Foreign Direct Investment in the First Half of the Year Scarred by COVID-19... Down 22.4% Year-on-Year

Below 10-Year Average
Concerns Over Decline in Advanced Investment Attraction

[Asia Economy Reporter Moon Chaeseok] Domestic foreign direct investment (FDI) showed a decline of over 20% in the first half of the year due to the impact of the novel coronavirus infection (COVID-19). It is expected that the government's plan to attract advanced investments to Korea will also face setbacks.

According to the Ministry of Trade, Industry and Energy on the 15th, FDI in the first half of this year amounted to $7.66 billion, a 22.4% decrease compared to the same period last year. This figure is even below the 10-year average of $8.98 billion from 2010 to last year.

The ministry explained that the sluggish FDI in the first half was due to restrictions on cross-border movement caused by COVID-19 and foreign companies reducing investments to prepare for growing uncertainties.

The United Nations Conference on Trade and Development (UNCTAD) estimated that global FDI this year will decrease by 40% compared to last year, reaching $1 trillion due to the spread of COVID-19.

UNCTAD also predicted that next year, the global FDI scale will fall below $900 billion due to the ongoing impact of COVID-19, breaking the $1 trillion mark.

Concerns have been raised about whether FDI performance can recover as countries increase domestic investments instead of overseas investments due to COVID-19. Attention is focused on whether the $20 billion mark will be recorded for the sixth consecutive year by the end of the year.

Major countries such as the United States and the European Union (EU) are expanding reshoring efforts to bring back their domestic companies that had expanded overseas in preparation for the spread of infectious diseases like COVID-19.

Korea has also announced measures to strengthen 'U-turn' investments by increasing tax support and expanding subsidies to 30 billion won per company (outside the metropolitan area).