Illustration: Liu Rui/GT

South Korea received $20.65 billion worth of foreign direct investment (FDI) commitments in the first three quarters of this year, down 18 percent from a year earlier, the Yonhap News Agency reported on Wednesday, citing data from the South Korean Ministry of Trade, Industry and Resources.

The ministry attributed the decline in FDI pledges to trade uncertainties sparked by the US government's sweeping tariff policies, as well as the depreciation of the South Korean won against the US dollar. While new investment pledges from the US increased 58.9 percent, FDI pledges from the EU decreased 36.6 percent, while those from Japan went down 22.8 percent and those from China went down 36.9 percent, according to Yonhap.

Although US investment in South Korea has grown rapidly, the country's total FDI inflows have still experienced a significant drop. This contrast highlights an important economic reality: Relying too heavily on one source of capital or one dominant market partner cannot shield an economy from broader global uncertainties. 

External shocks such as geopolitical tensions, supply chain disruptions, and shifts in global interest rates can easily outweigh gains from a single investment cooperation partner. Therefore, South Kora's economic resilience depends on diversified investment sources and balanced engagement with multiple markets rather than concentrated dependence on one.

Asia, as a dynamic emerging market, has become increasingly active in outbound investment, demonstrating growing financial strength and global engagement. China's outward foreign direct investment (FDI) reached $192.2 billion in net terms in 2024, up 8.4 percent over the previous year. China's outward FDI accounting for 11.9 percent of the world's total last year, according to data jointly released by the Ministry of Commerce, the National Bureau of Statistics, and the State Administration of Foreign Exchange.

Asia has been the most favored merger and acquisition (M&A) destination for Chinese enterprises for six consecutive years, according to a report by Ernst & Young (EY).

Southeast Asian countries are also stepping up outbound investment. For instance, the stock of Singapore's direct investment abroad by the corporate sector reached S$1.523 trillion ($1.142 trillion) as of the end of 2023, marking a 3.6 percent increase from S$1.47 trillion at the end of 2022, according to data released by the Singapore Department of Statistics.

More importantly, Asia still boasts vast potential and opportunities in investment cooperation. ASEAN investment agreements, bilateral treaties, and national policies reduce transaction costs and encourage outward investment. Multilateral and bilateral trade ties make overseas markets more accessible. There is room for faster growth of intraregional investment, possibly supported by outward investment promotion mechanisms, according to the ASEAN Investment Report 2024 jointly issued by the ASEAN Secretariat and the UN Trade and Development (UNCTAD).

Facing growing opportunities for investment cooperation in Asia amid rising uncertainties in the global economic and financial landscape, South Korea would benefit from diversifying its investment partners. By proactively strengthening collaboration with other Asian economies, the country can expect more stable and sustainable growth in its investment activities.

South Korea's participation in the Regional Comprehensive Economic Partnership (RCEP) offers significant opportunities to enhance its investment cooperation across Asia. The RCEP's investment chapter establishes a unified framework that facilitates investment cooperation among members.

In addition, the RCEP and other multilateral economic and trade cooperation platforms have created industrial and trade cooperation routes across the region, generating increasing demand for investment. South Korea, as a member of these platforms, can leverage these trends to expand its economic engagement and secure new opportunities for outbound and inbound investment.

By actively engaging with the RCEP and related multilateral mechanisms, South Korea can attract more FDI and strengthen its economic ties within Asia. The agreements' emphasis on reducing barriers, standardizing regulations, and promoting regional connectivity aligns with South Korea's goals of attracting foreign investments and mitigating global economic uncertainties. Leveraging these frameworks will enable the country to reinforce its position as a regional investment hub, fostering sustainable growth and economic resilience.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn