S. Korean investment abroad up

S. Korean investment abroad up

SEOUL (AFP): Approvals for overseas investments by South Korean firms soared 66.7 percent year-on-year to US$2.5 billion in the January-May period, the Bank of Korea said yesterday.

The five-month investment approvals for 700 offshore projects compared with $1.55 billion in 676 projects in the same period last year.

The bank said investments in Asia were the most popular. In May alone, approved overseas investments totaled $614 million for 104 projects, up 172 percent in value from the same month a year ago, the central bank said.

Bank officials said the latest investment trend showed that the size of a single offshore project was growing bigger, adding that the average project size stood at $5.9 million in May, compared to $3.2 million last year.

South Korean companies continued to make brisk investment forays into Asian countries with a total of $1.45 billion in the five-month period.

Investments in North America reached $556.5 million in the period, a 355.8 percent year-on-year rise, but Europe brought in 227.7 million dollars, sharply down 46.4 percent from a year earlier.

By business sector, manufacturing, which includes petrochemicals, metals and garments, attracted $1.44 billion, or 57.4 percent, of the total investment abroad from January through May, up 80.9 percent over last year.

The trading sector drew $361 million in the period, up from 169.5 million dollars a year ago, followed by $148.6 million in the construction sector, up from last year's $64.8 million.

Last year, South Korean companies invested a total of $4.91 billion in 1,560 overseas projects on an approval basis.

Deficit

South Korea's trade deficit worsened to $7.94 billion in the first half of 1996, up 13 percent over last year, the Ministry of International Trade and Industry (MITI) said yesterday.

"The weak yen has dealt a blow to South Korean exports, as a plunge in prices of semiconductors, a major South Korean export, conspired to aggravate the trade imbalance," a MITI spokesman said.

South Korea's total exports in the first half amounted to $65.14 billion, up 11.8 percent from a year before, while imports reached $73.08 billion in the period, up 12 percent year-on-year.

Ministry officials predicted that South Korea's trade deficit could reach $11 billion for the whole of 1996, given the current trend.

Exports in June alone totaled $11.47 billion on a customs clearance basis, up 2.0 percent from a year ago, with the monthly growth rate hitting a 41-month low, preliminary figures from the ministry showed.

Semiconductor exports dropped 23.8 percent in value in June over last year, while outbound shipments of steel and petrochemicals saw 38.0 percent and 8.0 percent falls respectively in the month, the ministry said.

Semiconductor exports account for nearly 20 percent of South Korea's total exports.

But auto exports remained brisk with a healthy 12.2 percent rise in June, while shipbuilding exports soared 36.2 percent year-on-year and computer exports rose 16.9 percent year-on-year in the month.

Imports in June increased 1.7 percent from a year earlier to $12.03 billion on a customs clearance basis, with imports of capital goods falling slightly but consumer good imports soaring steeply, the ministry said.

Accordingly, the June trade deficit stood at $563 million, down from $574 million in the same month last year.

Last year, South Korea, the world's 12 largest trading country, witnessed a record high trade deficit of $10.06 billion, as galloping economic expansion accelerated imports of capital goods and raw materials.

"It's problematic that a small number of goods are leading domestic exports. South Korea needs to correct that undesirable structure," said Yoo Byung-kyu, an economist at Hyundai Research Institute.

In contrast to worries by private researchers, government officials argued the widening trade deficit is not worrisome for South Korea's overall economy.

Cho Sung-Jong, a senior official at the Bank of Korea, however, said if the deficit were to remain high in the long term, the effect would be more negative, because of the impact on South Korea's foreign debt burden.

"If South Korea repeatedly records a 10 billion dollar deficit in the years to come, it means that we will have to pay 5 billion dollars of interest on foreign debts every year. Then it will be a great problem," Cho said.

The country booked an 8.1-billion-dollar current account deficit in the first five months of 1996, exceeding the government forecast of $7.9 billion dollars for the whole 1996.