A new analysis has suggested that over 70,000 manufacturing jobs in South Korea moved abroad last year, which accounted for 0.3 percentage point of the country’s unemployment rate.

The loss of 72,000 manufacturing jobs came against the backdrop of a tough job market that exacerbated the employment situation, the Korea Economic Research Institute, an organization under the Federation of Korean Industries, said on Monday.

“If the 72,000 manufacturing jobs were prevented from moving abroad, last year’s unemployment rate would have dropped 0.3 percentage point from 4 percent to 3.7 percent,” the KERI said.

The electrical equipment sector was the hardest hit among the estimated manufacturing job losses at 15,500, while the figures for the automotive and food industries stood at 14,500 and 9,300, the report showed.

The country’s corporate regulations and rigid labor market were blamed for holding investors back from investing and hiring, according to the institution’s analysis of the country’s job market last year.

“Instead of putting the increase in outward direct investment in a critical light, the problem lies in the fact that there has not been inbound foreign direct investment on a comparable level,” said Choo Kwang-ho, the head of KERI’s economy policy division.

“To tackle the unemployment crisis, the move of jobs abroad due to labor market rigidities and regulations needs to be stopped,” Choo said.

The analysis also showed that outward direct investment surpassed foreign direct investment in South Korea’s manufacturing industry over the last 10 years.

Between 2011 and 2020, South Korean companies’ outward direct investment was estimated at an annual average of 12.4 trillion won ($11 billion) while inbound direct investment from foreign investors stood at an annual average of 4.9 trillion won.

The figure translates to a net outflow of foreign direct investment from Korea, an annual average loss of 7.5 trillion won and a loss of 49,000 jobs each year over the last decade, according to the institute’s analysis.

The outflow of capital was measured by deducting the amount of foreign direct investment the domestic economy attracted from South Korean companies’ outward direct investment in other countries, the KERI explained.

When broken down by sectors, the semiconductor market saw the biggest net outflow of direct investment worth 2.5 trillion won, followed by the electrical equipment and automotive industries, which saw a net outflow of 2.2 trillion won and 1.8 trillion.

Although the three sectors saw an increase in overseas direct investment over the last decade, the direct investment from foreign investors in the domestic market for these sectors trailed far behind, attracting just 40 billion, 90 billion and 440 billion won, respectively.

By Yim Hyun-su (hyunsu@heraldcorp.com)