South Korea’s outward foreign direct investment continues to rise while the inflow of such funds remains sluggish, data showed Sunday.

The Ministry of Strategy and Finance said in a report that OFDI has climbed at an annual average of 24 percent since 2000 but inward foreign direct investment has grown at a mere 3 percent during the same period.

The net outflow of foreign direct investment is expected to continue as Korean companies invest more in foreign markets. In contrast, the inflow of foreign investment is unlikely to rise due to Korea’s higher production costs and other unfavorable factors such as restrictions on foreign investment and the rigid labor market.

The Finance Ministry said such a gap is not necessarily negative for the Korean economy, largely because OFDI is used for securing new markets, sales channels and technology rather than the transfer of production facilities that could bring about an industrial hollowing-out at home.

OFDI has a positive impact on Korea’s economic growth, exports and job creation, but balancing OFDI and IFDI by luring in more foreign investment is necessary in the long term, the ministry said.

The ministry said Korea is now in a better position to attract more foreign funds. China is witnessing a steep increase in average wages and slowing growth, which might steer the attention of foreign investors elsewhere in search of better conditions.

Korea has been enhancing its position as a destination for foreign investment through free trade agreements with the United States and European Union.

The ministry said Korea’s component, biochemical, alternative energy and service industries should take more steps to attract more foreign direct investment.

By Yang Sung-jin (insight@heraldcorp.com)