Despite the global economic recession, foreign direct investment (FDI) to Seoul has reportedly shown an upward trend so far for the third consecutive year, but Japanese direct investment specifically has dramatically decreased. This phenomenon can be ascribed to the deepening rift between S. Korea and Japan arising from issues of the Dokdo islands and comfort women, together with a series of Japanese investment plans put on hold because of the continuing trend of a weaker yen.
According to the Seoul City Government on November 29, Japan’s direct investment to Seoul amounted to just US$800 million as of late September, down 63% from a year ago (US$2.26 billion). A rise in Japanese investment by the end of this year is possible, but seems rather improbable in the current atmosphere. Direct investment refers to invested capital officially reported to the government aimed at the direct involvement in management, rather than capital gains from the purchase of shares or real estate investments.
The good news is that the total amount of FDI topped US$4.7 billion in the cited period, a 14% gain from US$4.2 billion during the same period last year. If the trend continues, Seoul City Government estimates that the number will reach US$6.2 billion by the end of 2013. The figures for 2010, 2011, and 2012 were US$2.6 billion, US$4.1 billion, and US$5.8 billion, respectively, which show a continuing upward trend.
The rise in FDI this year is attributable to a rebound in investment by the US and Europe from the 2008 global economic crisis. US investment in the period more than tripled to record US$1.2 billion, a year-on-year increase of US$770 million, and up US$240 million compared to the same period in 2008. European investments also surged 62% to hit US$2.4 billion, a US$850 million gain from a year earlier. The figure for 2013 is the same as that for 2009.
Meanwhile, China does not comprise a large proportion of the total FDI, since Beijing instead makes a lot of indirect investments in real estate and others. However, China’s direct investment more than doubled from US$120 million in 2012 to US$300 million this year, keeping an upward trend.
An official at Seoul City Government said, “Direct investment from Europe was drastically reduced following the global financial crisis of 2008, but it has been recovering since 2011, thanks to the implementation of the EU-Korea Free Trade Agreement.”