Advancing Economy
The overseas investment of Korea will exceed foreign investment into Korea within a year by the earliest. Korea will transform into a “net overseas asset country,” with more assets than debts overseas.
Lee Jung-yong, a manager at the Economic Statistics Department of the Bank of Korea, and Koo Hyun-hwe, a researcher at the Bank of Korea, said in the report of the Evaluation on International Investment Balance of Korea, “Foreign investment into Korea last March was US$990.9 billion, and overseas investment of Korea was US$986.6 billion. The difference is only US$4.3 billion. Korea is likely to become a net overseas asset country within a year or two if the current account surplus is maintained and the volatility of the stock market and exchange rate is not that big.”
Korea has always been a “net overseas debt country” ever since the first statistics were gathered in 1994. Korea became a net bond country in 2000, calculated by subtracting direct investment and securities investment from overseas assets. However, becoming a more comprehensive net overseas asset country has been delayed.
This is largely because of constant current account surplus and decreased overseas debts after the global financial crisis. The supply of foreign currencies has increased due to a current account surplus, and the investment in overseas assets by the government and individuals has increased accordingly. In 2010, direct overseas investment exceeded foreign direct investment (FDI) into Korea as well. As of the end of last year, direct overseas investment was US$54.2 billion more than FDI. Furthermore, the investment yield falling in the domestic market due to sluggish economic growth in Korea has encouraged many Korean investors to turn their attentions to overseas securities.
Becoming a net overseas asset country means the country is on its way to becoming a more advanced economy. Manager Lee commented, “As the economy grows, it is very natural to increase overseas investment for pioneering new markets and expanding overseas sales channels. In terms of payment capabilities to foreign countries, this is very positive, since foreign countries owe Korea more than Korea owes them.”
However, there is also a downside in which domestic investment is not active. Lee Geun-tae, chief researcher at LG Economic Research Institute, said, “Korea might follow Japan, where domestic production declined due to expanded overseas investment of domestic companies, not right now but some time soon.”