In the context of heightened global economic uncertainties such as inflation and supply chain crises, South Korea’s foreign direct investment has not decreased but increased. The first result is due to the solid manufacturing base, the strengthening of the foreign investment support system, and the reform of regulations. The South Korean government implements comprehensive liberalization and encouragement policies for foreign investment in South Korea, basically adopts a reporting system, and implements market access management to grasp capital flow trends. South Korea's "Foreign Investment Promotion Act" allows all forms of foreign direct investment, including the establishment of new companies, the acquisition of shares in established companies, mergers and acquisitions with a foreign capital ratio of not less than 10%, and a 5-year period from foreign parent companies or affiliated companies. Or longer-term loans, foreign investors can get 10% equity.
Affected by the cancellation of corporate tax relief for foreign-funded enterprises in 2019, shortened working hours, and increased minimum wages, South Korea’s FDI has been in two consecutive years in 2019 and 2020. year decline. Since 2020, the South Korean government has actively studied countermeasures to improve the foreign investment environment, and increased incentives and support for foreign-funded enterprises that increase employment and perform well. According to the data released by the Ministry of Industry and Energy of South Korea on January 3, 2023, based on the declared amount, in 2022, South Korea’s foreign direct investment (FDI) will exceed US$30 billion for the first time, reaching a total of US$30.45 billion, a year-on-year increase of 3.2%, a record new highs. In 2022, South Korea received a total of 3,463 foreign direct investment applications, a year-on-year increase of 12.1%. The actual foreign direct investment in place in 2022 will be US$18.03 billion, a year-on-year decrease of 3.1%. Among the types of investment, greenfield investment for purchasing land and building new factories increased by 23.4% year-on-year to US$22.32 billion; investment for mergers and acquisitions decreased by 28.8% year-on-year to US$8.14 billion.
Figure 1 2018-2022 foreign direct investment in South Korea and its year-on-year growth rate (unit: US$100 million, %)
Data source: Yonhap News Agency
Figure 2 Main fields of foreign investment in South Korea in 2022
Data source: Yonhap News Agency
From the perspective of foreign investment in South Korea, the foreign direct investment in the manufacturing sector was US$12.48 billion, a year-on-year increase of 149.4%. It is the highest value in history, accounting for 41% of the overall investment. Among them, textiles, fabrics and clothing increased by 3402.5% year-on-year; chemical industry increased by 482.5% year-on-year; metal and metal processed products increased by 399% year-on-year; electrical and electronic products increased by 135.6% year-on-year. In the field of service industry, foreign direct investment decreased by 29.6% year-on-year to US$16.59 billion, accounting for 54%.
From the perspective of the main source countries of foreign investment, the declared amount of direct investment from the United States surged by 65.2% to 8.69 billion US dollars; Foreign direct investment increased by 26.3% to US$1.53 billion; investment from the EU decreased by 36.9% to US$8.07 billion; investment from China decreased by 31.6% to US$5.16 billion.
2022 In 2009, South Korea's foreign direct investment (FDI) increased due to the increase in investment in facilities in the semiconductor and petrochemical industries, but the structural risks of introducing foreign capital cannot be ignored. These risks mainly include: financial risks, Industrial and market structure risks, resource and environmental risks, and economic disharmony risks. Once they occur, they will aggravate the imbalance of the domestic economic structure, have a certain degree of crowding out effect on the local economy, and aggravate the external imbalance of the domestic economy. At the same time, Weaker demand for chips, soaring prices, and worker strikes caused by labor disputes will complicate South Korea's economic outlook.The recovery trend of private consumption is weaker than expected, coupled with the interference of the external environment on the economy is difficult to eliminate in the short term, South Korea’s economic growth next year Or continue to slow down.
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