Foreign Investment Promotion and Control

Foreign investors may come across with diverse challenges, caused by political and economic situations of a country in which they operate, besides normal business risks. Given the risks, Korea has implemented regimes to protect foreign investors and their business. Meanwhile, Regulations on Foreign Investment and Technology Introduction prescribes the restraints and restricted businesses.

Liberalization of Foreign Investment
Except as otherwise prescribed by the Acts of the Republic of Korea, a foreigner may conduct, without restraint, various activities of foreign investment in the Republic of Korea. Foreigners are restricted from foreign investment in the following cases: where it threatens the maintenance of national safety and public order; where it has harmful effects on public hygiene or the environmental preservation or is against Korean morals and customs; and where it violates the Acts and subordinate statutes of the Republic of Korea.
Protection of Foreign Investment
Protection of foreign direct investment has become stronger than that of indirect investment such as investment in securities and bonds, as prescribed by the Foreign Investment Promotion Act.
Guarantee of Remittance to Foreign Countries
With respect to the proceeds that come from the stocks, etc. acquired by a foreign investor, proceeds from the sales of stocks, etc., the principal, interests, and service changes paid in accordance with the loan contract as prescribed by the Foreign Investment Promotion Act, and the compensation paid in accordance with a license agreement, their remittance to foreign countries shall be guaranteed in accordance with the details of the permission or report of the foreign investment contract or the license agreement at the time when the said remittance is made.
Exceptions to the Safeguard Clause on Foreign Currency Transactions
The Minister of Strategy and Finance may temporarily suspend or restrict foreign exchange transactions, if such measures are deemed inevitable on account of the outbreak of natural calamities, war, conflicts of arms, grave and sudden changes in domestic and foreign economic conditions, or other situations equivalent thereto (Article 6 (1) ~ (3) of the Foreign Exchange Transactions Act). However, such measures shall not apply to foreign investment as provided for in the Foreign Investment Promotion Act (Article 6 (4) of the Foreign Exchange Transactions Act).
National Treatment
Except as otherwise prescribed by the Acts of the Republic of Korea, foreign investors and foreign-invested companies shall be treated in the same way as nationals of the Republic of Korea and Korean corporations in respect of their business operation.
Equal Application of Tax Abatement Regulations, etc.
Except as otherwise prescribed by the Acts of the Republic of Korea, the provisions concerning the abatement or exemption of taxes from among the tax laws applied to nationals of the Republic of Korea or Korean corporations shall also apply to foreign investors, foreign-invested corporations, persons who have extended loans as prescribed by the Foreign Investment Promotion Act, and persons who have provided technology thereto.
Restrictions and Prohibitions on Foreign Investment
Out of a total of 1,145 categories of business under the Korean Standard Industrial Classification (KSIC), foreign investment is not permitted in 60 categories of business including public administration, diplomacy, and national defense (unpermitted category of business), while foreign investment is partially permitted in 29 categories of business (restricted category of business), as prescribed by the Foreign Investment Promotion Act.
Unpermitted Category of Business
Categories of business in which foreign investment is not permitted have public features, hence difficulties in applying the Foreign Investment Promotion Act. The prohibition of foreign investment in the said categories is notified by Regulations on Foreign Investment and Technology Introduction and Consolidated Public Notice for Foreign Investment.
Unpermitted Category of Business
Postal services, central banking, individual mutual aid organizations, pension funding, administration of financial markets, activities auxiliary to financial service activities, etc.
Legislative, judiciary, administrative bodies, foreign embassies, extra-territorial organizations and bodies
Education (pre-primary, primary, secondary, higher education, universities, graduate schools, schools for the handicapped, etc.)
Artists, religious, business, professional, environmental advocacy, political, and labor organizations
Restricted Category of Business
Foreign investment is not permitted in restricted categories of business as well in principle. However, when there are standards for permission, foreign investment is partially permitted. The restriction of foreign investment is notified by Regulations on Foreign Investment and Technology Introduction and Consolidated Public Notice for Foreign Investment.
