Sucking Sound, Part 2

Foreign capital continues to flee South Korea, and this time, the trend is far more pronounced than the last time I’d blogged about it.

Foreign investors’ exit from South Korea is accelerating amid worries over a worsening business climate here and the economy’s falling growth potential, the central bank said Sunday. 

According to the Bank of Korea, foreign direct investment in Asia’s fourth-largest economy reached a mere US$790 million in the first nine months of this year, about one-fourth of the $3.42 billion during the same period a year earlier.

Foreign direct investment tumbled to $4.34 billion in 2005 from $9.25 billion the previous year.

“It is true that foreigners are withdrawing their investments in South Korea,” a central bank official said. “They seem to be worried about the worsening of the domestic business climate and the weakening potential of economic growth.”

The South Korean economy is expected to grow around 5 percent this year, but its growth rate is widely forecast to be in the low 4 percent range next year due to sluggish private spending and a global economic slowdown.

Hmmm.  Not to be impudent, but would I be out of line to mention that large pink elephant standing across from all of you?  Worse, South Korean companies are bailing, too.  They’re increasingly investing overseas, rising from $3.32 billion to $4.97 billion compared to the same period last year.