With Japanese direct investment decreasing due to the weak yen, foreign direct investment (FDI) to Korea was greatly reduced after the past four years of growth. The downward trend is likely to continue this year owing to the US Fed’s tapering of its quantitative easing policy.
According to the Ministry of Trade, Industry and Energy on January 28, the total amount of FDI reported in 2013 equaled US$14.58 billion, a 10.7% year-on-year drop.
The figure for FDI showed an upward trend for the third straight year, as shown by US$11.48 billion in 2009, US$13.07 billion in 2010, US$13.67 billion in 2011, and US$16.29 billion in 2012. However, a downward trend started last year. The total amount of FDI invested in 2013 was US$9.68 billion, down 9.4% from a year ago, for the first time in three years.
The biggest reason for reduced FDI lies in the contraction of Japanese investment, affected by the weak yen. Japan comprises a large proportion of the total overseas investment in the local manufacturing sector, and the amount of Japanese investment reported last year plunged by 40.8%.
US investment hit US$3.53 billion in 2013, a year-on-year decrease of 4.1%, while European investments grew 76.9% year-on-year to reach US$4.8 billion.
By industry, the service industry posted US$9.85 billion in FDI, up 2.6% from the previous year, but investment in the manufacturing sector fell 23.8% year over year to reach US$4.65 billion.