $10m is a low expectation. Our expectation is high."

Analysts believe that Google's lack of experience with the Korean language makes its search and other services less effective for Koreans thereby dampening interest from the local market. 

But Google's Korean language website is among the 40 most popular sites in Korea, local reports say, despite the fact that the US company has so far made no promotional effort targeted at the country.

Web statistics firm Alexa currently ranks Google.com and Google.co.kr at 18 and 32 respectively in its list of websites most visited by users in Korea.