Q3 Foreign Direct Investment Hits Record High... 'Greenfield' Factory Establishments Up 20%

Reported $23.95 billion... 11.3% increase YoY

Foreign direct investment (FDI) in the third quarter of this year reached an all-time high. This was due to a 20% increase in 'greenfield investment,' which involves establishing factories or business sites.

According to the Ministry of Trade, Industry and Energy on the 4th, FDI for the third quarter (cumulative from January to September) amounted to $23.95 billion based on reported figures, marking an 11.3% increase compared to the same period last year. The arrival amount also rose by 20.2% year-on-year to $13.92 billion. Both reported and arrival figures represent the highest performance ever recorded for the third quarter.

An official from the ministry explained, "Despite a decrease in FDI from the US (-15.5%) and China (-12.8%) due to global investment uncertainties, domestic FDI steadily expanded," adding, "Global companies' trust in Korea's stable investment environment has led to a record high in new investment." The new investment amount reached $11.77 billion, up 17.3% from the previous year, marking an all-time high.

By type, greenfield investment, which involves establishing and directly operating factories or business sites, increased, whereas mergers and acquisitions (M&A) aimed at acquiring corporate shares or mergers declined.

Greenfield investment rose to a total of $16.79 billion, up 20.4% year-on-year, supported by increased investments from major countries such as the US ($5.05 billion, 2.8%), the European Union (EU, $2.14 billion, 38.9%), the Chinese-speaking region including China, Hong Kong, and Taiwan ($2.01 billion, 43.3%), and Japan ($830 million, 16.1%). In contrast, M&A investment decreased by 5.5% to $7.16 billion.

By industry, manufacturing showed a sharp increase. Manufacturing FDI amounted to $9.02 billion, up 15.7%, accounting for 37.7% of total FDI. This was followed by the service sector ($13.8 billion, 9.0%) and other industries ($1.13 billion, 7.0%), all of which increased.

In particular, manufacturing saw significant growth in the electrical and electronics sector ($3.32 billion) and the chemical industry ($3.01 billion), which increased by 27.0% and 61.1% respectively compared to the same period last year. Additionally, pharmaceuticals ($290 million, 86.8%) and non-metallic minerals ($90 million, 886.6%) also rose. The ministry analyzed that foreign companies' investments flowed into the manufacturing sector, supported by the expansion of domestic demand companies in advanced strategic industries.

By country, investments from the US and Japan decreased to $5.19 billion (-27.2%) and $930 million (-10.5%) respectively, due to the base effect of large-scale M&A investments in the previous year. The EU and the Chinese-speaking region recorded increases to $4.0 billion (38.1%) and $2.23 billion (49.9%) respectively compared to the previous year.

By region, the Seoul metropolitan area saw an increase of 21.6% year-on-year to $15.22 billion, while non-metropolitan areas decreased by 23.5% to $4.85 billion.

Park Deok-yeol, Director of Investment Policy at the Ministry of Trade, Industry and Energy, stated, "FDI momentum has expanded and accelerated, achieving record highs in both reported and arrival figures for the third quarter," adding, "This record performance is attributed to the outcomes of the presidential sales tour and corporate-friendly policy measures such as deregulation."