FDI in South Korea Hit All-time High Last Year

The Ministry of Trade, Industry & Energy announced on January 3 that foreign direct investment (FDI) in South Korea increased 1.9% between 2015 and 2016 to reach a new high of US$21.299 billion on a report basis.

That in the manufacturing sector increased 12.4% to US$5.13 billion with the cumulative investment in it breaking the US$100 billion mark in 55 years. That in the service industry rose by 5.3% to US$15.51 billion, continuing to increase for the fifth consecutive year. Greenfield investment, in particular, showed a growth of 6.4% to US$15.02 billion last year.

The growth was led by the EU, which invested US$7.4 billion in South Korea last year to show an increase of 196.5% from a year earlier. This has to do with the Korea-China FTA that became effective in late 2015. “Not only European companies in the EU but also American and Japanese companies in the region are increasing their investment in South Korea in order to enter and expand in the Chinese market,” the ministry explained, adding, “The EU increased its biotech and pharmaceutical investment by 707%, chemical investment by 103% and machinery and equipment investment by 21% and this is to enter the Chinese market with ease.”

China, in the meantime, invested US$2.05 billion in South Korea last year. Since the signing of the FTA, its investment has been increased a lot in various fields, ranging from manufacturing to luxury cosmetics, marinas and filmmaking. On the contrary, the FDI from the United States and Japan to South Korea dropped 29.3% and 25.2% to US$3.88 billion and US$1.25 billion last year, respectively.

The amount of the FDI that was actually made dropped, too. Specifically, the amount fell 40.9% year-on-year to US$9.76 billion. “This is because a decline in M&A investment, which is characterized by simultaneous reporting and investment making,” the ministry went on to say, continuing, “The FDI in the manufacturing sector takes an average of seven months to be actually made and that in the service sector takes approximately 2.5 months.”