Korean outward foreign direct investment (FDI) to manufacturing sectors has been mainly dominated by two categories: the manufacture of electronic components, computer, radio, television and communication equipment; and the manufacture of motor vehicles, trailers and semitrailers, which accounted for 27.4% and 13.9% of cumulative manufacturing FDI as of June, 2014.
Investment in the manufacture of electronic components, computers, radio, television, and communication equipment and related technologies amounted to 26 billion USD in 73 countries by 2013. It has grown significantly since the mid-1990s. For example, it increased from 80 million USD in 1990 to 3.9 billion USD in 2013. Geographically, investments in these areas are concentrated in China (including Hong Kong) and the USA, and accounted for 52.5% and 15.8% of the total Korean outward FDI respectively in 2013. The Netherlands, Vietnam, Ireland and Japan represent 6.0%, 3.1%, 2.6%, and 2.0% of investments respectively in 2013.
Investment in the manufacture of motor vehicles, trailers, and semitrailers amounted to 13.7 billion USD in 57 countries in 2013. Geographically, this kind of investment is concentrated in China (including Hong Kong) which accounted for 37.0% of total Korean manufacturing FDI in the world in 2013. India, the Czech Republic, the USA, Slovakia, and Brazil followed with 11.5%, 7.8%, 6.8%, 6.0%, and 5.4% respectively in 2013.
Foreign direct investment (FDI) is a critical business strategy for expanding the operations of a domestic firm abroad via green field investments, mergers and acquisitions, and the expansion of existing foreign facilities (a green field investment is one that a company builds a brand new facility in a foreign country from the ground up). Outward FDI has become a part of the progression of firms because it provides better business opportunities through the specific strengths and location-specific advantages of the firm in foreign countries. Korean outward FDI has undergone significant growth since the late 1980s, increasing from 1.1 billion USD in 1990 to 22.7 billion USD in 2007. The total number of new firms established by Korean FDI is 58,270 cases, and the amount of Korean FDI was a cumulative total of 265 billion USD between 1968 and June 2014.
When grouped by regions Asia, North America, and Europe accounted for 45.6%, 23.9%, and 19.4% respectively of Korean outward FDI in 2010. In particular, China and the USA accounted for 27.3% and 20.5%. The UK received 6.6%, Vietnam 4.0%, Canada 3.1%, and the Republic of South Africa 3.4%, while other countries received less than 3% in 2010. Interestingly, Korean FDI in Vietnam has increased significantly since the early 2000s with the result that Vietnam has emerged as the 4th largest host economy for the Korean outward FDI. The Korean outward FDI has also significantly contributed to the GDPs of some host countries. For example, the proportion of Korean outward FDI was 15%, 8.3%, 5.7%, 5.2%, 3.3% and 2.3% for Cambodia, Madagascar, Vietnam, Panama, Mongolia and Laos, respectively. The manufacturing sector received the largest investment, accounting for 35.8% of Korean total outward FDI between 1968 and June 2014. Mining and quarrying, wholesale and retail trade, and financial and insurance activities sectors received 18.2%, 11.3% and 11.0% during this period.