Slowed FDI
The Ministry of Trade, Industry & Energy of South Korea announced on April 4 that the foreign direct investment (FDI) in South Korea totaled US$3.85 billion on a reported basis in the first quarter of this year, down 9.2% from a year ago. Meanwhile, the amount on an arrival basis increased 38.1% to US$2.77 billion.
China’s investment in South Korea almost halved in connection with THAAD deployment in the latter. Specifically, the amount was US$163 million on a reported basis and US$41 million on an arrival basis, down 56.4% and 17.9% year on year, respectively.
Likewise, investment from the United States to South Korea fell 33.5% and 42.6% to US$365 million and US$193 million. Its trade protectionist policy and interest rate hikes affected its investment in a number of emerging countries.
European countries, in the meantime, reduced their investment in most countries including South Korea due to political uncertainties such as Brexit and a weak euro. Their FDI in South Korea decreased by 50.3% and 7.0% to US$876 million and US$1,018 million on a reported basis and on an arrival basis, respectively.
On the contrary, the FDI by Japan and countries in the Greater China Region such as Hong Kong showed a positive growth. Those in the region reached US$1,938 million (up 35.1%) and US$992 million (up 291%) while concentrating their investment on service sectors like finance, insurance and real estate development. Japan’s direct investment in South Korea increased for the first time in seven quarters. The amount was US$47 million (up 153%) and US$204 million (up 18.3%).
By industry, FDI in manufacturing decreased by 27.4% to US$971 million and that in service fell 4.5% to US$2.82 billion on a reported basis. By type of investment, green field investment fell 4.4% to US$3.06 billion as some economic uncertainties disappeared. M&A investment showed a decline of 24% and reached US$793 million on a reported basis and skyrocketed by 1,049% and reached US$1.07 billion on an arrival basis.