The purpose of this study is to investigate the relationship between Foreign Direct Investment (FDI) and Domestic Capital Investment using statistical data on the overall economy, industry, and investing corporations, as well as the effects of FDI on long-term economic growth.
There are concerns that an increase in FDI will contract domestic production, yet on the other side, there are views that foreign subsidiary companies would expand production and the distribution network, effectively helping to increase domestic investment.
According to an overall macroeconomic analysis, an industry analysis, and micro-analysis on companies that actually operate under FDI, FDI does not slow the growth of domestic capital investment. While there was no clear connection between the two investments according to the macro-analysis, the other two analyses proved a correlation between FDI and domestic capital investment. As the rate of foreign investment increases, capital investment in relevant industries also increased. Also, the larger the industry, the lower the capital equipment rate per person. The lower the wage difference between non-productive and productive workers, the higher the stock in capital investment. Moreover, at the corporate level, the annual capital investment of corporate parents increased around 0.1% ,while FDI stock increased by 1%. These subsidiaries appeared around high-tech industries such as IT and communication devices, cars, and general machines after the economic crisis in 1997.
The results of the analysis point to how since the economic crisis, domestic companies have been profiting from overseas production. Korea’s overseas investment ratio in comparison to GDP was only 6.8% as of 2005, which is not up to the level of other developed countries. Thus, the paper recommends that through FDI, Korea should achieve a competitive advantage and expand strategies to secure profits from overseas production.
해외직접투자와 국내 설비투자 간의 연관성 분석(Corollary analysis of foreign direct investment and domestic capital investment)
|Series Title; No||정책포럼 / 제198호|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Direct Investment|
|Holding||한국개발연구원; KDI 국제정책대학원|