Quality of FDI

 

Foreign direct investment (FDI) in Korea is declining and suffering qualitative deterioration at the same time, in the climate of overseas direct investment (ODI) by Korean companies exceeding the FDI since 2006.

According to the Federation of Korean Industries’ report released on Nov. 16, the FDI growth rate, which used to reach as high as 30 percent a year in the 1980s and 1990s, has remained at an average of 2 percent per year since 2001. Besides, the focus of the investment has shifted from factory construction to M&A investment, with less employment effects. The ratio of the latter increased from 0 percent for 1981 to 1990 to 21 percent for the following 10 years, and then to 31 percent for 2001 to 2013.

The FDI has concentrated on non-manufacturing sectors since 2000, too. The ratio increased from 44 percent to 49 percent, and then to 66 percent during the same period. The largest amount of investment has gone to the electrical, electronics, and transport machinery sectors in the manufacturing industry, and financial and insurance sectors in the non-manufacturing industry.

Meanwhile, Korea’s total ODI between 2001 and 2013 amounted to US$218.08 billion to show 6.9-fold growth compared to that in the 1990s. The rate of increase was 39 percent per year in the 1980s, 17 percent in the 1990s, and 15 percent between 2001 and 2013. FDI for the 13 year period totaled US$153.75 billion.

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