FDI Promotion and Korean market

The Past and Future of Korean Outward FDI

According to UNCTAD, Foreign Direct Investment (FDI) is defined as an investment reflecting a lasting interest and control by a foreign direct investor, resident in one economy, in an enterprise resident in another economy (foreign affiliate).

As early as 2001, the renowned think tank UNCTAD stated and recognized that investment promotion is becoming ncreasingly sophisticated and client-oriented.

It is not surprising that the UNCTAD report titled "The World of Investment Promotion at a Glance" included the following points:

"Investment promotion covers a wealth of services, ranging from the provision of market information to the undertaking of feasibility studies and environmental impact assessments.

IPAs are adopting more targeted approaches by focusing on selected industries, countries and companies." poiteipcd3.en.pdf (unctad.org)

With a domestic market of only 50 million consumers, Korean companies inevitably seek to penetrate overseas markets. The Korean economy has been built on export-oriented businesses, naturally fostering and enhancing manufacturing industries. Over 25% of businesses in Korea are manufacturers, primarily led by conglomerates such as Samsung, LG, SK, and Hyundai Motor Group.

Korea outward FDI projects gained significant momentum, particularly after the 1990s and early 2000s, when Samsung and Hyundai proactively initiated the establishment of international manufacturing plants.

Following in the footsteps of Chaebols, 1st, 2nd, and 3rd tier suppliers have established overseas operations. Notable examples include Samsung's semiconductor cluster in Austin, Texas, built in 1996, and Kia's first North American manufacturing site in West Point, Georgia, which began production in November 2009.

In December 2015, Lotte Chemical announced the largest investment from Korea to the US to date: a $3.1 billion investment to establish an ethane cracker and MEG facility in Lake Charles, Louisiana.

From 2021 to 2023, lithium-ion battery companies aggressively pursued FDI opportunities, particularly in the North American market, amid the supply chain transition period (Sino-American decoupling).

Since 2022, the semiconductor industry has been advancing to establish more manufacturing sites both domestically and internationally.

The Korean outbound FDI sector still has significant growth potential. Capturing and seizing the right opportunities at the right time is crucial for IPAs and EDOs interested in attracting Korean investors to their regions.

If you are an IPA or EDO seeking more opportunities with Korean companies, please feel free to contact us at info@ekglobalgroup.com.