[The Editors' Verdict] Ensuring Investment Is a Strategy, Not a Giveaway

"Giveaway Diplomacy" Misses the Point
Overseas Investment Is an Opportunity, Not a Handout

"All we did was give away concessions."

As South Korean companies announced large-scale direct investment plans in the United States totaling $150 billion (approximately 208 trillion won) on the occasion of the South Korea-U.S. summit, the opposition party has intensified its criticism, calling it "giveaway diplomacy." Concerns have been raised that the government, having already promised last month to create a $350 billion investment cooperation fund with the U.S. during tariff negotiations, has merely sent leading Korean companies to the U.S. to offer investment packages without securing reciprocal benefits.

While South Korea was promising major investments in the U.S., foreign-invested companies operating in Korea were considering withdrawal. On August 24, the amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act?commonly known as the "Yellow Envelope Act"?passed the National Assembly's plenary session, led by the Democratic Party of Korea. As a result, South Korea now faces concerns about an exodus of foreign-invested companies. Recently, when the Korea Foreign Company Association (KOFA), which has about 600 foreign member companies, surveyed 100 foreign-invested firms about "changes in investment plans in Korea after the labor law revision," 35.6% responded that they were "considering reducing investment or withdrawing their Korean branches." South Korea faces limitations: unlike the U.S., it cannot use tariffs as leverage to pressure investment, nor can it offer the bold subsidies and tax incentives that Japan and China provide.

On the surface, it appears unbalanced that Korean companies are making massive overseas investments just as foreign companies are contemplating leaving Korea. However, this view only holds if one sees investment as a simple transfer of funds. Criticism of "giveaway diplomacy" overlooks the fact that overseas investment can lead to increased market share and supply chain reinforcement, ultimately driving corporate growth. If we view overseas investment not as a large expenditure but as a strategic entry into the global manufacturing supply chain, securing production bases in the U.S. for high-tech industries is a golden opportunity for Korea. Rather than worrying about giving away too much, we should focus on crafting meticulous strategies to ensure that the benefits of our companies' overseas investments eventually return to the Korean economy.

Of course, the global trend of investing in the U.S. could, in the short term, create an investment gap by foreign companies in the Korean economy?a point the government must keep in mind. This is important because investment acts as a catalyst for economic growth. Korea is already experiencing a decline in investment. According to the Ministry of Trade, Industry and Energy, the amount of foreign direct investment (FDI) reported in Korea reached a record $34.57 billion last year, but the actual amount invested was only $14.77 billion, a decrease of 24%. This is attributed to foreign companies postponing investments in Korea due to domestic political instability following the martial law crisis in December last year and U.S. tariff policies. Furthermore, in the first half of this year, reported FDI amounted to $13.1 billion, a 14.6% decrease from a year earlier.

However, these issues should be addressed by maintaining policy consistency so that foreign companies can have predictability when investing in Korea, keeping legal interpretations clear, and revising systems to prevent discriminatory disadvantages against domestic companies. It is a time when strategic design is needed for investment diplomacy.