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Korea lost 660,000 jobs on weak FDI: think tank

April 30, 2012 - 19:13 By Park Hyung-ki
Korea’s increasing outbound investment and sluggish inbound foreign investment has contributed to a loss of some 660,000 jobs over the last 12 years, a private think tank said.

Hyundai Research Institute said in a report that Korea’s foreign direct investment grew only 3 percent, while its overseas investment rose 24 percent on average year-on-year.

Overseas energy and mining has been the most sought after investment for Korean companies since 2006. Investment in the energy sector abroad was worth more than $21 billion in 2011, compared with $4 billion in 2006, the report said.

Korea’s overall outbound investment continued to increase since then, reaching a record high of $44.5 billion in 2011, with the report saying that this is likely to gain momentum.

Besides energy, Korea’s automobile, chemical and IT companies have sought growth in countries such as the U.S. and Canada since the 1990s, then in emerging markets such as China, Vietnam and Brazil.

To this end, the country’s manufacturing sector has been hit the hardest, ultimately leading to little facility investment as companies seek to expand their operations abroad.

Facility investment for manufacturing grew an average of 25 percent between 2001 and 2005, but took a nosedive to minus 1.4 percent from 2006 to 2010, the report noted.

The institute said that Korea needs to adopt incentive measures like those of the U.S., Japan and Taiwan as a means to attract overseas-based Korean companies to make a “U-turn” to their homeland.

The report cited examples of the U.S. offering up to 20 percent of relocation fees for U.S. manufacturing corporations based overseas, while Taiwan supports its companies with loans for technology development when returning to the country.

Korean companies have been actively making investment abroad not only to enter new markets, but also take advantage of low labor costs especially in emerging markets. Also, rising regional protectionism against foreign products was one of the driving forces behind Korean companies seeking to localize in overseas markets.

The think tank also recommended that Korea encourage more overseas companies to set up research centers in Korea, which will lead to job creation in the long-run.

By Park Hyong-ki (hkp@heraldcorp.com)