FDI to Korea falls 13.3% to $23.3b

Data from the Ministry of Trade, Industry and Energy showed Monday that foreign direct investment to South Korea fell 13.3 percent on-year in 2019 to reach $23.3 billion of investment in total.

According to the data, last year’s FDI pledged to Korea was the second-largest amount after the $26.9 billion reported in 2018. 

The ministry said 2018 saw the record-high FDI thanks to earlier-reported investments by firms prior to the government’s planned abolition of corporate tax benefits for foreign investment firms.

It also highlighted that last year was the fifth consecutive year that Korea received more than $20 billion in FDI annually.

“Since 2015, foreign firms have been making investments worth over $20 billion to South Korea each year, meaning the basis for investments has stabilized,” said a ministry official. 

Last year, FDI rebounded in the second half of the year following megadeals clinched in the fourth quarter, after dipping 35.7 percent and 38.1 percent on-year in the first and second quarters, respectively. 

In the third quarter, FDI increased 4.7 percent on-year and further inched up 27.9 percent on-year in the fourth quarter. 

In the fourth quarter alone, there was a quarterly record-high of $9.8 billion won of investment. 

The ministry said such fluctuations came amid the persistent trade war between the US and China and a reduction in global investment demand that weighed on investor sentiment.

The megadeal projects involved investments in high functional composites, including plastic, polymers and power semiconductors in the material and components sector.

In the sector of technology development and research, FDI in R&D on science technology doubled compared to the previous year.

M&A deals were also clinched in the consumer sectors involving K-beauty, food, culture and IT companies here. 

By country, the US reported $6.8 billion in FDI to Korea, up 16.4 percent compared to the previous year. But the amount of FDI received by Korea fell 64.6 percent to $1.3 billion.

The EU saw FDI fall 20.1 percent to $7.1 billion, but the amount it received in the last year increased 27.7 percent on-year. 

Japan reported $1.4 billion in FDI, up 9.9 percent, while the amount it received was $1.03 billion, down 0.6 percent on-year. 

China’s reported FDI and the amount received by South Korea fell 64.2 percent and 72.2 percent, respectively, to reach $980 million and $1.9 billion.

By Kim Da-sol (ddd@heraldcorp.com)