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FDI Trends for Q1

FDI in Q1 of 2013 rises despite geopolitical risk

Foreign direct investment (FDI) pledges in Korea in the January to March period reached USD 3.4 billion, a 45 percent increase from a year ago

- Reported FDI over the Last Decade (unit: USD 100 million) -

1. FDI Trend

▶ [Overall trend] The amount of FDI reported in Q1 of 2013 increased by 44.7 percent year-on-year
    to USD 3.39 billion.
    • Arrived FDI reached USD 1.39 billion, a 23.4 percent decrease from last year’s USD
      1.81 billion.

▶ [Trends by sector] FDI in the fields of service, M&A, and long-term loans rose
    • [By nation] While FDI from Japan, the EU, and the Greater China region dropped 34.9
      percent, 25.2 percent, and 31.4 percent, respectively, to USD 600 million, USD 440 billion,
      and USD 190 million, FDI from the U.S. dramatically rose 299 percent to USD 1.7 billion.
    • [By industry] Although FDI in the manufacturing industry decreased by 23.0 percent to USD 1.14
      billion, FDI in the service industry increased by 169.5 percent to USD 2.25 billion.
    • [By type] Brownfield investments rose considerably, by 284.1 percent, to USD 1.26 billion,
      and greenfield investments went up 5.9 percent to USD 2.14 billion.
    • [By funds] Both new and additional FDI increased 24.4 percent and 4.7 percent, respectively,
      to USD 1.2 billion and USD 1.41 billion. Long-term loan-type FDI rose greatly - 2,200 percent -
      to USD 780 million.

2. FDI trend analysis

▶ General review
Despite factors that could shrink investor confidence, such as slowed domestic and global economic recovery, a stronger Korean currency, and geopolitical risks, FDI, especially in real estate and M&A, produced relatively good results.

▶ Main features
(1) [Large FDI in real estate] FDI in real estate in the Seoul metropolitan area and developing large
      commercial complexes to local demand
      * Investment in real estate: USD 400 million from U.S. Company A, USD 300 million from U.S.
        Company B, USD 150 million from Portugal’s Company C
(2) [Additional and M&A investments] Existing foreign-invested firms made large additional
      investments, and overseas financial investors took over medium-sized enterprises in Korea.
      * Additional investment: USD 700 million from U.S. Company D, USD 43 million from Japan’s
        Company E
       ** M&A investment: USD 100 million from Sweden’s Company F, USD 200 million from
            Japan’s Company G, USD 14 million from Singapore’s Company H
(3) [Reduced Japanese and European investor confidence] Due to the weak yen policy of the
      Japanese government and economic slowdown in Europe, Japanese and European firms’
      investments in the manufacturing industry decreased.
(4) [Geopolitical risks] It was analyzed that geopolitical risks, reflected in investors’ decisions,
      had limited influence on FDI in Q1.

3. Prospect and action plan

▶ [Prospect] Although the confidence of global investors is anticipated to recover* this year, the
    Korean economic slowdown** would make the overall foreign investment promotion environment
      * Global FDI (USD trillion, UNCTAD): 1.81 in 2008 → 1.60 in 2011 → 1.31 in 2012 → 1.4 in
      ** Korea’s economic growth rate (Ministry of Strategy and Finance): 3.7 in 2011 → 2.0 in 2012
          → 2.3 in 2013
    • It is anticipated that FDI in M&A will be vigorous as the U.S., Europe, and Japan are increasingly
      providing liquidity through quantitative easing.
    • Japanese firms’ investments in Korea decreased due to the fact that the Japanese government’s
      economic stimulus policy showed positive results. Considering that Chinese investment in the
      Korean stock market rose dramatically, Chinese investment in Korea is anticipated to increase.

▶ [Action plan] Stabilize the investment environment and conduct strategic investment promotion
    • Thoroughly monitor geopolitical risk impact on FDI and prepare for an increase in investments in
      the event of a reduction in risk.
    • Continuously promote and stabilize Korea’s investment environment by inviting important investors
      to Korea, holding conferences for foreign-invested companies in Korea, and meeting potential
      overseas investors.
    • Select 100 companies based on their possible contributions to the Korean economy in terms of
      job creation and high-tech adoption and launch activities to attract investments from the firms.
      * Hold investor relations sessions in the U.S., EU, Japan, and Greater China region.
      ** Form taskforces comprising personnel from the central and local governments for each critical
          investment promotion project.

Source: Ministry of Trade, Industry and Energy

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