South Korea will attract US $20.75 billion of foreign direct investment (FDI) in 2020, down 11.1% year on year, according to a report released by the Ministry of Industry and Commerce of the Republic of Korea on January 12. The actual utilized foreign capital reached US $11.09 billion, down 17 percent year-on-year. Although South Korea has attracted more than US $20 billion in foreign direct investment for six years in a row, the investment has declined for two years in a row since 2018, and the number of foreign enterprises has decreased significantly.

Influenced by the Covid-19 epidemic, the total amount of foreign direct investment in the world will shrink significantly in 2020. Multinational companies have lowered their earnings forecasts and are taking a wait-and-see approach to investment plans. The general environment is depressed, the difficulty of South Korea attracting foreign investment is further upgraded.

By sector, foreign investment in manufacturing fell from US $8.2 billion to US $6 billion in 2019, and that in service fell from US $14.8 billion to US $14.4 billion in 2019. The decline in investment in manufacturing was significantly greater than that in service. Some media analysis said that because South Korea cancelled the legal person tax relief for foreign enterprises, shortened working hours, and raised the minimum hourly wage standard, which led to the cost of labor-intensive enterprises, directly led to the reduction of relevant investment.

The decline in total foreign direct investment has been matched by a decline in the number of foreign companies operating in South Korea. According to data released by the Korea Industry Institute, 173 foreign companies have left South Korea in 2019, three times the number in 2018. Affected by the trade frictions between Japan and South Korea, the largest number of foreign companies that withdrew in 2019 is Japanese, 45, accounting for 26%. Japanese direct investment in South Korea halved from $1.4 billion in 2019 to $700 million in 2020. US companies followed, with 35.

While traditional industries are less attractive to foreign investment, emerging industries are doing well. Foreign investment in a number of high-tech sectors, including artificial intelligence, big data, bio-pharmaceuticals and renewable energy, all increased, and the scale of investment in related industries increased from US $7.7 billion in 2019 to US $8.42 billion.

South Korea's Ministry of Industry and Commerce said that the country's foreign investment policy in the future will be more inclined to emerging industries and cutting-edge technology industries, and will increase the relevant enterprises to attract investment.