The 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 progression of firms because it provides better business opportunities through 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 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 is 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% of Korean outward FDI in 2010. In particular, China and the USA accounted 27.3% and 20.5%. The UK took 6.6%, Vietnam 4.0%, Canada 3.1%, the Republic of South Africa 3.4%, and other countries took 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.
Investment in the manufacture of motor vehicles, trailers, and semitrailers amounted to 13.7 billion USD in 57 countries in 2013. There are fluctuations in the total amounts. For example, investment in this category increased from 100 million USD in 1990 to 800 million USD in 1998, but it decreased to 40 million USD in 2001. By 2013 it increased again to 1.4 billion USD in 2013. Geographically, this kind of investment is concentrated in China (including Hongkong) which accounts for 37.0% of total Korean manufacturing FDI in the world in 2013. India, the Czech Republic, the USA, Slovakia, and Brazil follow with 11.5%, 7.8%, 6.8%, 6.0%, and 5.4% respectively in 2013.
