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The Peninsula

Growing Role of FDI from Korea in Providing Opportunity and High-Paying Jobs for America

Published September 20, 2017
Category: South Korea

By Phil Eskeland

Recently, the U.S. Department of Commerce updated their statistics on the role of foreign direct investment (FDI) in the United States.  The United States is still home to the largest amount of FDI in the world.

South Korea continues to demonstrate its confidence in America by once again in 2016 increasing its holdings of $38.8 billion in investments at U.S.-based companies, nearly double the level the year prior to the implementation of the Korea-U.S. Free Trade Agreement (KORUS FTA) in 2011.

These are investments found in many states around America, including struggling communities in rural America that have clamored for economic opportunity and development.  Many investments have come from familiar, well-known Korean nameplates, such as Hyundai, KIA, Samsung, and LG.   But others may not be as well known.  For example, Doosan invested $4.9 billion to purchase Bobcat, a manufacturer of small construction and machinery equipment based in North Dakota, during a downturn in the U.S. home construction sector in 2007.  Last May, Doosan Bobcat North America completed a $9.5 million expansion of its headquarters, reflecting confidence in its future growth as a major manufacturer and employer in the Upper Midwest.

South Korea’s investments are heavily focused on the manufacturing sector, with automobile components and equipment; industrial machinery; and consumer electronics as top sectors, along with software and information technology services.  Many of the software and IT service companies are small firms, such as IriTech in Fairfax, Virginia that creates biometric identification software.

In addition to the growing level of investment, the number of Americans working at U.S.-based firms with investment from Korea has increased by over 50 percent since 2011 to employ 54,800 individuals in 2015.

These worker’s average annual compensation has grown 11 percent in the years since KORUS to approximately $91,100 in 2015.  This is remarkable in light of the average compensation level of workers at all companies with FDI ($79,328) and the U.S. median household income ($57,230).  In other words, a typical U.S. worker employed at a U.S. firm with investment from Korea earns nearly 60 percent more than a worker elsewhere in the U.S. economy and even 15 percent more than his or her counterpart employed at other U.S. firms with FDI.

Lastly, these firms helped to augment U.S. exports by $14.2 billion in 2015 and invested $1 billion in research and development.  Suffice it to say that if there was no investments by Korean firms in the United States, the trade deficit would have been even higher and perhaps some cutting-edge, innovative product would not be in the marketplace producing more economic growth and opportunity for American workers.

Thus, as the discussions on the future of the Korea-U.S. Free Trade Agreement (KORUS FTA) proceed or as other actions on trade or tax policy are contemplated, policymakers should do no harm to cultivating a positive climate for more FDI from South Korea.

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Photo from raymondclarkeimages’ photostream on flickr Creative Commons.

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