FDI Declined For 4 Consecutive Quarters

Foreign Direct Investment (FDI) has decline for four straight quarters.

According to “Foreign Direct Investment Trend for 3Q/4Q 2003” released by the Ministry of Commerce, Industry and Energy on 8th, FDI has decreased by 19.9% to $1.969 billion in the third and fourth quarter compared with the same period last year.

FDI has contracted for four quarters in a row showing a growth rate of –63.7% in 4Q 2002, -48.4% in 1Q 2003, and -41.1% in 2Q 2003.

However, these figures show that there have been some improvements in FDI growth rate and the investment in the third and fourth quarter this year increased by $416 million from the previous quarter.

As of September, the cumulative foreign investment of 2003 is $4.629 billion, showing a year on year 36.1% drop.

By region, the U.S.’s investment to Korea in 3Q/4Q 2003 has plummeted to $400 million from $1.333 billion in the same period last year. Investment inflow from Japan also dropped to $82 million from $419 million during the same period.

On the other hand, investments of EU jumped by 473% to $1.383 billion in 3Q/4Q 2003 from $241 million in 3Q/4Q 2002 partly due to the acquisition of Dongyang Heavy Industries Co. stock by Thyssenkrupp, Germany’s largest machinery company.

Foreigners invested most in services industry including financial and insurance services, recording $1.471billion followed by manufacturing industry of $318 million and electric, gas, water industry of $179 million.

FDI was made mostly through acquisition of new stocks which represented 83.7% of total investment, or $1.648 billion.

There were 563 investments made through Greenfield investments with a total of $1.649 billion and 84 M&A deals which recorded only $320 million. The ministry’s Director General for International Investment and Trade Lim, Che-min explained the trend by saying that multinational companies are still hesitating to make investments in Korea despite gradual recovery of the world economy.

Eun-Woo Lee libra@donga.com