Korea hit a new record high in foreign direct investment (FDI) last year, according to a report released on Jan. 3 by the Ministry of Trade, Industry and Energy.
In 2016, total FDI into Korea reached USD 21.3 billion, a figure 1.9 percent higher than the previous year’s figures, which were also a record at that time. For two years in a row now, FDI into Korea has exceeded the USD 20 billion mark.
It appears that the service sector and green field investments, a form of FDI where a parent company builds its operations in a foreign country from the ground up, were instrumental in increasing FDI in 2016.
Investments in the service sector hit a record high of USD 15.51 billion, up by 5.3 percent from the previous year. The sector has been on an upward climb for six years since 2011. Investments in the manufacturing sector, though relatively smaller in scale than the service sector, grew 12.4 percent from the previous year to USD 5.13 billion. As of last year, the total sum of investment in the manufacturing sector has exceeded the USD 100 billion mark, ever since the ministry began collecting FDI data in 1962.
Green field investments reached USD 15.02 billion, going up by 6.5 percent compared to the previous year. This growth is an indication that companies from around the world are looking to invest in Korea as a production base.
Investment in the form of mergers and acquisitions (M&A), meanwhile, reflected a global decline in M&A activity, stopping short of USD 6.27 billion, down 7.8 percent from the previous year. The FDI amount that arrived in Seoul reached USD 9.76 billion, a decrease of 40.9 percent from the previous year. Despite the increase in total FDI, the decrease in the flow of capital in the form of M&A investments is the reason for this drop, the ministry explained.
A representative from the Ministry of Trade, Industry and Energy gives a briefing on foreign direct investment (FDI) trends for 2016, at the Sejong Government Complex on Jan. 3.
The European Union (EU) was the biggest investor in Korea with USD 7.4 billion in investments, around three times the amount of the previous year. In spite of concerns surrounding Brexit, investment in both the service and manufacturing sectors showed tremendous growth. Chemical engineering, biomedicine, industrial machinery and equipment benefitted in the manufacturing sector, while companies in finance, business services, regional development and construction led the service sector.
Chinese companies invested USD 2.05 billion in Korea last year, up by 3.6 percent from the previous year. For the past three years now, Chinese investment in Korea has been showing upward trends, and total FDI from China has now exceeded the USD 10 billion mark. In the one year that has passed since the free trade agreement (FTA) between Korea and China was brought into effect, the scope of investment has expanded from real estate and finance to include sectors such as arts and culture, electric cars, robotics, tourism and even food products.
By Lee Hana
Korea.net Staff Writer
Photo: Ministry of Trade, Industry and Energy
hlee10@korea.kr
