Korea’s FDI at all-time low

Do foreigners view Korea as unsuitable ground for investment?In what has been noted as an alarming trend, direct investment foreign investment in Korea has hit an all time low. The Net FDI in Korea, showed a drop of US$9.25 billion in 2004 from previous years and the consecutive three years till 2007 have also shown a steady decline. In fact in 2007 the net figures for foreign investment totalled a drastic $1.58 billion.

In 2008, the amount of FDI that left Korea in the first three months was $670 million, higher than figures that came in. Plenty of foreign companies withdrew their investment from Korea. This is an unhealthy trend for the Korean market in the investment market. Some of this could be attributed to excessive government regulations, labour unions problems, high living costs and lack of proper education for children.

According to the Organization for Economic Cooperation and Development, Korea is the only country in the 30 member nations of the OECD where FDI shrink has been noticeably low for the past three years.

Other countries in this region like, Malaysia, Indonesia, India, Brazil, and China or Vietnam, have not shown such alarming figures in foreign investment. Vietnam’s FDI rise was more than eight times, from $2.1 billion to $17.9 billion. India saw a rise from $2.6 billion to $15.7 billion.

It is alarming to see that not only are new investors not investing in the country, but alarmingly those who have already invested in this country have not shown any positive growth or reinvestment.

The past few years have seen many a foreign businesses withdrawing their investments from Korea. Companies like Nokia transferred some of its facilities in South Gyeongsang Province, Masan to China and India. Motorola is another company that has also moved its plant in Icheon, to China. Yet another big name in this trend is that of Philips, which withdrew its investments from a joint venture with LG in Korea.  Following the trend, Wal-Mart and Carrefour have ended their business transactions with the country.

The trend has given rise to alarming trends of economic slowdown and rising unemployment in Korea. The youth and the workforce are those who are directly affected.