According to the UNCTAD 2013 World Investment Report, South Korea currently ranks 6th among the most attractive countries of South and East Asia for transnational companies. FDI flows into South Korea have been more or less constant in the recent years, around 10 billion USD, but they declined due to external shocks such as the unfavourable international economic context. In 2013, FDI flows declined by 9.4% compared to 2012.
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.
|South Korea||OECD||United States||Germany|
|Index of Transaction Transparency*||7.0||6.0||7.0||5.0|
|Index of Manager’s Responsibility**||4.0||5.0||9.0||5.0|
|Index of Shareholders’ Power***||7.0||9.0||5.0|
|Index of Investor Protection****||6.0||6.1||8.3||5.0|
Source: Doing Business - Last Available Data.
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||2011||2012||2013|
|FDI Inward Flow (million USD)||9,773||9,496||12,221|
|FDI Stock (million USD)||133,660||156,140||167,350|
|Performance Index*, Ranking on 181 Economies||115||-||-|
|Potential Index**, Ranking on 177 Economies||4||-||-|
|Number of Greenfield Investments***||133||109||107|
|FDI Inwards (in % of GFCF****)||3.2||3.1||3.7|
|FDI Stock (in % of GDP)||12.0||13.8||13.7|
Source: UNCTAD - Last Available Data.
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.
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.
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.
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Last Updates: October 2014