Foreign Capital Exits Korea for Two Consecutive Years

The Ministry of Commerce, Industry and Energy said on October 4 that from January to September this year, the size of foreign direct investment was $7.519 billion, down 2.3 percent year on year.

In the third quarter alone, it shrank as much as 14.8 percent.

Foreign direct investment in Korea reached $12.792 billion in 2004 but decreased about 9.5 percent to $11.564 billion last year and has continued falling this year.

The size of foreign indirect investment in Korean stock markets is also on the decrease.

Foreigners have been net sellers for two consecutive years (2005 and 2006) for the first time since the Korean stock market opened in 1992.

Foreign investors sold off 3.228 trillion won worth of stocks last year, and from January to October 2 in 2006, they’ve sold a whopping 9.5778 trillion won worth of stocks.

In the past year and a half, they’ve sold the equivalent of two percent of the total market capitalization of the Korean stock market.

Business Professor Ye Jong-suk of Hanyang University said, “The business environment in Korea is worsening compared to other advanced countries such as Singapore in terms of foreign capital attraction, and if this trend continues, Korea can lag behind other countries in attracting foreign investment.”

roryrery@donga.com smhong@donga.com