English I  2019

Foreign Direct Investment


 Korean outward foreign direct investment (FDI) to the manu-facturing sector 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 10.5% and 6.9% of cumulative manufacturing FDI as of 2018. Investment in the manufacture of electronic components, computers, radio, television, and communication equipment and related technologies amounted to USD 36.7 billion in 78 countries in 2013, showing significant growth since the mid-1990s. It increased from USD 20 million in 1990 to USD 5.2 billion in 2018. Geographically, investments in these areas are concentrated in China (including Hong Kong), the United States, and Vietnam, and accounted for 51.1%, 12.2%, and 8.0% of the total Korean outward 2018 FDI, respectively.


 Foreign Direct Investment (FDI) is a critical business strategy for expanding a domestic firm’s operations abroad via greenfield investments, mergers and acquisitions, and the expansion of existing foreign facilities. Outward FDI has become a part of the firm’s progression because it provides better business opportunities matching the firm’s specific strengths and location-specific advantages in foreign countries. Korean outward FDI has undergone significant growth since the late 1980s, increasing from USD 1.1 billion in 1990 to USD 49.8 billion in 2018. The amount of Korean FDI was USD 399.5 billion between 1968 and 2018.


 When grouped by regions, Asia, North America, and Europe accounted for 34.1%, 22.8%, and 23.5% of Korean outward FDI, respectively, in 2018. By country, the United States, China, and Vietnam accounted for 28.1%, 12.4%, and 8.2%, respectively. Interestingly, the Korean FDI in Vietnam has increased significantly since the early 2000s with the result that Vietnam has emerged as the 3rd 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 4.1%, 2.9%, 2.1%, 1.3%, and 1.1% for Luxemburg, Liberia, Samoa, Vietnam, and Cambodia, respectively. The manufacturing sector received the largest investment, accounting for 32.3% of Korean total outward FDI in 2018. Financial and insurance, mining and quarring, and wholesale and retail trade sectors received 18.0%, 14.3%, and 11.6%, respectively, in 2018.

 There are fluctuations in the manufacture of motor vehicles, trailers, and semitrailers. Investment in this category increased from USD 100 million in 1990 to USD 800 million in 1998, but it decreased to USD 40 million in 2001. In 2018, it increased again to USD 3.5 billion. Geographically, this kind of investment is concentrated in China (including Hong Kong), which accounts for 31.1% of total Korean manufacturing FDI in the world. The United States, India, Austria, Poland, and the Czech Republic followed with 12.3%, 10.9%, 5.1%, 5.0%, and 4.8%, respectively, in 2018.