Companies exit Korea in droves in the manufacturing sector

The amount of Korean manufacturing companies’ investment overseas hit all time high in the first quarter of this year, a news report suggests. Those companies’ facilities investment in Korea plunged by more than 17 percent during the same period.

As companies are exiting Korea in droves in the manufacturing sector that creates many quality jobs, there is a mounting concern that the unemployment rate in Korea, which is already high, could increase further.

The Economy and Finance Ministry released a report entitled “overseas direct investment trend” on Friday. According to the report, the total amount of overseas investment in the manufacturing, real estate, financial and insurance, wholesale and retail, and mining industries stood at 14.11 billion U.S. dollars in this year’s first quarter, which is up 4.37 billion dollars, or 44.9 percent, year-on-year. The reading in overseas investment was the highest ever since the fourth quarter of 1980, when Korea started compiling related statistics.

While investment capital is flowing out of Korea into foreign countries, Korean companies’ domestic investment is declining. Facilities investment in Korea fell 17.4 percent in this year’s first quarter year-on-year. As economic sentiment in the manufacturing sector has not rebounded, investment especially in the machinery and transport equipment sectors remains sluggish. The amount of foreign direct investment in Korea in this year’s first quarter came to 3.17 billion dollars, down 35.7 percent from the same period of last year. In its report entitled the “recent economic trend” released on the day, the ministry said, “Export and investment continues to remain in the doldrums.”


Jun-Il Kim jikim@donga.com