By Cho Jin-seo
Staff Reporter

Foreign direct investment (FDI) will likely remain down through 2011 across the world with South Korea being shadowed by emerging countries, a consulting firm's report showed.

The FDI Confidence Index report by A.T. Kearny said that nearly half of all executives at large global companies want to postpone their FDI plans for a year or more. Forecast was even less optimistic on South Korea, as it dropped out of the top 25 for most attractive nations this year after being 23rd in 2005 and 24th in 2007.

"Executives are wary of making investments in the current economic climate and revealed that they expect the economic turnaround to happen no earlier than 2011," the report said. "Half of the companies surveyed also report that they are postponing investments as a result of market uncertainty and difficulties in obtaining credit."

China remains the top-ranked destination by global firms, a title it has held since 2002. The United States, India and Brazil followed. But overall, developed economies rose in the index as investors looked for safe investments, the consulting firm said.

"The results indicate a return to market fundamentals and a flight to quality for corporate executives," said Paul Laudicina, chairman of A.T. Kearney. "Companies are looking for the antidote to uncertainty and are increasingly looking to invest abroad."

The global economic crisis has already had a significant impact on FDI flows. Last year, the global FDI slipped to $1 trillion from $1.7 trillion in 2008, according to the United Nations Conference on Trade and Development.

The main drivers behind the pessimism among investors are the uncertainties about market opportunities amid the current turmoil, and the difficulty in finding financing, the report said.

The FDI measures foreign ownership of productive assets, such as factories, land and mines. It is often used to indicate how a nation's economy is attractive to the outside world. Increases in FDI often happens in tandem with globalization and growth of a nation's economy, though it is not always the case.

For example, China has maintained the top position in the index since 2002 even though many Western companies cry foul about its complex web of regulations and active government interventions in industries.

On the other hand, Mexico's economy has been slow in growth even though the country has always been one of the most attractive destinations of FDI, mostly from the United States.

cjs@koreatimes.co.kr