The number of South Korean companies leaving their home country is increasing to a worrisome extent. Specifically, the net outflow of direct investment amounted to US$88.2 billion for the most recent five years. Both large corporations and smaller companies are refraining from investing in South Korea due to excessive regulations and an unfavorable investment environment.
According to industry sources, including the Korea Economic Research Institute, direct investment in South Korea turned into a net outflow in 2006 and has increased all the way since then. This means South Korean companies’ overseas investment has exceeded foreign investors’ direct investment in the country.
The net outflow has shown an explosive increase for the past couple of years. Specifically, the annual amount hovered at around US$10 billion from 2010 to 2015 but jumped to US$25.538 billion in 2016 and US$28.691 billion last year.
South Korean companies are investing more and more abroad these days. Samsung Electronics is planning to make an investment of 180 trillion won for three years to come and it includes 50 trillion won in overseas investment, which is the largest in the group’s overseas investment history. Semiconductor and display investments account for most of its investment to be made in South Korea whereas its overseas investments are focused on consumer electronics, TV and smartphone manufacturing.
In the meantime, an increasing number of Southeast Asian countries are trying to attract South Korean companies’ investment through various incentives. For example, Vietnam, which is South Korean enterprises’ largest overseas investment destination, is planning to lower its corporate tax rate by 5 percentages points to 15% to 17%. “The net outflow in direct investment is a matter directly related to an outflow of jobs,” said an industry source, adding, “It is a problem that should be dealt with by preventing a rapid increase in the minimum wage and shorter working hours.”