South Korea Shows Relatively Larger Investment Outflow

The Korea Enterprises Federation announced on July 26 that the overseas direct investment from South Korea was US$530.1 billion and the foreign direct investment in it was US$219.5 billion in the period of 2000 to 2021. The net investment outflow amounts to US$310.6 billion whereas the United States and the United Kingdom showed a net inflow of US$3.7163 trillion won and US$968.5 billion in that period, respectively.

For the 21 years, South Korea’s overseas direct investment increased 11.6 times faster than its GDP. On the other hand, the figure stood at 2.9 in Germany and 1.4 in the United Kingdom. In addition, the foreign direct investment in South Korea increased 2.4 times faster than its GDP while the figure was as high as 5.5, 3.7 and 3.1 in the United Kingdom, France and the United States, respectively.
 

In short, South Korea has been a relatively less attractive investment destination for more than two decades. According to experts, this is because of its small domestic market, geopolitical factors and unfavorable business environments such as higher corporate tax rates.

The maximum corporate tax rate in South Korea is 25 percent, the ninth-highest in the OECD. The ranking rose from 28th to 22nd from 2000 to 2009 and then to 10th and ninth in 2018 and this year, respectively. This is because South Korea has raised its corporate tax rates unlike many others. For example, the United Kingdom’s maximum rate has fallen from 30 percent to 19 percent since the 2008 global financial crisis.