Foreign direct investment inflows up 4.6% in 2011

Foreign investment in Korea grew a healthy 4.6 percent last year as an inflow of capital from rich countries sharply rose despite persistent uncertainties in the global economy.

Foreign direct investment was $13.67 billion last year, up from $13.07 billion in 2010, the Ministry of Knowledge Economy said Thursday.

The spike mainly resulted from robust investments by the European Union, the U.S. and Japan, which shot up 33.6 percent year-on-year to nearly $9.7 billion in 2011.

EU nations together invested more than $5 billion, up 57.4 percent from a year ago. U.S. investment jumped more than 20 percent to nearly $2.4 billion, while Japan spent around $2.3 billion, up almost 10 percent from 2010.

Also giving a boost was China, whose investment soared 57.2 percent on-year to $651 million last year. Other Asian neighbors including Singapore, Hong Kong and Malaysia pumped in nearly $1.3 billion collectively, up 10 percent from 2010.

In contrast, investment by the Middle East and other emerging economies nearly halved to $92 million and $1.95 billion, respectively, as internal and external factors dampened investor sentiment in the region.

“The growth seemingly reflects the growing confidence of the international community in the Korean economy, given the current global uncertainties,” the ministry said in a statement.

“The FDI levels in Korea have hovered between $11 billion and $12 billion throughout the 2000s. But foreign firms appear to have started scaling up investment since 2010, in which we saw the sum top $13 billion.”

By industry, foreign investment in the local service sector edged up 15.4 percent from a year earlier to $7.27 billion last year while that in manufacturing shed 15.1 percent to $5.65 billion.

As for this year, foreign investment is likely to remain at similar levels to last year despite the deepening European debt crisis and lingering double dip fears in the advanced economies, the ministry added.

“The free trade agreement with the U.S. could boost investment inflows and the strengthening yen may trigger the overseas relocation of Japanese firms,” the ministry said.

The ministry forecasts the Korea-U.S. FTA will bring in extra funds worth up to $3.2 billion here annually for the next 10 years when it comes into effect.

By Shin Hyon-hee (heeshin@heraldcorp.com)