In 2022, global foreign direct investment (FDI) fell 12% year-on-year to $1.3 trillion. The decline was the result of a challenging investment climate due to the Russia-Ukraine war, economic slowdowns, and debt burdens. FDI inflows to advanced economies fell by 37%, while FDI inflows to emerging economies reached a record high, and greenfield investment grew in global value chain-intensive industries, while investment in digital industries slowed. Emerging economies are introducing more favorable policies for investment, while developed economies are tightening investment screening and national security regulations.
Seoul's FDI outlook for 2023 is optimistic, but there are still uncertainties. While FDI in Korea as a whole reached a record high of $30.5 billion, Seoul saw a significant decline in FDI in services. In 2022, FDI in Seoul fell to $10.8 billion, a 40% year-on-year decline, which is related to the challenging global investment environment. 90% of Seoul's FDI comes from services, with finance and insurance accounting for a large share.
Through the first half of 2023, FDI in the country as a whole and in Seoul is expected to grow rapidly. Overall, FDI in the manufacturing sector has increased, mainly in the electrical, electronic, and chemical industries, while FDI in the service sector has increased due to large private equity inflows. On the other hand, Seoul's industrial structure is centered on services rather than manufacturing, and this feature seems to have influenced the city's FDI flows.
In particular, the financial and insurance sectors account for a large share of FDI in Seoul. This reflects the changing investment environment in Seoul. In addition to traditional finance, Seoul has recently been recognized as a global financial center in the fintech sector. Seoul is also increasingly recognized as a startup hub, ranking 12th among all cities in the 2023 Startup Ecosystem Assessment.
There are differences in the industrial environments of different cities in terms of attracting foreign investment, which are driven by geography and the nature of their relative markets. London and Berlin build their industrial policies and city industrial strategies around their advanced economies, systems, and talent to promote global markets, and strive to attract companies rather than favor foreigners.
Hong Kong emphasizes its traditional trade center between Asia and Europe, and applies Chinese and other Western open systems to attract foreign investment. Singapore leverages its geographical advantages, stable system, and sophisticated infrastructure to become Asia's largest financial industry attractor, optimize its capital market, and serve as a base and hub for new industries without geographical constraints.
China is attracting science and technology infrastructure, enterprises, and talent through the establishment of various industrial parks, creating special zones to match regional focus areas, and focusing on new industries based on science and technology and ICT. Tokyo emphasizes mature markets, stability, safety nets, and infrastructure, and strives to maintain developed market advantages.
In common, they are aligned with national and city industrial policies to attract foreign investment. National and city economic and industrial strategies are used to attract foreign investment, and new industries are encouraged based on the region's main industries and future vision. At the city level, there is also a trend to focus on R&D for future industries and to support university and private company collaboration in line with international cities.
In Asia, there is a particular focus on attracting talent for innovative industries. In addition to experienced and skilled workers, policies that create incentives for potential talent and facilitate the flow of talent are common.
Currently, Seoul's economic development plans and strategies are not comprehensively articulated, so the Seoul Investment Agency utilizes brochures and manuals at a working level. From the existing cases, it is evident that investment promotion organizations tend to adopt investment promotion strategies derived from national or regional economic development plans to contribute to the overall economic development plan. In the future, it is necessary to strengthen the credibility of the investment promotion strategy by establishing a higher-level plan to clarify the purpose and value of investment promotion and to ensure the stability of the strategy in the medium and long term.
In addition, while Seoul's industrial structure is centered on services, the government's current investment promotion strategy is centered on manufacturing, which is different from Seoul's industrial structure, and there is a lack of official analysis and strategy. Therefore, it is necessary to use Seoul's characteristics as the basis for a differentiation strategy based on an analysis of Seoul's industrial structure and investment attraction behavior. It is advisable to refer to recent examples that highlight future market opportunities by linking traditionally strong industries with currently emerging sectors.
Finally, recognizing Seoul's structural limitations as identified by global case cities, an approach is needed that identifies and benchmarks policy proposals at the central government level with those available within Seoul's purview. For example, consideration should be given to expanding the activities of the Seoul Investment Agency and transferring the necessary authority, securing staffing, securing space, developing incentives, strengthening networking, and establishing a multicultural and multilingual support system, and later expanding follow-up support functions such as ombudsmen and grievance redress.