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Korea's Facilities Investment to Post Highest Growth Rate in 6 Years
Date
2017.12.05
Views
1077

According to Yonhap News,

(SEOUL=Yonhap News) Korea's investment in facilities and equipment is set to hit the highest rate of growth in six years, according to Korea Development Bank (KDB).

Semiconductors accounted for a disproportionate share of that growth, however, highlighting the need to find new industries to reduce the imbalance.

On November 3, KDB released the '2018 Facilities Investment Forecast,' created based on a survey of 3,670 Korean companies of all sizes concerning their investments this year and plans for 2018.

According to the survey, a total of KRW 195 trillion was invested in facilities in 2017, seeing a 7.8 percent rise from a year earlier. This is the largest growth rate in six years since the 8.4 percent in 2011.

Early on in the year, companies had planned to invest KRW 181.8 trillion in facilities, but resulted in spending 7.3 percent more, an unusually larger increase compared to previous years, putting an end to the recent conservative investment trend, the bank analyzed.

KDB, however, also pointed out that the country should prepare for the risks emerging as a result of expanding investment in the semiconductor industry.

Investment in the semiconductor industry grew by KRW 10 trillion, accounting for 70.7 percent of the total (KRW 14.1 trillion) increase in investments this year. That is, the semiconductor industry alone is responsible for 5.5 percent points of the 7.3 percent surge.

Voices are thus being raised for the need to develop a new growth industry in preparation of a possible semiconductor slowdown, and spread the warmth to related industries.

Next year, investment in the semiconductor industry is expected to fall by 3.7 percent from the previous year.

Facilities investment is expected to reach a scale of KRW 195.4 trillion in 2018, rising only by 0.2 percent from the year before, due to the base effect of the surge in 2017.

While facilities investment in 2017 was led by large manufacturing companies, in 2018 it is expected to be led by non-manufacturing secotors.

Both medium and small companies are expected to increase their investments in facilities in 2018, the former from KRW 24.6 trillion in 2017 to KRW 25.3 trillion, the latter from KRW 25.2 trillion to KRW 25. 9 trillion.

In contrast, large companies is expected to see a decrease from KRW 145.2 trillion to KRW 144.2 trillion.

Non-manufacturing sectors' facilities investment is predicted to rise from KRW 87 trillion to KRW 88.4 trillion, as manufacturing firms' investment falls from KRW 108 trillion to KRW 107 trillion.

The focus of investment also seems to be shifting to promising industries that are able to adapt to socioeconomic changes.

The rise in single-person households and changes in lifestyle have cause the food and rental industries to see an increase in investment from KRW 3.1 trillion to KRW 2.4 trillion, and KRW 4.1 trillion to KRW 3.2 trillion, respectively.

In contrast, investment in the real estate industry is expected to drop from KRW 13.7 trillion to KRW 11.8 trillion due to stronger regulations, while the steel industry, too, will see its facilities investment fall from KRW 1.8 trillion to KRW 1.7 trillion due to lower demand.

The survey also showed that companies with relatively low facilities investment numbers are in fact aware of the need to increase investment in preparation for the fourth industrial revolution.

About 76.4 percent of the companies replied that Industry 4.0 technology is important to their businesses, and yet only 16.6 percent plan to make related investments in 2018.

The Industry 4.0 technology the companies found to be most important was big data (20.3%), followed by new materials (15.3%), artificial intelligence (14.7%), and internet of things (14.5%).

Lee Seon-ho, head of KDB's Industrial Technology Research Center, noted, "by expanding finances for innovative growth industries and small and medium companies, KDB plans to reinforce its support for the fourth industrial revolution."

pseudojm@yna.co.kr

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Source Text

Source: Yonhap News (Dec. 3, 2017)

** This article was translated from the Korean.
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