By Choi Sung-jin
Foreign direct investment in Korea sharply fell in the first three quarters of this year, as many foreigners failed to turn their investment promises into action amid the global economic slowdown, government officials said.
According to data released by the Ministry of Trade, Industry and Energy Tuesday, foreign direct investment (FDI) in Korea totaled $6.68 billion in the first nine months, marking a steep drop of 40.2 percent from $11.18 billion in the same period of 2015.
By region, direct investments by major countries plummeted, as shown by China (down 84.2 percent), the U.S. (down 49 percent) and Japan (down 33.4 percent). The European Union's (EU) investment, which accounts for the largest share of FDI in Korea, fell 18.5 percent.
Officials attributed the sharp drop in the money actually invested to the lack of investor confidence resulting from the global business slump.
Korea is not alone in suffering dwindling foreign investment, the officials said, noting that the United States and EU recorded drops of 9.7 percent and 45 percent, respectively.
The United Nations Conference on Trade and Development (UNCTAD) projected that worldwide FDI would drop 10-15 percent because of growing uncertainty over the global economy and the protracted business slump.
In Korea's case, some large investments last year made the FDI appear relatively smaller this year, the officials said. For instance, ARAMCO, the Saudi Arabian state oil company, bought $1.84 billion worth of S-Oil's equities in the first quarter of 2015, and China's Anbang Insurance took over Tongyang Life Insurance for $980 million in the third quarter of last year.
"There are always gaps between the time an investment report is made and the time when the cash actually arrives here in most ‘greenfield' investments, which build factories and produce goods," said Park Sung-taek, the ministry's director-general for investment policy. "Last year, large amounts of such investment cash arrived, making this year's performances relatively slower."
On a brighter note, FDI on a reports basis sharply increased this year compared with other years. In the January-September period, $15.04 billion of foreign direct investment reports were made, up 13.4 percent, or $1.78 billion, from a year earlier and hitting a record high. The sharp increase in intended foreign investment heightens expectations of a rise in actual investment, Park said.
By sector, manufacturing attracted $4.32 billion, up 46.2 percent from a year ago, and services drew $10.23 billion, an increase of 14.9 percent. Particularly, reports of foreign investment grew sharply in such future industries as the information-communication, bio and health-care sectors.
"Despite uncertain economic conditions, including an economic slump and the North Korean nuclear crisis, the sharp increase in reported foreign investment indicates foreign businesses are favorably assessing Korea's economic foundation and potentials," said Kim Jae-joon, director of the ministry's investment inducement division.
At stake is how to convert the intended investment into reality.
"What matters is how much of the investment promises are turned into the actual arrival of cash," Park said. "As the circumstances to attract FDI are unfavorable now, as shown by Brexit and the global rise of trade protectionism, the government will focus efforts on making the most of high-level talks to materialize actual increases in foreign investment."
In this regard, the ministry will hold investor relationship meetings in Europe, China and Japan until the end of this year, he said.
Foreign direct investment in Korea sharply fell in the first three quarters of this year, as many foreigners failed to turn their investment promises into action amid the global economic slowdown, government officials said.
According to data released by the Ministry of Trade, Industry and Energy Tuesday, foreign direct investment (FDI) in Korea totaled $6.68 billion in the first nine months, marking a steep drop of 40.2 percent from $11.18 billion in the same period of 2015.
By region, direct investments by major countries plummeted, as shown by China (down 84.2 percent), the U.S. (down 49 percent) and Japan (down 33.4 percent). The European Union's (EU) investment, which accounts for the largest share of FDI in Korea, fell 18.5 percent.
Officials attributed the sharp drop in the money actually invested to the lack of investor confidence resulting from the global business slump.
Korea is not alone in suffering dwindling foreign investment, the officials said, noting that the United States and EU recorded drops of 9.7 percent and 45 percent, respectively.
The United Nations Conference on Trade and Development (UNCTAD) projected that worldwide FDI would drop 10-15 percent because of growing uncertainty over the global economy and the protracted business slump.
In Korea's case, some large investments last year made the FDI appear relatively smaller this year, the officials said. For instance, ARAMCO, the Saudi Arabian state oil company, bought $1.84 billion worth of S-Oil's equities in the first quarter of 2015, and China's Anbang Insurance took over Tongyang Life Insurance for $980 million in the third quarter of last year.
"There are always gaps between the time an investment report is made and the time when the cash actually arrives here in most ‘greenfield' investments, which build factories and produce goods," said Park Sung-taek, the ministry's director-general for investment policy. "Last year, large amounts of such investment cash arrived, making this year's performances relatively slower."
On a brighter note, FDI on a reports basis sharply increased this year compared with other years. In the January-September period, $15.04 billion of foreign direct investment reports were made, up 13.4 percent, or $1.78 billion, from a year earlier and hitting a record high. The sharp increase in intended foreign investment heightens expectations of a rise in actual investment, Park said.
By sector, manufacturing attracted $4.32 billion, up 46.2 percent from a year ago, and services drew $10.23 billion, an increase of 14.9 percent. Particularly, reports of foreign investment grew sharply in such future industries as the information-communication, bio and health-care sectors.
"Despite uncertain economic conditions, including an economic slump and the North Korean nuclear crisis, the sharp increase in reported foreign investment indicates foreign businesses are favorably assessing Korea's economic foundation and potentials," said Kim Jae-joon, director of the ministry's investment inducement division.
At stake is how to convert the intended investment into reality.
"What matters is how much of the investment promises are turned into the actual arrival of cash," Park said. "As the circumstances to attract FDI are unfavorable now, as shown by Brexit and the global rise of trade protectionism, the government will focus efforts on making the most of high-level talks to materialize actual increases in foreign investment."
In this regard, the ministry will hold investor relationship meetings in Europe, China and Japan until the end of this year, he said.
