The Export-Import Bank of Korea (KEXIM) reported that the amount of FDI by Korean firms in 2009 dropped. According to the “FDI trends in 2009” announced by the Overseas Economic Research Institute, economic downturn and shaken investor confidence brought a 15.1% reduction in FDI by Korean firms. Newly established corporate bodies via FDI by Korean firms fell 38.3% to 2,488 from a year before. Those reduced figures are still below global FDI declines (38.7% reduction from 2008). Moreover, since the 2nd quarter, this downturn trend has been overturned and since the 4th quarter, 47.1% of total annual investment has been achieved.
Although overall, investment decreased, the mining industry became the most preferable area of investment due to the high preference for investment in overseas resource development. In contrast, FDI in the manufacturer sector, traditionally the most preferable investment category, has dropped for two consecutive years.
Regionally, investment preference has diversified. FDI in Asian countries, the most sought after investment region of the last year, decreased by 45.2%, while FDI in North America has increased by 13.0%, and FDI has been on an upward by 61.5% due to the high preference of investment in real estate and leasing service. Increase in FDI for big firms has been limited to 0.9%, while FDI to middle-sized firms has fallen by 44.4%.
In particular, investment in M&A, overseas resource development, and real estate has boosted. The Overseas Economic Research Institute reported that exports through local subsidiaries amounted to $191.6 billion both directly and indirectly, with a million new jobs created in addition to the 20,000 new jobs in Korea.
Net export improvement encouraged by FDI is more effective for the big firms than the middle-sized firms, while the job creation effect is much bigger for middle-sized firms based on the fact the number of newly employed workers of middle-sized firms is similar to that of big firms for only one forth of the money the big companies invested.
KEXIM provides diverse credit systems, including loans and guarantees of an obligation to national parent companies, local subsidiaries or foreign firms invested in by Korean companies to support Korean firm’s FDI. FDI Funding in 2009 amounted to 3,970 billion won and is to increase in 2010 to 5.2 trillion won in order to fulfill the surplus of firm’s demand for funding.