41% of Foreign Investment Dwindled

Foreign investment dropped down dramatically.

According to the Ministry of Commerce, Energy and Industry, foreign direct investment for the second quarter shrank by 41.4% in comparison with last year`s, and amounted to only $1.5 billion.

In total, the foreign direct investment has come only to about $2.7 billion so far, a figure 44.4% less than that of last year for the same period. Overall, the trend continued. Ever since the fourth quarter last year, the downfall continued for three quarters.

The Ministry pointed out several reasons for the declivity. First, it blamed for the depressing world economy, which was not stimulated even by the early-ended Iraq war. Secondly, it believes the worsening labor disputes and the North Korean nuclear crisis drove foreign investors away from this country. Industry-wise, the service industry was hit hard, losing 67% of its investors, or sliding down from last year`s $2.2 billion to $730 million this year. But the investment in the manufacturing industry shot up from $440 million to $849 million.

Geographically, American investors fled this country most. For example, they invested $1.6 billion last year. So far this year, they have invested only $226 million. But the EU companies increased their investment by 27.7 %. Last year, they invested a total of $91 million, and, this year, $627 million this year. French companies led the increasing move. In general, foreign investors avoided making a large-scale investment. For instance, investments more than $100 million occupied 72.1% of the total in the second quarter last year, while, this year, it stood just at 37.9%.

On the other hand, investments amounting to less than $100 million but more than $10 million increased from 17% to 36.1%.

49.2% of the total investments were made for establishment of factories, while 50.8% for M&A.

Ki-Jeong Ko koh@donga.com