As foreign investment in Korea expands into areas directly linked to national competitiveness—including strategic technologies, critical infrastructure, and data—calls are mounting for systematic management from an economic security perspective. Experts say Korea's foreign investment security screening system needs reform to manage technology leakage and supply chain risks without deterring foreign investment.
The Korea Enterprises Federation (KEF) jointly hosted a seminar on "Improving the Foreign Investment Security Screening System" with Rep. Kim Won-i of the Democratic Party of Korea, secretary of the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee, at the FKI Tower Conference Center in Yeouido, Seoul, on Thursday.
The event focused on economic security risks from expanding foreign investment and directions for institutional reform.
"Foreign investment remains a core growth engine for the Korean economy," Rep. Kim said in her opening remarks. "However, as foreign investment in strategic technologies and critical infrastructure can directly and indirectly affect industrial competitiveness and security, we need to clarify the legal basis and procedures to systematically evaluate such investments."
KEF Vice Chairman Kim Chang-beom emphasized that "foreign investment is evolving from simple capital inflows into strategic investments directly connected to technology, data, and supply chains." He added that "the security screening system is a core foundation for managing economic security risks and creating a stable investment environment through protecting strategic technologies and preventing circumvention investments."
Prof. Cho Soo-jung of Korea University Law School, the keynote speaker, outlined how major economies including the United States, European Union, and Japan are strengthening investment security screening. The U.S. includes minority stake investments in companies related to critical technologies, facilities, and sensitive information in its screening scope. Japan mandates prior notification for acquisitions of even 1% stakes in critical sectors. Some EU countries are expanding screening to include greenfield investments such as new factory construction and indirect investments.
"Korea's Foreign Investment Promotion Act limits screening to six areas: defense, strategic materials, state secrets, international peace, national core technologies, and national advanced strategic technologies," Prof. Cho noted. "Foreign stake acquisitions are only subject to screening when they exceed 50%. Compared to major countries, improvements are needed in screening scope, criteria, and procedures."
She proposed reforms including expanding security screening target areas, rationally adjusting stake acquisition thresholds, introducing regulations on greenfield and indirect control investments, and strengthening pre-consultation systems.
Panelists also argued that foreign investment screening should comprehensively consider impacts on industrial ecosystems and supply chains.
"We now need to examine not only investment size but what type of investment it is and how it affects our industries and future," said Park Heon-jin, Director of Investment Policy at the Ministry of Trade, Industry and Energy, emphasizing the importance of investment security screening.
Noh Hyun-seung, Director at the Korea Automobile Manufacturers Association, noted that "the automotive industry is a representative supply chain industry connecting thousands of suppliers." He warned that "if core parts companies are acquired by foreign capital, it could affect the entire industrial ecosystem through production base relocation, supply chain disruption, and changes in pricing power." He added that "comprehensive review of technology leakage and supply chain stability is necessary in the security screening process."
Others called for strengthening post-screening management systems. Chae Soo-hong, Director of Policy Cooperation at the Trade Security Administration, emphasized that "like overseas cases, we need to establish a full-cycle management system covering notification, screening, and post-management—including monitoring compliance after conditional investment approvals."
Experts predicted that strengthening investment security screening would not lead to reduced investment. "Security screening is not a device to block investment but a system to protect strategic industries while selecting sound investments," said Ryu Seong-won, head of KEF's Industrial Innovation Team. "Germany's approach of expanding screening scope while expediting approval for most investments through procedural efficiency could serve as a reference."
Prof. Cho also explained that "investment security cooperation has become an important agenda item in recent economic security consultations between countries. Institutional improvements aligned with international trends will also serve as a foundation for building trust among foreign investors."