20-30% of Foreigners’ Investment in Korea – Bubble

It is revealed that the announcement by government about the investment amount by foreigners in Korea is exaggerated.

The announcement includes a company not invested, and there are big differences between actual investment and reported investment.

According to Ministry of Commerce, Industry and Energy (MOCIE), the number of foreign companies operating in Korea at the end of 2000 was 9,420 and increase to 12,000 at the end of this June.

However, according to the survey of KIET requested by MOCIE, the number of foreign companies operating in Korea was 7,524 including manufacturing 2,525 at the end of 2000. So the number is less by 1,896 than MOCIE announcement.

KIET tried to contact foreign companies for the survey with the cooperation of Gallop, a opinion survey institute, but they could not contact 1,890 companies.

Han Byung-sup, an assistant researcher of KIET explained, “Some moved, others disappeared after liquidation, and others were only reported without actual investment”.

Monthly statistics on ‘Foreigner’s Direct Investment’ performed by MOCIE also has big gap between actual and report investments. Taking investment withdrawn into account, the actual investment by foreigners will decrease much more.

In case of last year, reported investment amount by foreigners was 11.87 billion dollars, but actual investment was only 37% of it (4.44 billion dollars).

To make thing worse is that 1.62 billion dollars was sent to overseas from January to July in last year. So actual investment was only 1.82 billion dollars.

It is not easy to compare reported amount with actual amount because of the time gap reporting time actual investment. However, reported amount has been bigger than actual on by 20-30 % every year, so reported amount is indicated to include bubble.

Han Byung-sup, an assistant researcher, commented, “In some case, the amount of investment decreases because of the change in economic environments, but some foreigners report bubble to receive benefits designed for large amount of investments, and the government is supposed not to be able to confirm them.”

Ja-Ryong Koo bonhong@donga.com