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Foreign direct investment (FDI) refers to foreigners’ acquisition of the stocks or shares of a Korean company in order to build lasting economic relations, and generally involves participation in management or technology transfer. FDI differs from portfolio investment as it is intended to exercise substantive influence on the management of a company. In addition to cash investments, FDI includes investment in the objects of investment defined under the Foreign Investment Promotion Act (the “Act”) such as capital goods, industrial property, intellectual property rights, local real estate and the shares of a company listed overseas. Long-term loans with maturity of five years or longer provided by a foreign investor to a domestic company can also be recognized as FDI.

■ Types of FDI
  Contents Examples
Portfolio investment (Indirect investment) Investment in stocks or bonds for short-term finacial gain rather than maintaining contnued economic rlations

- Stock investment(not exceeding 10% of the equity shares of a business
- Ordinary borrowing

Greenfield investment Establishment of a new form of business, including investment of expansion of existing production/operational facilities - Establishment of a new legal entity
- Real estate purchase
M&A investment Investment intended to secure equity share for the takeover of the management right of a business as a strategy for outward growth - Establishment of a new legal entity through the purchase of equity shares of an existing business
- Securing voting rights related to an existing legal entity
- Merger of part of a Korean business by a foreigner-invested business
P&A investment Investment intended for the takeover of assets of an existing Korean business  
■ Long-Term Loans

Loans with a maturity of not less than five years (based on the loan maturity prescribed in the first loan contract) supplied to a foreign-invested company by the following entities are recognized as FDI:
① An overseas parent company (OPC) of the foreign-invested company (corporation)
② A company that has capital investment relations with ①
③ A foreign investor (individual)
④ A company that has capital investment relations with a foreign investor (individual)

(Article 2 (4), (5) of the Enforcement Decree of the Act)
■ Contribution to a Non-Profit Organization (NPO)

A contribution to a non-profit organization is recognized as FDI when: the foreign contribution amount is KRW 50 million or more and accounts for 10 percent or more of the total contribution amount; the NPO has independent research facilities in the field of science and technology; and the NPO meets any one of the following conditions:

  • The number of research staff members who are full-time employees as prescribed by Article 11 of the Employment Standards Act is five persons or more, consisting of persons with a master’s degree or higher in the field of science and technology, or persons with a bachelor’s degree in the field of science and technology with a research career of not less than three years.
  • The NPO’s business should be classified as ‘research and experimental development on natural sciences and engineering’ under the Korea Standard Industrial Classification as publicly announced by the Commissioner of Statistics Korea in accordance with Article 22 of the Statistics Act.

Other contributions to an NPO by a foreigner of not less than KRW 50 million accounting for 10 percent or more of the total contribution amount that meet one of the following conditions, and which are recognized as foreign investment by the Foreign Investment Committee as prescribed by Article 27 of the Act, are recognized as foreign investment.

  • An NPO established for the purpose of promotion, etc. of science, art, medical services, or education and which continues to conduct its business with a view to developing professionals in the relevant fields and to expanding international exchanges
  • An NPO that is a regional office of an international organization that engages in international cooperation business between civilians or governments