ED Surge of FDI pledges

Additional measures needed to attract more overseas investors

Foreign direct investment (FDI) pledges made to Korea hit an all-time high last year. According to the Ministry of Trade, Industry and Energy, overseas investors promised to invest $29.51 billion in Korea in 2021, up 42 percent from the previous year. Last year's FDI figure marked an increase of nearly 10 percent from the previous record of $26.9 billion in 2018. The amount of investment that arrived in Korea last year also jumped 57.5 percent year-on-year to $18.03 billion.

The service sector saw its overseas investments soar by 64.2 percent, taking the largest share of FDI last year. It was attributed to growing investment in platform services to back up online-to-offline (O2O) ― online-based offline ― service and other e-commerce deals. The EU recorded the sharpest investment growth of 169 percent to total $12.8 billion. The European investors were most interested in the mergers and acquisitions of Korean service providers.

Foreign investment pledges last year were noteworthy from a qualitative aspect as well. Most significant was the inflow of investment money into various large-scale platforms, including e-commerce, gaming, and fintech, establishing the basis for the service industry's growth. In addition, investment into new industries, such as future vehicles, biopharmaceuticals and information and communications technology, reflected ever-growing interest in Korea's high-tech industries among overseas investors.

Local experts interpreted the trend as the increasing willingness of overseas investors to recognize the innovative potentials of Korean businesses and co-prosper with them. However, it was somewhat disappointing to see FDI pledges made to the manufacturing industry decline 16.2 percent to $5 billion. Still, key materials, parts and equipment industries drew relatively brisk investment, helping to stabilize the supply network.

It is good to see overseas investors regard Korea Inc. as a reliable investment destination amid the growing uncertainty and aggravating global supply bottlenecks due to the prolonged COVID-19 pandemic. However, to induce a virtuous circle of growing foreign investment, upgraded domestic industrial basis and job creation, the government should focus not only on attracting new investment but also on their follow-up management by, for instance, carrying out regulatory reforms.