No foreigner shall make an investment in any company concurrently running both a category of business in which foreign investment is not permitted and a category of business in which foreign investment is only partially permitted. And where intending to make an investment in any company running not less than two categories of business in which foreign investment is only partially permitted, a foreigner shall be prohibited from making an investment in the company in excess of the ratio of foreign investment in the category of business in which the ratio of permissible foreign investment is lowest.
  • Restricted Category of Business (As of March 8, 2010)
Growing of cereal crops and other crops for food (01110)
  • Growing of rice and barley is prohibited
Farming of beef cattle (01212)
  • Permitted where the foreign investment ratio is less than 50%
Inshore and coastal fishing (03112)
Manufacture of other basic inorganic chemicals (20129)
  • Permitted with the exception of manufacture and distribution of nuclear fuel
Manufacture of other smelting, refining and alloys of non-ferrous metals (24219)
Nuclear power generation (35111)
  • Prohibited
Hydroelectric power generation (35112) Fire power generation (35113) Other power generation (35119)
  • The sum of power plant facilities purchased by foreigners from Korea Electric Power Corporation (KEPCO) must not surpass 30% of the total domestic power plant facilities
Transmission and distribution of electric power (35120)
  • The foreign investment ratio must be less than 50% – Voting stocks owned by foreign investors < Dominant stocks held by Korean nationals
Disposal of radioactive waste (38240)
  • Radioactive waste management business under Article 82 of the Electric Utility Act is prohibited
Wholesale of meat (46312)
  • Permitted where the foreign investment ratio is less than 50%
Coastal water passenger transport (50121) Coastal water freight transport (50122)
  • Permitted: Transport of passengers or freight between South and North Korea; – Joint venture with a shipping company of the Republic of Korea; – The foreign investment ratio is less than 50%
Scheduled air transport (51100) Non-scheduled air transport (51200)
  • Permitted where the foreign investment ratio is less than 50%
Publishing of newspapers (58121)
  • Permitted where the foreign investment ratio is less than 30%
Publishing of magazines and periodicals (58122)
  • Permitted where the foreign investment ratio is less than 50%
Radio broadcasting (60100)
  • Prohibited
Over-the-air broadcasting (60210)
  • Prohibited
Program distribution (60221)
  • Permitted where the foreign investment ratio is 49% or less (* General programming channel and specialized news channel businesses are prohibited.) * Program distribution refers to program providing business under the Broadcasting Act
Cable networks (60222)
  • CATV broadcasting business is permitted where foreign investment ratio is 49% or less (* CATV relay broadcasting business is prohibited)
Broadcasting via satellite and other broadcasting (60229)
  • Permitted where foreign investment ratio is 33% or less (* Internet multimedia broadcasting business is permitted where the foreign investment ratio is 49% or less)
Wired telecommunications (61210)
  • Permitted where the sum of shares (limited to voting shares, including depositary receipt (DR) and other share equivalents and equity interests) held by a foreign government or a foreigner (including fictitious corporation of foreigners) is 49% or less of the total issued shares of the company (Foreigners are not allowed to become a majority shareholder of KT. However, they may invest in KT where they own less than 5% of the total shares.) * Fictitious corporation of foreigners: a corporation whose largest shareholder is a foreign government or a foreigner (including a specially-related person as referred to in Article 9 (1) 1 of the Financial Investment Services and Capital Markets Act), and not less than 15/100 of the gross number of whose issued stocks are owned by the said foreign government or foreigner. – Telecommunications resellers business (61282) is permitted – Supplementary communications business is not restricted
Mobile communications (61220)
Satellite communications (61230)
Other electronic communications (61299)
News agency activities (63910)
  • Permitted where the foreign investment ratio is less than 25%
Domestic commercial bank (64121)
  • Permission is limited to commercial banks and local banks (* Specialized banks, and agricultural/fisheries/livestock cooperatives are prohibited.)