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Types of FDI
| Contents | Examples | |
|---|---|---|
| Portfolio investment (Indirect investment) |
Investment in stocks or bonds for short-term financial gain rather than maintaining continued economic relations |
|
| Greenfield investment | Establishment of a new form of business, including investment for expansion of existing production/operational facilities |
|
| 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 |
|
| P&A investment | Investment intended for the takeover of assets of an existing Korean business |
Methods of foreigner’s establishment of a business in Korea
Establishment of a local corporation or a joint venture with a private business in Korea (under the Foreigner Investment Promotion Act) or establishment of a branch or a liaison office (on the condition that income shall not be earned)(under the Foreign Exchange Transactions Act)
※ A foreign corporation is not allowed to register as a domestic private business.
Local Corporation
A foreigner (or a foreign-based business) investing through the establishment of a subsidiary is regarded as a domestic corporation under the Foreigner Investment Promotion Act and Commercial Law. Minimum capital requirement does not apply to a branch or a liaison office. In the case of a local corporation, the foreigner investor should invest at least 50 million won under the Foreigner Investment Promotion Act (A domestic corporation is subject to the minimum capital requirement of 50 million won under Commercial Law.)
Private business
Investment of not less than 50 million won in a private business is regarded as FDI under the Foreigner Investment Promotion Act. In actual operation of the business, there is no difference between it and a local corporation. Compared to a local corporation, the procedure for starting or closing of this type of business is simple. This type of business is under relatively little burden of social responsibility, but experiences difficulty in fund supply and securing talented employees due to its low creditworthiness. Thus, this type is used for small-sized businesses.
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