Foreign investment increases in Q2

Incoming foreign direct investment grew for the second consecutive quarter on a rapid economic recovery, according to the Ministry of Knowledge Economy yesterday.

The July to September period saw $3.37 billion in new foreign direct investment, a 17.4 percent increase from last year, the ministry said, while for the first nine months of 2009, the figure totaled $8.01 billion, an 8.1 percent increase from 2008.

Incoming funds plunged 38.2 percent in the first quarter, but then surged 62 percent on-year in the second.

The government attributed the growth to the weakness of the local currency compared to 2008, which made Korean companies attractive investment targets, and the government’s quick response to the economic crash.

Korea also stood in stark contrast to other major economies, where investment retreated as the global economy remained stagnant.

Foreign direct investment made in the United States in the first half fell 68.8 percent from a year earlier. Japan saw its figure fall 56.6 percent in the first six months, while investment in Taiwan was down 51.3 percent. Spending in Malaysia plunged 76.7 percent in the first six months. From January to August, China saw its foreign direct investment drop 17.5 percent on-year.

One notable large investment here was eBay’s $700 million acquisition of Korea’s online shopping portal Gmarket. Other major inflows included Bosch’s $250 million joint investment in auto parts, made with Samsung last month, and the $100 million from Malaysia’s Berjaya in September for resort development in Jeju.

The service sector saw the biggest increase in foreign investment, up 84.4 percent on-year to $2.84 billion. Manufacturers trailed with 15.1 percent on-year growth to $511 million.

Investment from Japan and Europe continues to grow, while inbound cash from the U.S. failed to turn around after a sharp drop earlier this year.

Japanese investment in Korea was up 161.9 percent in the third quarter to $626 million, particularly centered on Korea’s service industries, while European countries invested 47.2 percent more in the third quarter to $2.1 billion. The total for the U.S. was down 44.5 percent on-year to $141 million.

“Pushed by the recovering real economy in Korea, foreign direct investment is likely to continue for the time being,” said Park Soon-kee at the ministry’s investment policy division.

“However, the uncertainty in the global economic recovery and the recent appreciation of the Korean won against the U.S. dollar remains a burden.”

By Lee Ho-jeong [ojlee82@joongang.co.kr]