In this page: FDI in Figures | What to consider if you invest in South Korea | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information
According to UNCTAD's World Investment Report 2024, FDI to the Republic of Korea reached USD 15.1 billion, down from the 25 billion recorded the previous year. At the end of the same period, the total stock of FDI stood at USD 284.1 billion. According to the Ministry of Trade, Industry, and Energy (MOTIE), FDI pledges to South Korea increased by 5.7% in 2024, totalling USD 34.5 billion, with the manufacturing sector seeing a 21.6% rise to USD 14.49 billion. FDI in materials, parts, and equipment surged 52.7% to USD 11.13 billion, while semiconductor investments rose 46.5% to USD 1.33 billion and bio-health pledges more than tripled to USD 1.23 billion. FDI in the service sector edged up 0.3% to USD 17.83 billion, driven by real estate and communication industries. Inflows from the United States dropped 14.6% to USD 5.24 billion, while those from China, Hong Kong, and Taiwan surged 125% to USD 7 billion. FDI from the European Union fell 18.1% to USD 5.1 billion. As per OECD figures, FDI stocks are mainly oriented towards financial and insurance activities (31.4%), followed by manufacture of petroleum, chemical, pharmaceutical, rubber and plastic products (13.2%), wholesale and retail trade; repair of motor vehicles and motorcycles (11.6%), manufacture of metal and machinery products, except electrical equipment (10.4%), information and communication (6.8%), real estate activities (4.4%). Japan (21%), the United States (16.3%), Singapore (8.7%), the Netherlands (7.1%), the United Kingdom (5.8%), and Hong Kong (5.8%) hold the majority of stocks.
South Korea's appeal in terms of foreign direct investment is the result of the country's rapid economic development and its specialisation in new information and communication technologies. The World Bank qualifies the Republic of Korea as a country with a highly developed business environment. However, despite the economy's sophistication and complexity, foreign investors encounter difficulties due to South Korea's intricate, opaque, and country-specific regulatory framework. Additionally, the competitiveness of the country's manufacturing sector has been undermined notably by low-cost producers like China. Both foreign and domestic private entities are permitted to establish and own business enterprises and participate in profit-making activities across numerous sectors of the economy. Nonetheless, limitations on foreign ownership persist for 30 industrial sectors under the Foreign Exchange Transaction Act (FETA). Notably, three sectors, including nuclear power generation, radio broadcasting, and terrestrial broadcasting, remain closed to foreign investment. The Ministry of Economy and Finance (MOEF) oversees tax incentives and other measures to promote advanced technology transfer and investment in high-tech services. There are three types of special areas for foreign investment: Free Economic Zones, Free Investment Zones, and Tariff-Free Zones, offering favourable tax incentives and support for investors. South Korea ranks 6th among the 133 economies on the Global Innovation Index 2024 and 14th out of 184 countries on the latest Index of Economic Freedom. Moreover, it is at the 20th place in Kearney's Foreign Direct Investment Confidence Index 2024.
Foreign Direct Investment | 2020 | 2021 | 2022 |
---|---|---|---|
FDI Inward Flow (million USD) | 8,765 | 22,060 | 17,996 |
FDI Stock (million USD) | 260,801 | 280,085 | 272,328 |
Number of Greenfield Investments* | 83 | 103 | 116 |
Value of Greenfield Investments (million USD) | 3,710 | 4,965 | 13,405 |
Source: UNCTAD, Latest data available.
Note: * Greenfield 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.
Main Investing Countries | 2021, in % |
---|---|
Japan | 29.4 |
Ireland | 14.3 |
United States | 10.0 |
United Kingdom | 9.1 |
Germany | 6.0 |
Belgium | 5.1 |
China | 3.3 |
Main Invested Sectors | 2021, in % |
---|---|
Manufacture of petroleum, chemical, pharmaceutical, rubber and plastic products | 31.0 |
Wholesale and retail trade; repair of motor vehicles and motorcycles | 24.0 |
Manufacture of metal and machinery products, except electrical equipment | 13.4 |
Information and communication | 8.9 |
Financial and insurance activities | 6.3 |
Manufacture of food products; beverages and tobacco products | 5.1 |
Source: OECD Statistics, Latest data available.
South Korea's strong points include:
South Korea's weak points include:
Nevertheless, some restrictions and interdictions exist in public administration, education, national defence, energy, media sectors.
For more information, visit the Invest Korea website.
The South Korean government significantly increased cash incentives for foreign companies to encourage more investment at home. In 2021, FDI flows to South Korea recorded a historical high of USD 29.51 billion.
Country Comparison For the Protection of Investors | South Korea | OECD | United States | Germany |
---|---|---|---|---|
Index of Transaction Transparency* | 8.0 | 6.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 6.0 | 5.3 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 8.0 | 7.3 | 9.0 | 5.0 |
Source: The World Bank - Doing Business, Latest data available.
A foreign investment must be reported under the Foreign Investment Promotion Act (FIPA) or the Foreign Exchange Transaction Act. A fast registration process is available for foreign direct investment (FDI) under the FIPA. To apply, an FDI needs to:
Invest Korea Plaza (IKP) offers furnished office space and cutting edge conference facilities to foreign investors.
Click here for Info on Foreigner's Land Acquisition Act.
Most of FDI incentives offered by the Korean government are provided via:
Korean Free Economic Zones (KFEZs) aim to strengthen national competition for business and promote balanced regional development by enhancing living conditions and business environments for foreigners in South Korea. The KFEZs offer great incentives such as tax benefit, business support, deregulation, administration support and one-stop services for your successful business.
Other sectors have restrictions on FDI (from 25% to 49%)
Finally, in numerous sectors, FDI cannot exceed 50%. The government has the right to approve FDI in the domain of defence.
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Latest Update: March 2025