Korean Economy News
S. Korea’s foreign direct investment in H1 falls 22.4% on year amid coronavirus

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Foreign direct investments in South Korea dipped 22.4 percent in the first six months of this year from a year ago amid economic uncertainty from the COVID-19 pandemic.

According to data from the Ministry of Trade, Industry and Energy, Korea received $7.66 billion worth of foreign direct investment pledges in the January-June period, down 22.4 percent from the same period last year. Actual investment plunged 23.9 percent to $4.7 billion.

An unnamed official from the trade ministry said that the outbreak of coronavirus has begun to fully affect Korea following entry barriers and increased uncertainty due to COVID-19.

The decline, however, was less steep compared with those in other major countries including the United States and Japan.

Foreign direct investment in the U.S. fell 35.5 percent in the first quarter from a year ago and Japan 80.9 percent.

The Korean trade ministry said Korea was able to attract investments in high technology area such as in high-tech materials, component, and equipment as well as research and development sectors. Korea has been putting out efforts to lure more investment particularly in materials, component, and equipment sectors to counter Japan’s export curbs.

According to the ministry, Korea attracted $300 billion worth of investment from the U.S. related to the development of extreme ultraviolet-use photo resist and construction of its production facility, as well as $250 million investment from the Netherlands in corporate-use large-scale printing research development.

In a new industry sector, a U.S. company invested $200 million to expand data center in Korea and another U.S. company spent $150 million in new information technology development to advance logistics service.

Data showed that foreign direct investment pledged in the new industry area reached $3.81 billion in the first half of the year, up 1.3 percent from last year. It accounted for 49.7 percent of total pledged foreign direct investment, up from 38.1 percent during the same period.

Foreign companies also found new investment opportunities in so-called “untact” – or non-face-to-face – industry amid rapid digital transformation due to COVID-19. Investments flowed into sectors such as e-commerce, online education, logistics, and cloud service.

By country, investment pledges from the U.S. fell 43.5 percent in the first half of the year from last year mainly due to a decline in manufacturing and service sectors. Those from the European Union including the United Kingdom also fell 51.2 percent, and Japan 15 percent.

Direct investment from China, meanwhile, increased 184.4 percent during the same period.

The prospect for foreign direct investment in the remaining of the year remains gloomy.

According to United Nations Conference on Trade and Development (UNCTAD), global foreign direct investment is projected to reach $1 trillion this year, down 40 percent from last year. The amount is expected to dip below $900 billion next year after falling up to 10 percent.

Korea plans to focus on attracting investments in future growth sectors such as semiconductor, bio, and future mobility technology. It will also put out efforts to woo foreign investors to sectors related to digital device and e-commerce that have high growth potential amid increased demand for contactless services.

By Lee Eun-joo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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