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Foreign Direct Investment in South Korea Hits All-Time Highs for Both Pledges and Arrivals in 2023
FDI commitments in 2023

Thanks to robust performance of the semiconductor, battery and transportation industries, as well as joint public-private efforts toward creating the world’s largest semiconductor mega cluster and nurturing advanced industries, foreign direct investment in S. Korea reached a record high last year in terms of both pledges and arrivals. Read on to find out more.

According to the Ministry of Trade, Industry and Energy (MOTIE) on Jan. 4, 2024, foreign direct investment (FDI) pledges to S. Korea increased 7.5 percent year-on-year in 2023 to hit an all-time high on the back of robust performance of the chip, battery and transportation industries.

S. Korea, which is Asia's No. 4 economy, received USD 32.7 billion worth of FDI commitments in 2023, compared with USD 30.4 billion tallied a year earlier, and the amount of investment that actually arrived in S. Korea also set a fresh high of USD 18.7 billion, which was up 3.4 percent on-year. In a statement, the ministry said, "The investment will not only help S. Korea expand its exports but also create quality jobs and reinvigorate the local economy.”

Despite the poor performance of FDI in the global economy in 2023, S. Korea was able to weather the storm thanks to heavy investments in the country’s high-tech industries as well as materials, parts and equipment sectors. In addition, strengthened public-private partnerships and the government’s commitment to create a more favorable environment for investors also contributed to the remarkable achievement.
By industry, FDI pledged to the manufacturing sector suffered a slight decline of 4.5 percent from the previous year, marking USD 11.9 billion. Meanwhile, FDI pledges to the service sector grew by 7.3 percent from the previous year to USD 17.8 billion, driven by investment from Saudi Arabia’s sovereign wealth fund and large financial and insurance companies.

By country, investment from the European Union (EU) decreased by 17 percent year-on-year to USD 6.2 billion due to the base effects of large investments in 2022. However, Korea enjoyed a sharp increase in FDI from countries like France (USD 1.2 billion in FDI with a 448 percent increase), which hosted summit meetings with Korean President Yoon Suk Yeol in 2023. If FDI from the EU is combined with FDI from the United Kingdom (USD 3.6 billion), FDI from major European countries totaled USD 9.8 billion, a year-on-year increase of 21.6 percent.

However, FDI from the United States and Japan slid year on-year to USD 6.1 billion (-29.4 percent) and USD 1.3 billion (-14.7 percent), respectively, due to the base effects of large investments in 2022. With respect to FDI from the US, large investment projects were declared through other countries offering lower tax rates or in countries where joint ventures were located, resulting in a slightly lower reported amount. Investment flows from Greater China reached USD 3.1 billion (year-on-year increase of 65.6 percent), returning to the level before 2022, as FDI from Greater China significantly decreased during the COVID-19 pandemic.

Meanwhile, FDI in S. Korea contracted from USD 26.9 billion in 2018 to USD 23.3 billion in 2019, and further, to USD 20.7 billion in 2020 before turning around to growth in 2021 to USD 29.5 billion. This was followed by an increase to USD 30.5 billion in 2022, logging the third consecutive year of growth.

By Grace Park
Investment PR Team, Invest KOREA
Korea Trade-Investment Promotion Agency (KOTRA)

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