SEJONG, Dec. 23 (Korea Bizwire) - Foreign direct investment (FDI) in South Korea surpassed the US$15 billion mark this year for the first time ever, driven by a free trade pact with China and more favorable business conditions, the government said Wednesday.
As of Tuesday, the amount of FDI that arrived in the country reached $15.19 billion, a surge of 28.6 percent from a year earlier, the Ministry of Trade, Industry and Energy said. Total FDI pledged from Jan. 1 onwards also rose 11.2 percent on-year to $20.43 billion.
“Both numbers represent all-time highs for the country, and surpass previous records set in 2014,” the ministry said.
Last year, investments that arrived in the country reached $11.52 billion, and $19 billion worth of FDIs were pledged.
The ministry attributed the sharp gain to the free trade agreement (FTA) with China that was officially signed in June 1, and overall improvements in the business infrastructure that is making Asia’s fourth-largest economy more attractive to foreign investors.
Large-scale investment by Middle Eastern investors into local companies also boosted FDI figures, it added.
“The bilateral FTA with China played a part, as there was a sharp increase in inflow in the second half that offset weak gains in the January-June period,” the ministry said.
The free trade deal went into effect on Sunday.
Investments by Sumitomo Seika Chemicals and EMP Belstar are linked to the China FTA, as foreign companies move to use South Korea as a springboard to enter the Chinese market, it said.
A stake purchase in POSCO Engineering & Construction by Saudi Arabia’s public investment fund and similar action taken by the United Arab Emirates to acquire holdings in Ssangyong Engineering & Construction boosted the inflow of foreign capital. Seoul has recently made a determined effort to make it easier for outsiders to do business in the country.
By country, FDI from the United States jumped 21 percent on-year to $2.13 billion, with that from China and the Middle East reaching $1.62 billion and $1.29 billion each. FDI rose in the service and construction sectors, while falling in manufacturing.
Besides such developments, the ministry said South Korea’s strong fundamentals represented by its high ranking in the World Bank’s Doing Business Index and the upgrade of its sovereign credit rating by Standard & Poor’s and Moody’s helped build the investor confidence that led to more FDI.