This year's cumulative foreign direct investment (FDI) reported in the first half decreased by 14.6% compared to the same period last year. The primary reason is analyzed as global corporations postponing new investments due to the U.S. tariff policy leading global investment to the U.S. and ongoing domestic political uncertainty.
The Ministry of Trade, Industry and Energy announced on the 3rd that foreign direct investment in the first half of this year was $13.1 billion, a decrease of 14.6% compared to the same period last year. In contrast, the actual amount of funds arriving in the country was $7.29 billion, an increase of 2.7%.
By type, greenfield investment decreased by 4.5% to $10.97 billion, while mergers and acquisitions (M&A) dropped by 44.6% to $2.13 billion.
By country, the European Union's investment report showed an increase of 14.5% to $2.24 billion in the first half compared to the same period last year. This is attributed to last December's EU corporation winning the bid for an offshore wind project. The investment report from the U.S. also increased by 20.2%, primarily in the service industry. In contrast, investment reports from Japan and China decreased by 25.4% and 39%, respectively.
By industry, investment in manufacturing decreased by 34.5% to $5.33 billion. This is attributed to global investment being concentrated in the U.S. due to tariff policies as well as a slump in domestic facility investment. Notably, the drop was significant in sectors like electronics (-61.6%) and machinery & precision medical equipment (-77.0%).
In contrast, investment in the service industry increased by 10.6% to $7.09 billion. Reports of investment from the retail (73.3%) and information & communication (9.4%) sectors aimed at entering the Korean market grew compared to the same period last year.
The amount arriving in the first half of the year was $7.29 billion, which is a 2.7% increase compared to the same period last year. This is believed to be due to the stable inflow of previously reported investment funds, following favorable investment report performances last year.
The amount arriving was significantly reduced, particularly in the manufacturing sector (-54.1%). Especially, the fund arrivals in the electronics (-46.4%) and machinery & precision medical equipment (-57.8%) sectors lagged behind due to reduced investment reports in the first half. This is analyzed to be affected by uncertainties in U.S. tariff policies causing delays in investment execution. In contrast, the service industry experienced a 51% increase in the amount arriving, recording $5.41 billion, primarily due to large-scale M&A activities, with significant funds inflowing into the financial & insurance (39.3%) sector.
The Ministry of Trade, Industry and Energy noted that "it is difficult to predict this year's foreign direct investment flow," but also stated that "the startup of the new government and the easing of uncertainties regarding U.S. tariffs are expected to lead to an upward trend in the flow of investments."
It added that "we will encourage investments through overseas investor relations (IR) targeting advanced industries such as AI, semiconductors, and materials, components & equipment, as well as regional IR for foreign corporations entering the domestic market," and stated that "we plan to continue close management for promising reported investments of more than $50 million on a one-on-one basis."