By Lee Hyo-sik
South Korea has become an unattractive place in the eyes of international investors as inbound foreign investment into the world's 13th largest economy has fallen over the past few years.
Many foreigners cited the nation's rigid labor market, uneasy management-labor relations and heavy regulations as some of the negatives that make them reluctant to do business here.
According to the United Nations Conference on Trade and Development (UNCTAD) Wednesday, foreign direct investment (FDI) into Korea reached $2.63 billion last year, down 46 percent from $4.88 billion in 2006, falling for the third consecutive year. Its global ranking also dropped by 13 notches to 60th during the one-year period.
The agency said the country's falling economic growth, surging oil prices and a drop in the number of domestic companies for sale contributed to pushing down its 2007 FDI global ranking.
But Korea's investment into other countries rose 88 percent to $15.3 billion from $8.13 billion in 2006, as domestic businesses took over foreign firms, including Doosan Infracore's acquisition of Bob Cat. Also, local firms continued to move plants to China and other emerging economies for greater market access and cheaper labor costs.
The world's total inbound and outbound FDI rose to an all-time high of $1.83 trillion last year, up 30 percent from $1.4 trillion in 2006.
But the UN agency said this year's global FDI will likely decrease from 2007, weighed down by the ongoing worldwide credit market crunch triggered by the U.S. subprime mortgage defaults. It projected that 2008 global FDI will total $1.6 trillion, down 10 percent from last year.
Meanwhile, South Koreans' purchase of overseas real estate fell sharply last month from a year ago as individuals and businesses here continued to refrain from putting money into properties abroad amid the worsening global financial market conditions and U.S. housing slump.
The Ministry of Strategy and Finance said that local residents purchased homes and other properties in foreign countries worth $45 million in August, down from $94 million a year earlier. The number of transactions totaled 89, a steep decline from 219. The August figure was also lower than the $71 million the previous month.
By country, the number of property purchases by Koreans fell to 20 in Malaysia and other Southeast Asian nations, totaling $4 million, from 39 worth $12 million in July. Transactions in North America also dropped to 42 from 83.
Individuals' property purchases amounted to $30 million, while those by businesses totaled $15 million. The average amount of money spent on each purchase was $500,000, up from $460,000 the previous month.