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FDI in South Korea Drops in First Half of 2019
Due to Worsening Investment Environment
FDI in South Korea Drops in First Half of 2019
  • By Jung Suk-yee
  • July 12, 2019, 10:26
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Foreign direct investment (FDI) in South Korea plunged in the first half of this year due to the nation's worsening investment environment.

The Ministry of Trade, Industry and Energy announced on July 11 that the reported foreign direct investment (FDI) in South Korea totaled US$9.87 billion, with a year-on-year decline of 37.3 percent, in the first half of this year. The amount on an arrival basis fell 45.2 percent to US$5.61 billion.

Experts point out that this is because of South Korea’s high-cost and low-efficiency structures and a decline in its cost competitiveness attributable to 52-hour work week. The South Korean government is aiming to attract an annual investment of US$20 billion for five years in a row, yet the goal is unlikely to be achieved with uncertainties mounting in the semiconductor industry, South Korean companies increasing their overseas investment, and the FDI on the decline along with capital expenditures. The Ministry of Economy and Finance recently announced that South Korea’ overseas direct investment (ODI) jumped 44.9 percent from a year earlier to US$14.11 billion in the first quarter of 2019.

In the first half, the FDI from Japan on a report basis fell 38.5 percent on year to US$540 million. The figures are 51.2 percent and US$330 million on an arrival basis. During the same period, the FDI from China dropped 86.3 percent to US$300 million and 90 percent to US$70 million on a report basis and on an arrival basis, respectively. As for the FDI from the European Union, the respective figures are 41.5 percent (US$2.68 billion) and 12.8 percent (US$2.92 billion).

The FDI from the United States edged up. Specifically, the reported amount increased 3.1 percent to US$3.11 billion, led by financial investment from private equity funds and venture capitals. Still, the investment that actually arrived stood at US$630 million with a year-on-year decrease 65.8 percent.

The Ministry of Trade, Industry and Energy explained that such a rapid decline in the first half is because the global FDI has continued to decrease since 2015 and the FDI in South Korea was exceptionally large in the first half of 2018, when it added up to US$15.75 billion on a report basis. “In the first half, both the reported investment and the investment that actually arrived exceeded the respective 10-year averages, US$8.45 billion and US$5.22 billion,” the ministry said, adding, “A sizeable FDI continued to flow into high-tech and new industries in that period.”