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FDI pledges to Korea jump to 2nd highest for Q1 2018-04-04

The Ministry of Trade, Industry and Energy announced on April 4 that foreign direct investment (FDI) pledged to Korea in the first quarter of 2018 jumped 28.1 percent year-on-year to USD 4.9 billion.
This second highest figure ever for the first quarter indicates that foreign investors find Korea an attractive destination for investment.
FDI arrivals in the first quarter contracted 2.9 percent year-on-year to $2.9 billion, which exceeded an average quarterly amount of $2.7 billion for the past five years.

Newly pledged investments in the first three months of this year from the European Union (EU), the U.S., and China increased while those from Japan slightly contracted.

Investors from the EU committed $1.9 billion, up 114.0 percent from a year earlier, while their actual investment fell 2.9 percent to $1.1 billion. This is attributable to a significant investment in manufacturers of semiconductors and auto parts which play a key role in the Fourth Industrialization Revolution.

FDI pledged from the U.S. more than doubled (102.3 percent) to $738 million and those arrived almost quadrupled (297.7 percent) to $777 million. A large portion of the American investment was made in the service industry that uses information technology, such as electronic commerce and cloud computing.

Investment newly pledged from China soared 541.5 percent to $1.1 billion while those arrived dropped 47.8 percent to $22 million. The economic cooperation between Korea and China has improved since the bilateral summit held in December 2017.

The declared amount of FDI from Japan decreased 9.6 percent to $368 million while actual investment advanced 26.9 percent to $312 million. Although investment in chemical and electrical engineering slowed down, that in consumer goods, telecommunications, and finance increased. This shows that its investment to Korea has been diversified.

By industry, the manufacturing sector saw an increase both in FDI pledges and arrivals. The service sector saw an increase in FDI pledges, but a decrease in FDI arrivals.

The amount of FDI pledges received by the manufacturing sector jumped 58.6 percent to $1.5 billion and the actual investment made in the industry increased 14.6 percent to $573 million. This growth was led by increased joint ventures for building a global value chain with competitive Korean large companies.

Foreign investors committed $3.3 billion to the service industry, up 18.6 percent from a year earlier, while their actual investment inched down 4.8 percent to $2.3 billion. The spread of digital economy brought about concentrated funding in various new service industries based on information technology, including digital platforms, cloud computing, electronic commerce, and financial technology.

By type, greenfield investments pledged to Korea increased 16.2 percent to $3.6 billion. This value was the highest on record for the first quarter. Those arrived in Korea also expanded 12.0 percent to $2.1 billion. Greenfield investments were mostly made to expand factories for boosting production and establish IT service infrastructure for achieving early market dominance.
Merger and acquisition (M&A) investments pledged to Korea increased 73.8 percent to $1.4 billion, while those arrived dropped 26.6 percent to $850 million. Many M&A deals that worth more than $100 million were struck in the manufacturing industry, and active equity investments were made to improve solvency.
The Ministry forecasts that the tense trade relations between the U.S. and China would decrease global trade volume and that higher U.S. interest rates would lead to a contraction in the international M&A market. With this backdrop, the Ministry will continue to improve its communication with foreign investors and companies from home and abroad to maintain the growth momentum of the first quarter’s FDI inflows.

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