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Foreign direct investment hits record in 2018

Jan 04,2019
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Foreign direct investment hit an all-time record last year in part due to a recovery in interest from Chinese companies as tensions between the countries eased.

According to the Ministry of Trade, Industry and Energy, overall foreign direct investment commitments increased 17.2 percent in 2018 from the previous year to $26.9 billion. This is the fourth year that foreign direct investment commitments exceeded $20 billion.

“Despite the difficult conditions internally and externally, foreign investments have persistently flowed in,” said Lee Ho-joon, director general of investment policy at the ministry. “While in the third quarter they dropped slightly after reaching an all-time record in the first half, annual results reached the highest levels ever.”

The ministry said while investments from major economies - including the European Union and the United States - continued to grow, one of the biggest drivers last year was the return of investment from China.

China, which accounted for 10.2 percent of all foreign direct investment last year, committed $2.74 billion in 2018. This is not only a 238.9 percent surge year-on-year, but also the largest commitment from the country ever.

China had been shunning Korean investments, products and travel because of the deployment of a missile defense system, but as time has passed, resolve seems to have weakened and Chinese companies and individuals have started to re-engage.

China wasn’t the only economy to make record-breaking investments in Korea.

The EU, which is the largest foreign investor in the country with 33.2 percent of the total, pledged $8.92 billion. The commitment is an all-time record and 26.9 percent up compared to 2017.

According to the ministry, EU investments were mostly focused on new technologies.

A British company developing autonomous vehicles made a strategic investment in a Korean automotive parts supplier, while a French cosmetics company hoping to expand its presence in China bought an online Korean shopping mall. A German wind-turbine manufacturer set up a production plant manufacturing high-efficiency turbines and blades in Korea.

The United States was the second-largest foreign investor in the country, accounting for 21.9 percent of the total. It increased investment 24.8 percent to $5.88 billion.

“In addition to the easing geopolitical risk on the peninsula, exports breaking $600 billion and the maintenance of an extensive free-trade network helped Korea remain an attractive investment location,” said ministry official Lee. “Also, the high-level of R&D skills in the country appeals to foreign investors.”

Not all countries increased their investments in Korea. Japan, which accounted for 4.8 percent of the total, committed 30 percent less than in 2017. The ministry said the drop in investment from Japan was largely due to the country’s shift toward China and Asean.

The ministry said this year’s goal is to keep the level of foreign direct investment above $20 billion for the fifth consecutive year.

The key to achieving this is continued improvement in the relationship with Pyongyang, the ministry said. When relations with North Korea ameliorate, more foreign investment rolls in. The ministry emphasized the importance of the country’s extensive FTA network, especially for Chinese investors hoping to utilize Korea as a platform for access to other markets.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]