In 2023, foreign direct investment (FDI) in Korea exceeded US$32.7 billion, a record high. High-tech materials, parts, and equipment such as semiconductors, secondary batteries, and biotech items led the increase in FDI in Korea.
According to the Ministry of Trade, Industry and Energy on Jan. 4, FDI swelled 7.5 percent year on year to US$32.72 billion based on reported amounts in 2023. This is the highest amount ever. In terms of arrivals, it increased 3.4 percent year on year to US$18.79 billion, which is also a record high.
FDI contracted from US$26.92 billion in 2018 to US$23.328 billion and US$20.747 billion in 2019 and 2020, respectively, before returning to growth in 2021 with a 42.3 percent increase to US$29.513 billion. This was followed by an increase to US$30.45 billion in 2022, logging the third consecutive year of growth.
By industry, FDI in manufacturing reached US$11.92 billion, down 4.5 percent from the previous year due to the base effects of large petrochemical investments. But FDI in the service sector rose 7.3 percent year on year to US$17.79 billion, driven by investment from Saudi Arabia’s sovereign wealth fund and large financial and insurance companies.
Among manufacturing industries, there was a year-on-year increase of 17.7 percent in FDI in the electrical and electronic sectors, which hit US$4.06 billion. The electrical and electronic sectors include semiconductors and secondary batteries. FDI in transportation machinery amounted to US$1.76 billion, posting a year-on-year increase of 168.0 percent. Transportation machinery includes automobiles and parts. In the services sector, FDI considerably ascended in industries such as finance and insurance as it stood at US$9.77 billion (an increase of 108.5 percent).
By country, investment from the European Union (EU) decreased by 17.0 percent year on year to US$6.22 billion due to the base effects of large investments in 2022. However, Korea enjoyed a sharp increase in FDI from countries such as France (US$1.18 billion in FDI with a 447.8 percent increase), which hosted summit meetings with the Korean President in 2023. It FDI from the EU is combined with FDI (US$3.6 billion with a 520.5 percent increase) from the United Kingdom, FDI from major European countries totaled US$9.82 billion, a year-on-year increase of 21.6 percent.
However, FDI from the United States and Japan slid year on year to US$6.13 billion (-29.4 percent) and US$1.3 billion (-14.7 percent), respectively, due to the base effects of large investments in 2022. As for FDI from the United States, large investment projects were declared through third countries with lower tax rates or in countries where joint ventures were located, resulting in a slightly lower reported amount. Investment flows from Greater China reached US$3.12 billion (a year-on-year increase of 65.6 percent), returning to the level before 2022. FDI from Greater China significantly shrank due to the COVID-19 pandemic.
Greenfield investment, which is the direct operation of factories and businesses, reached a record US$23.54 billion, up 5.5 percent from a year earlier. The Korean Ministry of Trade, Industry and Energy is expecting positive effects such as the creation of decent jobs and technology transfers. Merger and acquisition (M&A)-type investment that companies make in order to take over companies or facilities or set up joint ventures in foreign countries inflated by 12.9 percent to US$9.18 billion.