Foreign Direct Investment in South Korea

Not too long ago, the Economist Magazine released its assessment of foreign direct investment (FDI) prospects for South Korea. The report's title, Magnet or Morass, says it all. The outlook for FDI in Korea will remain unclear--at best--until the North Korean situation has been resolved.

Despite its current problems, Korea performed well in attracting almost $32 billion in FDI during the 1997-2001 period, which matched Japan's FDI results during the same period. About 22 percent of Korea's total FDI comes from U.S. companies. Another 11.5 percent is by Japanese companies.

FDI dropped off to $4.65 billion in 2001, compared to $9.3 billion in 2001. Who is Korea's chief FDI competition in the Asian Basin? You guessed it--China, which put on a show for everyone last year by not only besting its Asian neighbors, but also attracting more FDI than the U.S. in 2002.

Everybody always asks this question: "What is the average hourly labor rate in Korea?" Answer: $7.53, which compares very favorably to Japan's $19.52 rate. Korea's labor rate is just slightly lower than that of Australia and New Zealand at this point. China, by comparison, is about $.50 per hour.

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