FDI in Q1 hits record high amid security concerns

The amount of foreign direct investment into Korea hit a record high of $3.39 billion in the first quarter of this year, a 44.7 percent increase from a year ago, despite rising security concerns on the Korean Peninsula, according to data released Thursday by the Ministry Trade, Industry and Energy.

“The data showed that the impact of geopolitical risks created by North Korea on investment decisions of foreigners were limited for the first three months of the year,” a ministry official said.

The first-quarter FDI performance was attributed to an investment surge from pledges by U.S. investors in the January-March period, which nearly tripled to $1.7 billion from some $567 million a year ago.

”U.S. investors, in particular, pledged investments in the nation’s property market rather than manufacturing sectors,“ the official said.

However, new FDI pledges from Japan plunged 34.9 percent, affected by a cost increase triggered by the rising value of the won against the yen.

Market watchers doubted the FDI record high would continue into the second quarter due to the nation’s worsening business environment.

In fact, ministry data showed that actual FDI transfers plunged 23.4 percent on-year to $1.39 billion in the first quarter due to the protracted global economic slump and lingering geopolitical risks.

”With tension in inter-Korean relations escalating, the government will carefully monitor the impact of geopolitical risks on foreign investment and the exchange rate to develop measures to stabilize sentiment of foreign investors,” the ministry said.

The ministry forecast increased FDI to Korea from the U.S., which is expected to gain more liquidity this year.

China is also expected to increase investments into the nation’s financial sector by buying more Korean stocks. China, however, was a low performer in investments to Korea in the first quarter. The country’s FDI to Korea dropped 34.9 percent to $600 million in the first quarter from a year ago.

By Seo Jee-yeon  (jyseo@heraldcorp.com)