The Inflow of Foreign Direct Investment Falls Sharply

Foreign direct investment (FDI) decreases for last three months. And Korea`s overseas investment also is dropping.

According to `Report on Foreign Investment in April` presented by the Ministry of Commerce, Industry and Energy (MOCIE), foreign investment dropped 62.9 percent in April year-on-year, to total $ 371 million.

It marks the largest decline since April 1998 (-63. 8%). Foreign investment increased over 200% year-on-year when Japan`s NTT DoCoMo reported to purchase SK telecom`s stake on last January, but is falling down for last three months, recorded -47.5% on February, -19.1% on March and -62.9% on April.

Cumulative FDI, during the first four months of the year, totaled $4.87 billion, up 30.4% over the same period last year. But when SK Telecom`s planned sale of a stake worth $2.96 billion is excluded, the total investment would amount to $1.91 billion, a drop of 48% year-on-year. Actual inflow of FDI reached $1.07 billion, 22% of reported amount.

Analysts said that the plunge of FDI drew from contracted economy of major investing countries such as the U. S. and Japan, Korea`s delayed economic restructuring, and unstable labor-capital relations.

Until April in this year, by country, FDI from the U. S. and Japan dropped by -46.7% and -23.3% respectively, while investments of the EU increased by 12.2%. Especially, the investment from Germany, rose greatly.

Meanwhile , thus far this year, Korea`s direct overseas investment plummeted in a large degree. And amounts of investment to China exceeded those to the U. S..

Ministry of Finance and Economy revealed that during the first quarter of the year, the overseas direct investment was $0.46 billion, dropped by 47.1% from the same period last year ($0.87 billion), and by 54.0% from the fourth quarter last year($1 billion). During the first quarter this year, the cases f overseas direct investment numbered 432, fell by 1.4% year-on-year, and this means that large-scale overseas investment plunged greatly. By country, an investment to China amounting to $0.13 billion, constituted 28.3% of total amount of overseas investment, exceeded by $10 million over that to the U. S. ($0.12 billion).

Kim Sang-Chul sckim007@donga.com