Direct Investment Overseas
The Ministry of Strategy & Finance of South Korea announced on May 18 that the remittance from the country for foreign direct investment (FDI) purposes totaled US$10.71 billion in the first quarter of this year, up 30.2% from a year ago.
The amount had been US$8.23 billion in Q1, 2016 and US$8.74 billion and US$8.45 billion in the next two quarters. Then, it increased to US$9.83 billion in the last quarter of last year and exceeded US$10 billion for the first time ever in Q1 this year.
This recent increase is attributable to M&A contracts. For example, Samsung Electronics recently acquired Harman International Industries for US$8 billion, the largest amount in the history of international M&A led by South Korean companies.
At present, remittance for international M&A that is made from a South Korean manufacturer to its overseas corporation falls into the category of FDI from the wholesale and retail sector. As a result of Samsung’s acquisition of Harman, the FDI from that sector jumped 1,094.7% from a year earlier.
Netmarble Games, the largest mobile game company in South Korea, acquired U.S. game company Kabam's Vancouver studio for approximately one trillion won to increase the remittance, too. This deal resulted in a year-on-year remittance increase of 472.8% in the category of information service, publishing, visual entertainment, broadcasting and communications and a 137% increase in M&A-type investment. Likewise, investment in power, gas, steam and water supply projects showed an increase of 162.7%.
Meanwhile, greenfield investment covering the establishment of new companies fell 28.7% as is the case with investments in manufacturing (down 31.6%), finance and insurance (down 45.5%) and real estate and leasing business (down 75.1%).
FDI in the United States rose 142.8% to US$6.81 billion in Q1. On the contrary, that in China and the Cayman Islands fell 18.6% and 57.3% to US$570 million and US$350 million, respectively. The ministry added that the total reported investment for Q1, 2017 is US$10.32 billion, slightly less than the remittance for the same period.