FDI of $15.3 Billion in First Half '3rd Highest Ever'... "Solid Despite Global Slowdown"

Foreign Direct Investment Trends in the First Half of This Year
1st Place Last Year $17.1 Billion · 2nd Place 2018 $15.8 Billion
Non-Capital Region Share 25.6%... Expanded Continuously Over the Past 5 Years

Foreign Direct Investment (FDI) in the first half of this year exceeded $15.3 billion, ranking third highest ever. Although it decreased by about 10% compared to the same period last year, it is evaluated that a favorable trend was maintained despite the global contraction of FDI.

According to the Ministry of Trade, Industry and Energy on the 5th, FDI in the first half of this year was $15.34 billion based on reported amounts, down 10.3% from the same period last year. Based on actual arrivals, it recorded $6.9 billion (-17.4%).

An official from the Ministry of Trade, Industry and Energy explained, "The reported amount for the first half of this year decreased due to the base effect of attracting a total of $3.11 billion during last year's official visits, but it is about 30% higher than the average of the past five years," adding, "This result confirms foreign investors' trust in Korea's investment environment despite difficult conditions such as increased geopolitical uncertainty, sustained high interest rates, and wider exchange rate fluctuations."

When President Yoon Suk-yeol visited Switzerland in January last year to attend the World Economic Forum (Davos Forum), Vestas, the world's largest wind turbine company, reported an investment of $300 million to the Korean government. During the state visit to the United States in April, $1.9 billion was secured, and in June, a $940 million investment was attracted during the state visit to France. These exceptional achievements led to last year's first half FDI ranking first ever. This ranks third in the first half of this year, following the large-scale investments reported in 2018 due to GM's business normalization and debt-to-equity conversions.

By industry, manufacturing recorded $8.13 billion, up 6.5% from the same period last year. Investments increased in advanced industries and sectors related to materials, parts, and equipment, such as electrical and electronics ($3.64 billion, 25.7%), machinery and medical precision equipment ($1.11 billion, 102.6%), and pharmaceuticals ($470 million, 70.6%). The service sector showed growth centered on industries with high contributions to economic growth, such as information and communications ($990 million, 25.3%) and research and development, professional, and scientific technology ($360 million, 10.8%).

By country, investments from the United States ($2.61 billion, -28.7%) and the European Union (EU, $1.96 billion, -32.8%) decreased. The Greater China region, including China, Hong Kong, and Taiwan, increased by 128.9% to $3.94 billion, and Japan also rose by 386.8% to $2.89 billion.

By type, unlike mergers and acquisitions (M&A) which absorb existing companies or businesses, 'greenfield investment'?a form of investment that builds businesses from scratch by establishing subsidiaries locally and constructing factories or business sites, thereby creating significant employment effects?accounted for $11.49 billion, representing 74.9% of this year's first half FDI.

The proportion of investment in non-capital regions has been steadily increasing over the past five years. It expanded from 9.8% in the first half of 2019 to 26.5% in the first half of this year. The Ministry explained that while FDI tended to concentrate in the Seoul metropolitan area in the past, the share of investment in non-capital regions has increased since 2019 due to location advantages, cash support, and overseas roadshow support by local governments in non-capital regions.

The government set an FDI target of $35 billion through the economic policy direction announced earlier this year. An official from the Ministry of Trade, Industry and Energy said, "Since companies usually plan investments in the first half and execute them in the second half, the scale of FDI is expected to increase as the year progresses," adding, "We will do our best to induce actual investments in Korea in the second half to achieve the annual target of $35 billion."