South Korea FDI Security Review: NASTs & Defense Industry Restrictions

 Korea FDI Security Review

National Security Review Framework for Foreign Direct Investment (FDI) in South Korea

South Korea has significantly strengthened its screening system for Foreign Direct Investment (FDI) to ensure economic security and prevent the leakage of critical technologies. 

This regime is administered primarily by the Ministry of Trade, Industry, and Energy (MOTIE) and strictly manages investments in National Advanced Strategic Technologies (NASTs) and the defense industry.

1. National Advanced Strategic Technologies (NASTs)

The South Korean government designates and manages technologies that are essential for national security and supply chain stabilization as "National Advanced Strategic Technologies."

• 19 Designated Technologies: As of 2025, the government has designated a total of 19 core technologies. This list includes the addition or expansion of the Robotics and Defense sectors to the existing four major fields of Semiconductors, Displays, Secondary Batteries, and Biotechnology.

• Investment Restrictions: If a foreign investor intends to acquire shares of a domestic company possessing these technologies to exercise managerial control, obtaining prior approval from the Minister of Trade, Industry, and Energy is mandatory. The intensity of the review is particularly high if the technology in question was developed using government R&D budgets.

2. MOTIE Security Review

A robust security review procedure is operated based on the Foreign Investment Promotion Act and the Act on Prevention of Divulgence and Protection of Industrial Technology.

• Review Targets: The review targets cases where a foreign entity intends to engage in Mergers and Acquisitions (M&A) or acquire de facto managerial control of a company possessing National Core Technologies or a defense industry enterprise.

• Ex Officio Review: Through recent legal amendments, the government's authority to initiate a review ex officio has been strengthened. This allows the government to start a review if a security threat is suspected, even if the foreign investor does not voluntarily file a report, in order to block circumvention attempts to steal technology.

• Procedure: Following a preliminary review by the Security Review Expert Committee, the Foreign Investment Committee (chaired by the Minister of MOTIE) makes the final decision to approve, approve conditionally, or disallow (order the sale of shares) the investment.

3. Defense Industry Restrictions

As the defense industry is directly linked to national existence and sovereignty, it is subject to the strictest FDI controls.

• Mandatory Prior Approval: Unlike general manufacturing investments which typically operate on a post-investment reporting system, foreign investors intending to invest in a company designated as a Defense Industry Enterprise must obtain prior approval from the Minister of Trade, Industry, and Energy before signing a contract.

• Security Risk Assessment: Precise and targeted reviews are conducted in cooperation with the Ministry of National Defense and the National Intelligence Service (NIS) to assess whether there is a possibility of disrupting the production and procurement of defense materials or leaking classified military secrets.