Banks vie for more FDI in South Korea

Competition among banks to attract foreign direct investment (FDI) in South Korea is growing as the country continues to experience an all-time high in FDI, despite some recent signs of a domestic economic slowdown. FDI not only presents an attractive opportunity for financial institutions but also generates commission revenue and brings in foreign exchange trading customers.

In the first half of this year, Woori Bank led the industry in FDI inflows with $2.73 billion. Hana Bank, with 690 transactions, also held a dominant position in terms of the number of transactions.

Korean banks have been increasingly focusing on their FDI operations. For instance, Woori Bank established a dedicated organisation for foreign exchange capital transactions in July, with the aim of strengthening its marketing efforts in this area. The bank also expanded its workforce dedicated to FDI operations, increasing the number of employees from seven in one team to 10 in three teams.

Woori Bank is currently engaged in projects such as financing deals for the relocation and expansion of domestic production facilities for a global chemical company headquartered in the United States and the relocation of a secondary battery material production facility for a Chinese joint venture corporation.

Hana Bank, which maintained a dedicated FDI organisation even when it was known as the Korea Exchange Bank, leads in terms of FDI arrivals. Hana Bank offers consultations in English, Chinese, and Japanese, with a team of 13 employees specialising in FDI operations.

In a significant deal worth $800 million, Hana Bank successfully secured investments from the United States, China, and Qatar for a domestic secondary battery company in the third quarter of 2023.

Korean banks are ramping up their FDI operations because FDI is one of the few indicators that continue to perform well amid the current economic environment marked by global economic stagnation. With ongoing geopolitical tensions and a fragmented global economy, FDI continues to reach “historic highs.”

According to the Ministry of Trade, Industry, and Energy, South Korea recorded $17.09 billion in FDI for the first half of 2023, marking a 54.2 percent increase from the same period the previous year in terms of declarations, and a 6.3 percent increase to $7.75 billion in terms of arrivals.