By Kim Yon-se
Staff Reporter

South Korea saw the ratio of facilities investment to gross domestic product drop to its lowest point in six years amid economic slowdown and frozen business sentiment.


After falling for three consecutive years since it rose to 12.8 percent in 2000, the corporate facilities investment to GDP ratio dropped further to 8.9 percent in the first quarter of 2004, the Bank of Korea (BOK) reported Monday.
According to the central bank, the ratio of corporate facilities investment to GDP continued to drop over the past few years _ 12.8 percent in 2000, 11 percent in 2001, 10.4 percent in 2000 and 9.5 percent in 2003.

It is the lowest figure since the facilities investment to GDP ratio reported 8.4 percent in 1998 when Korea was hit by the financial crisis, and the first time in six years business investment in Korea was lower than in Japan.

While the nation’ GDP grew 2.2 percent in the second quarter of 2003, 2.4 percent in the third, 3.9 percent in the fourth and 5.3 percent in the first quarter of 2004, corporate facilities investment fell by 0.6 percent, 5 percent, 2.4 percent and 0.3 percent over the respective periods.

Furthermore, this is the first time that Korea posted a lower ratio than Japan since 1998. Japan’s facilities investment to GDP ratio is estimated at 9 percent in the first quarter of the year, the BOK said.

BOK economists attributed the slump in the investment to the increasing imports of capital goods, such as machinery and equipment. BOK official Kim Yong-tae said more than 70 percent of local companies producing semiconductor equipment are importing goods.

The BOK said the growth of facilities investment with domestic capital goods stood at 4.8 percent in 2003 and 14.1 percent in the first quarter of this year. But investment with imported goods grew by 13.1 percent and 20.8 percent for the same periods.

``The high dependency on imports are making more and companies hesitate to invest in facilities,’’ the BOK said.

kys@koreatimes.co.kr