Foreign investment in S. Korea tumbles in Q1

(ATTN: ADDS with comments, information in paras 3-9)
By Lee Joon-seung
SEOUL, April 2 (Yonhap) -- Foreign direct investment (FDI) in South Korea plunged
nearly 40 percent on-year in the first quarter due to the global economic slump,
a government report showed Thursday.
FDI reported by businesses totaled US$1.67 billion in the January-March period,
down 38.2 percent from $2.71 billion a year earlier, according to the report by
the Ministry of Knowledge Economy.
"The drop is related to worsening business conditions worldwide and large scale
corporate restructuring efforts taking place in advanced industrialized
economies, which are causing funds to flow into countries like the United
States," said Lee Dong-geun, deputy director of trade and promotion.
Compared with last year, there was a 80 percent decrease in mergers and
acquisition-related deals in the insurance and financing sectors, causing FDI into
the service sector to fall 61.1 percent to $757 million, Lee said.
"The weak numbers mirror reports by the World Bank and the United Nations
Conference on Trade and Development, which predicted global FDI to contract 20 to
30 percent this year," the senior official said.
At the current rate, inbound investment will likely fall 30 to 40 percent in the
first half with numbers improving after July, according to Lee.
Despite the overall decline, the official said foreign investment in the
manufacturing sector surged 26 percent on-year to $913 million, with fresh FDI
topping $1.49 billion.
He claimed that gains in the manufacturing sector were noteworthy as they
translate into more jobs down the road, and are a sign of overseas confidence in
South Korea's economic fundamentals and competitiveness.
The official added that by making full use of the weak Korean won, pushing for
deregulation and offering incentives, Seoul may be able to lure future
investments.
The government has already announced that it will start offering cash grants to
companies that create more jobs starting in July, and will set up a dedicated
60-billion won (US$44.7 million) fund for manufacturers of parts and components
for autos, electronics and machinery. The fund will be aimed mainly at attracting
Japanese companies to set up shop in South Korea.
The ministry said that Japanese investment played an important role in the first
quarter, gaining 162.8 percent on-year to $661 million.
The rise contrasts against a 21.0 percent decline in investment from the United
States and a 65.2 percent drop for the European Union.
Government officials said that the disappointing tally for the first quarter may
affect the government's plan to attract $12.5 billion in FDI for 2009, up from
the $11.7 billion estimate for last year, although every effort will be made to
attract foreign businesses in the coming months.
Seoul is actively seeking to attract FDI to help make up for sluggish local
corporate investment.
yonngong@yna.co.kr
(END)