o Foreign direct investment is one which aims to realize long-term business profits by participating in the corporate management unlike the stock investment for short-term capital gains or the portfolio investment including bond investment in which participation in management activities are not allowed, and is subject to the Foreign Investment Promotion Act.

The foreign investment defined by the Act only means the direct foreign investment, and the definition under the Act is as followings:

– Acquisition of stocks or equity of domestic companies

• In case a foreigner owns more than 10% of outstanding shares with voting rights or 10% of total investment amount with a view to establish continuous economic relationships with the applicable corporation or company by participating the economic activities of companies run by the corporation or people of Korea.
• Even if a foreign investor holds less than 10% of stocks or equity, in case i) any contract which empowers to dispatch or appointment of an officer or ii) any contract which enables to deliver or purchase raw materials or products for more than a year or iii) any contract which enables to suggest, introduce technologies or a collaborative contract is made.

– Long-term loan

• When a foreign investment company’s 1) overseas parent company ii) foreign investor iii) a company with capital investment relationships with a foreign parent company iv) a company which has capital investment relationship with a foreign investor provide the loan for more than 5 years to the applicable foreign investment company, such a loan (based on the loan term specified in the first loan agreement) shall be constituted as a foreign investment.

– Contribution (enforced as of ’07 .10.28)

• It is for a foreigner to contribute to the applicable corporation for establishing continuous cooperative relationships with non-profit corporation in the science sector which corresponds to the standard set forth in Presidential Decree per research manpower, facilities, etc.
•In addition, in case the contribution of a foreigner to a non-profit corporation is acknowledged as a foreign investment by the Foreign Investment Committee in accordance with standards prescribed by the Presidential Decree for business contents of non-profit corporation.