Hello, this is attorney Lee Kyusung from WeOn Law.

It has been confirmed that in the first quarter of this year, foreign direct investment in Korea recorded a staggering $7.05 billion, breaking the record for the highest first-quarter performance ever. Despite difficult economic conditions such as economic slowdown, high interest rates, and a strong dollar, foreign direct investment has increased.

Specifically, by country, the United States and the European Union (EU) recorded $720 million and $570 million in investments, respectively. Japan invested $1.13 billion, and the Greater China region invested $2.12 billion.

As a result, the government has set a goal of attracting $35 billion in foreign investment this year and is focusing its policy efforts on achieving this.

What is Foreign Direct Investment?

Foreign direct investment refers to a situation where the investment amount is over 100 million KRW and the foreign ownership share is 10% or more. Unless there are special regulations, foreigners can freely conduct business in Korea.

In simple terms, it is an investment method where a company from one country invests in a company in another country, acquiring equity or gaining control.

Through this, economic relationships between countries can be formed, and the recipient country can benefit from economic growth and technological development.

Additionally, foreign direct investment has various advantages, such as promoting economic activity by creating jobs and raising wages, helping economic diversification, and aiding industrial restructuring.

Types of Foreign Direct Investment

① Equity Acquisition

This is where a foreigner owns shares or equity in a Korean corporation or company to establish a continuous economic relationship.

For two or more investors, each must invest over 100 million KRW and own more than 10% of voting shares. Both new and existing shares can be acquired.

Even if the ownership ratio is below 10%, it is still considered foreign investment if the foreigner dispatches or appoints an executive to the domestic company.

② Long-Term Loans

This refers to a loan of five years or more provided by the foreign parent company or a related company that has a capital investment relationship with the foreign-invested company.

In this case, the long-term loan must be preceded by equity investment, and the average loan term must exceed five years.

③ Contributions to Non-Profit Corporations

Foreign direct investment can also be recognized when contributing over 50 million KRW, amounting to more than 10% of the total contribution to non-profit corporations or companies, and meeting certain conditions.

✅ Contributing to a non-profit corporation or company in the field of science and technology, while meeting one of the following:

- Having at least five full-time employees engaged in research with either a bachelor’s degree in science and technology and at least three years of experience or a master’s degree.

- Engaging in research and development in natural sciences and engineering according to the Korean Standard Industrial Classification.

✅ Investing in one of the following non-profit corporations recognized as foreign direct investment by the Foreign Investment Committee:

- Non-profit corporations established to promote academia, the arts, medical care, and education, which continuously engage in international exchange and nurturing professionals in these fields.

- Regional headquarters of international organizations that carry out international cooperation projects between the private sector or governments.

④ Reinvestment of Undistributed Retained Earnings

This refers to foreign-invested companies reinvesting their undistributed retained earnings into specific uses such as establishing or expanding factory facilities.

In this case, the foreign-invested company is regarded as a foreigner, and the foreign investment amount is calculated by multiplying the amount used by the foreign investment ratio.

In today’s post, we discussed the meaning, procedures, and methods of foreign direct investment.

As foreign direct investment in Korea continues to increase, we are receiving more inquiries on this matter.

I, Attorney Kyusung Lee, provide the necessary assistance based on my English proficiency, honed through overseas study and work experience, as well as my extensive experience advising foreign-invested companies.

If you encounter any difficulties during the process, feel free to contact our law firm at any time.

Contact 

이규성 변호사 Kyusung Lee

(010-9023-5665, kslee@weonlaw.co.kr)