In the first half of 2010 M&A-type foreign direct investment (FDI) fell 43% as compared to the same period last year, according to the Ministry of Knowledge Economy’s latest figures.
M&A FDI amounted to $352 million for the second quarter, for a first half total of $885 million, down from $1.55 billion in the first half of 2009. The M&A FDI was split $453 million from the manufacturing sector, and $431 million from the service sector.
Major inbound-M&A transactions in the first half included Singapore’s Temasek Holdings investing $190 million in Celltrion, a biosimilar focused company, and GlaxoSmithKline’s $120 million investment in Dong-A Pharmaceuticals.
Total FDI into Korea also dropped on a year-on-year basis, falling 6.7% in the first half of 2010 to $4.33 billion, down from $4.64 billion a year ago. However, FDI inflows on a quarter-on-quarter basis increased 81% to $2.8 billion from $1.54 billion in the first quarter.
The ministry blamed the y-o-y decrease on the stronger value of the Korean won, which makes investing more expensive, and the lingering effects of the global financial crisis. The average value of the won was 1,154 against the U.S. dollar in the first half of this year against 1,351 won to the dollar in the first half of 2009.
A positive noted by the Ministry of Knowledge Economy’s report was an increase in the share of FDI received by the new growth industries, of biomedical, renewable energy, light-emitting diodes (LED) and software (31.3%, up from 15.8% last year).
In regards to the origin of FDI, the recent trend of inbound investment from emerging economies (so called south-south FDI), including China and the Middle East, surged 80.5% on-year to $1.9 billion,
whereas investments from advanced economies, including the U.S., Japan and Europe, fell 32.5% to $2.4 billion.
“Despite the decline of FDI in the first half, the country’s investment conditions are improving,” the ministry said, as reported in the JoongAng Daily.
“As the global economy recovers, there will be more flow of investment.”
Taking a look back at past FDI figures, Korea tends to attract more investment in the second half of the year, a trend which will need to continue if the country is going to reach its 2010 FDI target of $13 billion.
The full FDI report can be downloaded here (Korean). Or see here for the JoongAng Daily English-language article covering the announcement. And here for the post on the 2010.1Q results.
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