Korea unattractive to foreign investors: Ambrosetti report

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By Lee Kyung-min

Korea ranked eighth out of 148 countries and last out of five major Asian economies this year in terms of global attractiveness, a report by a European think tank showed.

Global Attractiveness Index (GAI) 2021 findings released by the boutique management consultancy and private bank, The European House ― Ambrosetti _ showed Korea's GAI stood at 81.26 this year.

The index measures the foreign-investment-attraction capabilities and environment of 148 countries surveyed relative to the top-ranked country.

Korea ranked eighth in 2016, fell to 11th the following year but then rose back to 8th again in 2018 ― it remained in ninth place in 2019 and 2020.

The U.S. (100.00) topped the list, followed by Germany (93.30) which came in second by a narrow margin.

China came in third with a score of 91.55. Japan ranked fourth (89.61), while Singapore came in sixth (84.84) and Hong Kong seventh (82.82).

Other top countries included the U.K. in fifth place (89.03), the United Arab Emirates in ninth (77.66) and France, 10th (76.19).

The composite index compares 148 economies that represent 95 percent of the world's population and 99 percent of the world's gross domestic product (GDP).

It has four sub-indices including a Positioning Index (PI) and Dynamism Index (DI), Sustainability Index (SI) and growth expectations.

PI and DI include openness, innovation, efficiency and endowment. SI includes resilience and vulnerability.

"Openness" measures foreign direct investment flows, export-import flows, the number of inbound and outbound tourists, foreign university students relative to the young population and the number of migrants.

"Innovation" is measured by hiring in the high-tech sector relative to total employment and exports of high-tech goods relative to the world's total. It also measures the number of scientific publications and the percentage of internet users out of the country's total population.

"Efficiency" is measured by the unemployment rate, logistics and performance index, total factor productivity, rule of law and total tax rate.

"Endowment" is measured by GDP, per-capita Gross National Product (GNP), gross fixed capital formation and the Program for International Student Assessment (PISA) test score.

Korea scored high on the SI and growth expectations, evaluated as "high attractiveness." But it was evaluated as "medium-low attractiveness" in DI.

Inbound Foreign Direct Investment (FDI) for Korea exceeded $20 billion (23 trillion won) in 2015, and rose further to a record-high of $26.9 billion in 2018.

But it dipped to $23.3 billion in 2019, down 11.1 percent due to an overall shrinking of FDI worldwide amid the spread of protectionism and increased trade uncertainties. The figure fell further to $20.7 billion due to the COVID-19 pandemic.

FDI is expected to grow this year due to a low base effect and a recovery of global trade. According to the Ministry of Trade, Industry and Energy, Korea attracted $13.14 billion in foreign investment in the first half of this year, up 71.5 percent year-on-year and the second-highest figure on record.

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