Korea’s FDI hits record in 2016, surges in U.S.

The direct offshore investments of Korean companies rose to a record level last year, with investments in the United States nearly quadruple the figure for China due to strong demand for business expansion in the world’s most advanced market, a report showed Monday.

Foreign direct investment (FDI) by Korean companies stood at $35.2 billion in 2016, the highest figure ever, according to a report by state-run Industrial Bank of Korea (IBK). The 2016 figure represents a 34 percent jump from $23.1 billion in 2007.

FDI refers to an investment by a company in a foreign country, either in the form of establishing business operations or the acquisition of controlling assets in a foreign counterpart, which is different from portfolio investment that mainly includes purchasing equity in a foreign company.

Korea’s direct investment to the U.S. amounted to $12.9 billion last year, growing by 123.6 percent from four years earlier, while that invested in China declined 36.5 percent to $3.3 billion over the same period, the report showed.

The increase in the FDI of Asia’s fourth-largest economy in the U.S. came as more local companies opted to expand their presence in the U.S. through mergers & acquisitions (M&As) and set up subsidiaries to secure and adopt advanced technologies and skills.

Last November, Korean tech behemoth Samsung Electronics took over U.S. audio and automotive electronics firm Harman International Industries Inc. as part of efforts to boost competitiveness. It carried out a dozen other takeovers in the U.S. over the past three years.

Hyundai Motor, the top automaker in Korea, unveiled a five-year investment plan worth a total of $3.1 billion in the U.S. market at the beginning of this year. Major home appliance maker LG Electronics is set to build a large washing machine production line in Tennessee.

Such a drive by Korean companies will likely get a boost going forward, as the Donald Trump administration calls on foreign companies to spend more in the U.S..

In contrast, the decline in FDI to China is largely attributable to the completion of Samsung Electronics’ $7 billion chip factory in Xian.

FDI in Vietnam from Korea jumped more than twofold to $2.27 billion in 2016 from $1.15 billion in 2013, according to the report.

YONHAP