Korea's FDI pledges reach record-high $25.18 billion

Foreign direct investment pledges to Korea reached a record $25.18 billion in the January-September period, reflecting heightened interest from Japanese investors in semiconductors and EV batteries.

Yoo Beop-min, the Industry Ministry's director-general for cross-border investment policy, speaks during a press briefing on Wednesday at the Sejong government complex. [NEWS1]

Foreign direct investment (FDI) pledges to Korea hit an all-time high for the first nine months of this year, reflecting heightened interest from Japanese investors in semiconductors and EV batteries.

Pledges amounted to $25.18 billion in the January-September period, an increase of 5.2 percent from the same period of last year, according to data the Ministry of Trade, Industry and Energy released Thursday.

The figure marked the highest of any January-September period since the government began compiling the relevant data in 1962. The country's inflow of committed investments, however, declined 27.2 percent to $10.49 billion over the period due to the U.S. Federal Reserve having cut interest rates later than some expected, making it more expensive for companies to raise the funds needed to execute planned investments during the summer months and contributing to overall market volatility.

Investment commitments from Japan surged a whopping 412.7 percent to $4.69 billion. The ministry attributed the significant leap in Japanese investments to the bolstered economic ties between the two countries. Korea has been pursuing tighter ties with its neighbor since President Yoon Suk Yeol met with then-Japanese Prime Minister Fumio Kishida last March.

President Yoon Suk Yeol, center, speaks during a meeting with businesspeople in Tokyo during his visit to Japan on March 17, 2023. [YONHAP]

“Foreign investment pledges in Korea surged to a record high in the third quarter as economic cooperation between Korea and Japan continues to expand,” said Yoo Beop-min, the Industry Ministry's director-general for cross-border investment policy, during a press briefing on Wednesday.

Japanese investors have ramped up investment in manufacturing this year, particularly in the production of parts, materials and equipment for chips and EV batteries. The country's Toray Industries, for example, pledged to put 500 billion won ($377.5 million) through next year toward the expansion of a production plant in Gumi, North Gyeongsang, back in May. Investment pledges in the manufacturing sector rose 36.4 percent on year to a record of $12.31 billion while those in the service sector dropped 13.3 percent to $11.95 billion.

China pledged $4.57 billion over the cited period, a 316.3 percent jump from a year earlier, while commitments from the United States shrank 39.9 percent to $3.12 billion. Investment pledges from the European Union dipped by 1.4 percent to $3.95 billion.

The ministry attributed the decrease in investments from the United States to increased market volatility and the country's policy efforts to bring manufacturing capacity back to its own soil.

“With the presidential election coming up soon, the United States is facing significant uncertainty,” said Yoo, adding, “Coupled with industrial policies encouraging domestic investments, there are not many short-term incentives [to invest in Korea].”

However, Yoo noted that “Considering that some of the investments are indirectly made through other countries due to tax and other issues, the actual scope of the decrease is likely limited.”

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]