Foreign Direct Investment Drops 15% in First Half of Year... Uncertainty Rises Due to Russia-Ukraine War and More

[Asia Economy Sejong=Reporter Dongwoo Lee] Foreign Direct Investment (FDI) in the first half of this year decreased by 15.6% compared to the previous year based on reported amounts. This decline is analyzed to reflect the impact of investment uncertainties such as global inflation and the prolonged Russia-Ukraine conflict.

The Ministry of Trade, Industry and Energy announced on the 15th that FDI in the first half of this year was $11.09 billion based on reported amounts, down 15.6% from the same period last year. Based on actual investment arrivals, it decreased by 21.1% to $6.97 billion, while the number of cases increased by 10.1% to 1,640 based on reports and by 12.1% to 1,183 based on arrivals compared to the first half of last year.

The Ministry explained that FDI decreased compared to the record high performance in the first half of last year due to increased uncertainties caused by the prolonged Ukraine conflict, global inflation, and interest rate hikes. However, it increased by 12.3% compared to the first half of 2019, before the COVID-19 pandemic, marking the third highest reported amount ever.

The Ministry evaluated positively that although investments from the European Union (EU) and in the service sector decreased by 73.2% and 26.3% respectively, manufacturing (53.3%) and greenfield investments (building factories or business sites, 9.1%) expanded, and the number of reported and arrived investment cases increased.

Reported manufacturing investment amounted to $3.1 billion, a 53.3% increase from last year, accounting for 15.4% of total FDI. Conversely, investment inflows were sluggish in non-metallic minerals (-81.2%), transportation machinery (-41.9%), and petrochemicals (-7.1%). Reported service sector investment was $7.64 billion, down 26.3% from last year.

By country, reported investment from the United States was $2.95 billion, up 39.5% from the same period last year, and Japan’s reported investment ($890 million) also increased by 62.1%. EU reported investment ($1.74 billion) decreased by 73.2% as both manufacturing and service sector investments declined, and reported investment from Greater China ($2.45 billion) also fell by 13.1%.

By type, greenfield investments increased by 9.1% year-on-year to $8.26 billion, while M&A (mergers and acquisitions) investments decreased by 49.2% to $2.83 billion.

This content was produced with the assistance of AI translation services.