Foreign direct investment (FDI) in South Korea nearly halved in the first six months of this year from previous year amid uncertainties in the global market due to protracted trade war between the United States and China and a significant decline in Japanese capital amid diplomatic row over past issues.

According to data released by the Ministry of Trade, Industry and Energy on Thursday, new investment pledged by foreign investors in Korea from January to June this year amounted to $9.87 billion, down 37.3 percent from the same period last year. Paid investment recorded $5.61 billion, down 45.2 percent on year. Both pledged and actual investments, nevertheless, were above the 10-year averages of $8.45 billion and $5.22 billion, respectively.

Capital investment pledged by Japanese names fell 38.5 percent to $540 million, while delivery stopped at $330 million, down 51.2 percent.

Observers connect the sharp contraction to a government-led capital control as Japan has mounted export curbs on Korea in complaint over Seoul’s hard-line actions on wartime damage issues.

The FDI commitment from the United States grew 3.1 percent to $3.1 billion, while actual investment shriveled 65.8 percent to $630 million over the same period.

FDI pledged by the European Union dropped 41.5 percent on year to $2.68 billion and actual investment down 12.8 percent to $2.92 billion.

Chinese investors, whose investment capacity has weakened due to on-going trade war with the U.S., sharply cut down their direct investment to Korea. Investment pledged from China plunged 86.3 percent in the first half of this year to $300 million from a year earlier, and actual investment sank 90.0 percent to $70 million.

By sector, manufacturing industry had $3.09 billion worth of direct investments committed by foreign investors, down 57.2 percent on year. The actual FDI in the sector also fell 75.0 percent to $1.33 billion. Service sector drew $6.72 billion FDI commitments, down 19.7 percent, with actual investment shrinking 28.4 percent to $3.54 billion.

By Lim Sung-hyun and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]