Foreign direct investment in S. Korea up slightly in H1

(ATTN: UPDATES with more details, comments after para 5)
By Lee Joon-seung
SEOUL, July 2 (Yonhap) -- Foreign direct investment (FDI) in South Korea gained
2.1 percent in the first half compared to the previous year due to a rise in
funds pledged for large business projects, a government report said Thursday.
South Korea attracted US$4.64 billion in future FDI in the January-June period,
compared to $4.54 billion a year earlier, according to the preliminary report by
the Ministry of Knowledge Economy.
It said while investment plunged in the first quarter, expectations of business
opportunities related to the government's plan to build up the country's "green"
growth industry attracted overseas investors from April through June.
Inbound investment nosedived 38.2 percent on-year to $1.67 billion, but shot up
62 percent to around $2.97 billion in the second quarter.
Of the total that may arrive in the country, $1.68 billion is expected to be
invested in manufacturing, with $2.95 billion to be used to expand foreign
business presence in the country's service sector.
"The rise in FDI in the second quarter is a sign that foreign businesses are
looking favorably on South Korea's future growth potential after they put off
making any serious commitment earlier in the year," said Lee Dong-geun, a deputy
minister in charge of trade and investment promotion said.
He said that if the global economy makes a comeback in the second half, it may be
possible for Seoul to meet this year's FDI target of $12.5 billion. In 2008, the
country reported that it secured potential deals totaling $11.7 billion worth of
future business investment from foreign investors.
The official said the surge is directly linked to the 79.2 percent increase in
investments exceeding $100 million and added money to be injected into clean
electricity and hightech electronics gained 31.9 percent on-year to $860 million.
"A lot of investment in electricity and energy was in such areas as solar power
generation and related technologies and production," he said.
The deputy minister also said that investment from Japan soared 82.6 percent
annually to $1.17 billion, while figures from the United States and the European
Union fell 12.8 percent and 16.2 percent, respectively.
He speculated that the strong Japanese yen is the main reason for the rise in
funds coming from the neighboring country, although adding that it may take time
for investments to actually take place.
As a rule, the ministry in charge of the country's industrial policy and
investment promotion, said there is usually a lag time of over six months between
a pledge to make investment and actual funds arriving in the country. Roughly
70-80 percent of planned investments take place with the rest being canceled.
It, meanwhile, said Seoul will redouble efforts to attract FDI by increasing cash
grant incentives that can reach 300 million won (US$238,000), tax breaks and
administrative support to prospective investors.
Investment is critical for national growth since it can create more jobs and fuel
overall business opportunities.
The government said last month that South Korea's economy may likely contract 1.5
percent annually this year.
yonngong@yna.co.kr
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