A rising inflow of foreign direct investment is rare good news for the South Korean economy that is struggling with declining exports, stagnant domestic demand and the task of overhauling inefficient, debt-ridden industries.
New FDI pledged to the country hit a record high of $10.52 billion in the first half of this year, up 18.6% from $8.87 billion a year earlier, according to the Ministry of Trade, Industry and Energy, Yonhap reported.
The ministry forecasts fresh FDI commitments to Korea will surpass $20 billion by the end of the year.
Ministry officials say the surging FDI inflow shows foreign investors’ confidence in South Korea’s economic fundamentals and business potential particularly in next generation industries.
The country’s vast network of free trade also seems to make it a key investment destination in Asia. South Korea has signed free trade agreements with 15 countries and economic blocs, including the US, EU and China.
Experts say, however, it is far from guaranteed that FDI pledges to Asia’s fourth-largest economy will continue to be on an upward trend in the latter half of the year amid worsening global economic conditions.
According to the UN Conference on Trade and Development, the world’s FDI is projected to fall by up to 15% this year from the previous year’s $1.76 trillion due mainly to economic uncertainties and a slowdown in resource-exporting countries.
What is more worrisome is the discrepancy between government agencies over the need and ways to attract more foreign investment, experts note.
Trade ministry officials have vowed to strengthen efforts to increase FDI in the country.
“We will try to induce foreign investors into more diverse areas, including cultural content, health care and bio industries,” said Deputy Trade Minister Cheong Seung-il at a press briefing early this month.
