Foreign direct investment (FDI) declarations in the first quarter of this year once again set a new record, hitting an all-time high. A significant increase in investment in advanced manufacturing, particularly in China and Japan, is expected to greatly contribute to economic revitalization.
The Ministry of Trade, Industry and Energy (MOTIE) announced that FDI in the first quarter of this year reached USD 7.05 billion on a declared basis, recording a significant increase of 25.1% year-on-year. However, in terms of the actual arrival value, we find that the amount is USD 1.85 billion and the arrival rate is approximately 26%. The difference between the amount declared and the amount actually arrived can be attributed to the time it takes for foreign companies to declare their intention to invest and implement their investment plans.
The rapid increase in overseas investment can be attributed primarily to the strength of the manufacturing industry. Foreign investment in the manufacturing industry increased significantly by 99.2% from the previous year, reaching a total of US$3.08 billion. In the manufacturing industry, the increase was particularly notable in industries such as electrical and electronics, which recorded growth of 113.5%. Mechanical equipment and precision medicine increased by 49.2%. Chemicals he showed an increase of 69.5%. However, investment in transport equipment fell by 44.1%.
Investments in the services sector recorded USD 3.85 billion, down 2.5% year-on-year. Increased investment was observed in the financial and insurance sector, with a growth rate of 34.3%. Leisure, sports and entertainment showed a notable increase of 103.7%. However, there was a decline in sectors such as information and communications, which fell by 1.2%. Real estate, down 13.0%. Wholesale and retail trade suffered a hefty decline of 62.6%. It is worth noting that this calculation does not include Chinese e-commerce company AliExpress’ recently announced plans to invest 1.5 trillion won in the domestic market.
By country, investments from Greater China and Japan accounted for almost half of the total. Investment from Greater China reached $2.12 billion, an increase of 146.7% from the previous year, and investment from Japan reached $1.13 billion, an increase of 281.8%. Conversely, investment from the US and EU decreased by 3.4% and 69.8%, respectively. A Ministry of Commerce official explained, “Investment from Greater China has increased significantly, especially in the materials field for advanced industries.”
However, “greenfield investment,” in which foreign companies independently secure land and establish factory facilities in South Korea, decreased by 7.1% from the same period last year to a total of $3.86 billion. Meanwhile, merger and acquisition investment recorded a significant increase of 115.4%, reaching USD 3.19 billion. Investment in non-metropolitan areas has increased significantly by 63.9% from the previous year, and is expected to contribute to the revitalization of the regional economy.
A Ministry of Industry official said, “Despite the difficult situation such as slowing global economic growth and high interest rates and exchange rates, foreign investors’ confidence in South Korea’s investment environment remains strong.” Investment is expected to flow into key manufacturing sectors, resulting in the creation of quality jobs. ”
