Foreign direct investment (FDI) in South Korea reached a record high of US$23.95 billion (32.48 trillion won) by the end of the third quarter this year. The surge in investment, primarily focused on advanced industries such as secondary batteries, came from the European Union (EU) and regions in the greater China area, such as China, Hong Kong and Taiwan.
According to the “Foreign Direct Investment Trends in the Third Quarter of 2023” released by the Ministry of Trade, Industry and Energy (MOTIE) on Oct. 4, the cumulative FDI by the end of the third quarter this year reached US$23.95 billion, marking an 11.3 percent increase compared to the same period last year. The actual amount of FDI also recorded a 20.2 percent growth, totaling US$13.92 billion.
Both the FDI amount and actual inflow reached all-time highs. However, when considering the third quarter alone, the reported amount for the quarter stood at US$6.86 billion (9.3 trillion won), ranking second in history.
By industry, the manufacturing sector recorded US$9.02 billion (12.23 trillion won), a 15.7 percent increase compared to the same period last year, while the service sector reached US$13.8 billion (18.71 trillion won), showing a 9.0 percent rise. Within the manufacturing sector, investments in electronics witnessed a significant growth of 27.0 percent, while investments in chemicals surged by a whopping 61.1 percent.
In the service sector, finance and insurance industries showed a remarkable increase of 107.2 percent, while accommodation and food services witnessed an astounding surge of 228.5 percent compared to the previous year.
By country, South Korea attracted increased investments from the EU and the Greater China region while experiencing a decrease in investments from the United States and Japan. The EU recorded a 38.1 percent increase, reaching US$4 billion, and the Greater China region, including China, Hong Kong and Taiwan, saw a substantial 49.9 percent growth, reaching US$2.23 billion. In contrast, investments from the U.S. decreased by 27.2 percent to US$5.19 billion, and investments from Japan declined by 10.5 percent to US$930 million.
In relation to this, Park Deok-yeol, an official from the foreign investment policy division under the MOTIE, explained, “We have seen a significant influx of investment from China as collaboration in material sectors related to supply chain security has intensified, fueled by the steady growth of domestic battery companies in the battery industry.”
Regarding the decrease in investment attraction from the U.S. and Japan, he said, “Investment attraction is influenced by a wide range of variables, but in the case of countries like the U.S. and Japan, there were substantial investments in the third quarter of last year. Since the U.S. made a US$1.8 billion M&A investment, and Japan also had a US$250 million investment, they had a significant base effect.”
By type, investments in greenfield projects, aimed at establishing and operating factories and facilities directly, amounted to US$16.79 billion, marking a 20.4 percent increase compared to the same period last year. Meanwhile, M&A investments, which involve the acquisition or merger of corporate stakes, slightly decreased by 5.5 percent to US$7.16 billion.