The novel coronavirus has put the Korean economy on alert in terms of foreign direct investment (FDI) attraction. In the first quarter of 2020, the amount of FDI arrivals plummeted by 18 percent compared to the same period of 2019.
FDI arrivals in the first quarter totaled US$2.4 billion, down 17.8 percent from the same period in 2019, according to a report released by the Ministry of Trade, Industry and Energy on April 9. However, when measured on the report basis, FDI increased 3.2 percent to US$3.27 billion.
In particular, green-field investments reached US$1.13 billion in the first quarter on the arrival basis, down 32.1 percent from the same period in 2019 (US$1.66 billion). This is a whopping 45.3 percent drop compared to the fourth quarter of 2019 (US$ 2.6 billion). Green-field investments are more effective in stimulating the domestic economy as foreign investors directly build factories and workplaces, creating new jobs.
The United Nations Conference on Trade and Development (UNCTAD) predicted that the new coronavirus fiasco will reduce decisions on making new global green field investment or expanding global green field investment in 2020 or cross-border mergers and acquisitions (M&As). The UNCTAD said that the world recorded at an average of 1200 M&A-type investment cases per month in 2019 but the figure fell to 874 cases in February and to 385 cases in March when the epidemic began to spread.
The UNCTAD predicted that global FDI could decrease by 30 to 40 percent by 2021 as the COVID-19 has been spreading to the United States and Europe.