Foreign Direct Investment in South Korea
FDI in Figures
Under the effect of the world's recession, the flows of foreign direct investment (FDI) have reduced in 2009; later on, they started to slowly increase again with the recovery, a trend that should be confirmed in 2011.
South Korea's appeal in terms of foreign direct investment (FDI) is the result of the country's fast economic development and the specialization of its industry in new information and communication technologies. However, the lack of general transparency in regulations is a major concern to foreign investors.
Country Comparison For the Protection of Investors
|South Korea||OECD||United States||Germany|
|Index of Transaction Transparency*||7.0||6.0||7.0||5.0|
|Index of Manager’s Responsibility**||2.0||5.2||9.0||5.0|
|Index of Shareholders’ Power***||7.0||6.8||9.0||5.0|
|Index of Investor Protection****||5.3||6.0||8.3||5.0|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||2,628||8,409||5,844|
|FDI Stock (million USD)||119,630||94,680||110,770|
|Performance Index*, Ranking on 141 Economies||137||123||124|
|Potential Index**, Ranking on 141 Economies||16||16||-|
|Number of Greenfield Investments***||72||86||96|
|FDI Inwards (in % of GFCF****)||0.9||3.1||1.3|
|FDI Stock (in % of GDP)||11.4||10.2||13.3|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Why You Should Choose to Invest in South Korea
- Strong Points
- The Korean workforce is highly skilled. The R&D capabilities, as well as the quality of the infrastructures are deciding strong points for investors.
- Weak Points
- The laws and national regulations are restrictive and the manpower cost is high. Private real estate, as well as renting office or shop premises is expensive. Lastly, competitiveness is relatively restrained.
- Government Measures to Motivate or Restrict FDI
- Korea has implemented measures in order to protect Foreign Investment:
- External Remittance guarantees;
- Identical treatment to domestic firms with regard to business operations;
- Tax deductions provisions.
However, there are restrictions or prohibitions in terms of foreign investment in sectors of public administration, educational organizations, national defense, etc. For more information, see the Invest Korea website.
- Bilateral Investment Conventions Signed By South Korea
- Korea is a signatory to many conventions.
UNCTAD allows you to visualize the list of conventions signed by Korea, and to download these conventions .
Procedures Relative to Foreign Investment
- Freedom of Establishment
- Acquisition of Holdings
- Obligation to Declare
- Acquisition of the stocks or shares of a domestic enterprise:
-Minimum initial investment to qualify as foreign investment: 50 million won;
-Foreigner's investment hold 10% or more of the total shares along with voting rights or total equity investment.
Long-term loan provided by a foreign investor:
- A firm that owns 50% or more of the total issued shares or equity investment of its foreign parent firm;
- A firm that owns 10% or more of the total issued shares or equity investment of its foreign parent firm;
- A firm of which 50% or more of its total issued shares or equity investment is owned by its foreign parent firm; or -
- A firm of which 50% or more of its total issued shares or equity investment is owned by a firm that owns 50% or more of the foreign parent firm's total issued shares or equity investment.
- Competent Organization For the Declaration
Invest Korea or KOTRA trade offices in Korea
- Requests For Specific Authorizations
- Government's approval is required in agriculture, forestry, fishing, power generation, publishing, Telephone and other communication services, broadcasting, air transportation, coastal transportation, etc.
- Investment Aid Agency
Korea Trade Investment Promotion Agency (KOTRA)
Office of the Investment Ombudsman (OIO)
Invest Korea Plaza
- Tenders, Projects and Public Procurement
Service des marchés publics, Tenders
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide
- Other Useful Resources
Hi Korea e-Government for foreigner
Seoul Global Center
Free Economic Zone Planning Office
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Riding on the global economic revival, South Korea’s economy posted a 6.1% growth in 2010, an eight-year record high.
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