S Korea foreign direct investments decline
Thursday, July 5, 2007
FOREIGN direct investment plans lodged with South Korea fell for the fourth successive quarter in the April-June period, data showed yesterday, denting the Asian nation's ambition of becoming a regional business hub.
The commerce ministry said foreign direct investment commitments fell 35 per cent to US$1.76 billion ($2.68 billion) for the second quarter from a year earlier, following 28 per cent and 3.9 per cent annual drops respectively for the previous two quarters.
Analysts listed high equity valuations, high costs of doing business and an inflexible labour market among the factors that have been pushing foreign investors away from South Korea and toward cheaper places such as China, Vietnam and India.
"At the heart is the cost. Everyone knows there's no game with such countries as China in terms of costs," said Huh Chan-guk, director of macroeconomic research at Korea Economic Research Institute.
"The country should then assure potential investors that it can stand out in some other aspects, such as high level of engineering or language skills, but it has not got there yet," he said.
It marked the eighth out of the past nine quarters that South Korea saw foreign direct investment commitments drop from the year-earlier quarter, the commerce ministry data showed.
South Korea aims to win around US$11 billion in foreign direct investment commitments for the whole of this year, steady from US$11.24 billion last year. Investment commitments shrank 3 per cent in 2006 after a 10 per cent drop in 2005.
Reuters
The commerce ministry said foreign direct investment commitments fell 35 per cent to US$1.76 billion ($2.68 billion) for the second quarter from a year earlier, following 28 per cent and 3.9 per cent annual drops respectively for the previous two quarters.
Analysts listed high equity valuations, high costs of doing business and an inflexible labour market among the factors that have been pushing foreign investors away from South Korea and toward cheaper places such as China, Vietnam and India.
"At the heart is the cost. Everyone knows there's no game with such countries as China in terms of costs," said Huh Chan-guk, director of macroeconomic research at Korea Economic Research Institute.
"The country should then assure potential investors that it can stand out in some other aspects, such as high level of engineering or language skills, but it has not got there yet," he said.
It marked the eighth out of the past nine quarters that South Korea saw foreign direct investment commitments drop from the year-earlier quarter, the commerce ministry data showed.
South Korea aims to win around US$11 billion in foreign direct investment commitments for the whole of this year, steady from US$11.24 billion last year. Investment commitments shrank 3 per cent in 2006 after a 10 per cent drop in 2005.
Reuters
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