Rapid Increase in Overseas Investment
According to the Ministry of Strategy & Finance on March 13, the total annual remittance from South Korea for foreign direct investment (FDI) purposes hit an all-time high of US$43.7 billion last year, up 11.8% from a year ago. The amount has rapidly increased for years since 2014, when it was US$28.49 billion.
Large corporations increased their remittance by US$3.2 billion to US$35.3 billion. Likewise, smaller corporations increased their FDI by US$1.3 billion to US$7.5 billion, more than doubling the amount in three years. “The fact that both large and small companies are increasing their FDI can have a negative effect on employment and investment in South Korea,” said Bank of Korea manager Lee Yong-dae, adding, “The effect can be particularly significant when production systems for intermediate and finished goods are transferred together as in the case of the automobile industry.”
The rapid increase in FDI can also result in a decline in production in and export from South Korea attributable to an increase in overseas corporations’ sales. “The year-on-year increase in intermediate goods exports based on overseas corporations’ sales growth dropped from 173% to 117% between 2011 and 2016,” the manager explained.
Last year, the remittance to North America increased by 6.6%, Asia by 11.4%, Latin America by 15.8%, and Europe by 55.6%. By sector, that from finance and insurance showed a significant increase along with that from wholesale and retail. According to the ministry, the FDI is likely to keep increasing for a while due to U.S. trade protectionism, overseas demand growth, militant labor unions and regulations in South Korea, etc.