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FDI pledged to Korea in first three quarters reach record high 2018-10-08

The Ministry of Trade, Industry and Energy announced on October 4 that foreign direct investment (FDI) pledged to Korea in the first three quarters of this year reached a record high of USD 19.2 billion, up 41.4 percent from the same period last year.
This highest figure ever for the January-September period indicates that Korea is certainly an attractive investment destination as the Asian country engages in many free trade agreements, has an excellent research and investment workforce, and is home to some of the world’s leading companies. FDI arrivals also expanded 31.9 percent to $11.7 billion.
Newly pledged investments from the European Union (EU), the U.S., and China kept increasing while those from Japan started to contract after posting growth in the first half.

Investors from the EU committed $5.1 billion, up 63.1 percent from a year earlier, while their actual investment grew 6.8 percent to $3.5 billion. This is attributable to growth in both manufacturing and services sectors. In manufacturing, expansion was driven by transportation machinery and electrical and electronic devices. In services, finance and insurance, retail, and leisure products mostly attracted investment.
FDI pledged from the U.S. went up 41.0 percent to $4.1 billion and those arrived more than doubled (107.9 percent) to $2.0 billion. The American investment into both Korean manufacturing and services saw growth. In manufacturing, chemical engineering (including biotechnology), transportation machinery, and machinery equipment and precision medical devices were strong. In services, information communication services, regional development and real estate, finance and insurance, and retail showed strength.

Investment newly pledged from China jumped 292.7 percent to $2.4 billion while those arrived soared 470.8 percent to $747 million. Both manufacturing and services posted growth. In manufacturing, electrical and electronic devices, machinery equipment and precision medical devices, and metals were the main contributors. In services, regional development and real estate, finance and insurance, and transportation and storage led expansion.

The declared amount of FDI from Japan decreased 42.6 percent to $968 million while actual investment also went down 26.7 percent to $804 million. Both manufacturing and services saw a decline. In manufacturing, while machinery equipment and precision medical devices slightly increased, chemical engineering (including biotechnology) and electrical and electronic devices decreased. In services, information and communication services inched up and finance and insurance remained mostly unchanged. Meanwhile, retail and regional development and real estate contracted.
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. In terms of FDI pledges, manufacturing investment accounted for 43.6 percent of the total investment; service investment, 56.4 percent.

The amount of FDI pledges committed to the manufacturing sector jumped 14.6 percent to $10.6 billion and the actual investment made in the industry increased 116.7 percent to $5.6 billion. This growth was a result of increased joint ventures for building a global value chain with competitive Korean companies in fields such as transportation machinery, chemical engineering (including biotechnology), and electrical and electronic devices.

For the service industry, the amount of FDI pledged climbed 101.7 percent to $8.4 billion, while that of FDI arrived inched down 1.5 percent to $6.1 billion. Foreign investors think highly of Korea’s information technology infrastructure and their commitment to mobile finance and other areas that utilize digital technologies, such as e-commerce, cloud computing, and blockchain-based platforms.

By investment type, greenfield investments pledged to Korea advanced 37.9 percent to $14.9 billion, accounting for 77.1 percent of the total foreign investment. Those arrived in Korea also expanded 63.1 percent to $8.9 billion. Merger and acquisition (M&A) investments pledged to Korea also grew 54.7 percent to $4.3 billion, being responsible for 22.9 percent of the total.
The Ministry forecasts that reduced geopolitical risks in the Korean peninsula, high sovereign credit ratings, and strength of the country’s main industries, such as semiconductors and petrochemicals, will keep contributing to a positive investment environment. Meanwhile, unresolved economic uncertainties, including rising global protectionism and the widening interest-rate gap between Korea and the United States, remain as challenges.
With this background, the Ministry will focus its policy efforts to sustain foreign investment growth and to stimulate investment that helps create quality jobs and provides better preparation for the Fourth Industrial Revolution.

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