Foreign Direct Investment (FDI) Restricted Industries Guide — Key Points to Check Before Entry
Foreign Direct Investment (FDI) is not open to every industry in Korea.
This guide is for foreign investors looking to set up a corporation in Korea, Korean companies searching for joint venture partners, and overseas headquarters reviewing an equity acquisition.
We'll walk through the differences between excluded, restricted, and closed industries — and the points where practitioners most often get stuck.
What "Excluded Industries" Really Means in FDI
FDI excluded industries can't be summed up with a single line saying "investment is prohibited."
Here's the core point.
Exclusion, restriction, and closed status each rest on different legal grounds and follow different procedures.
The Difference Between Closed, Excluded, and Restricted
The first thing to look at is classification.
- Closed industries: Sectors where foreign investment itself is not permitted
- Partially open (restricted) industries: Sectors that can only be entered up to a certain equity ratio or through a joint venture
- Prior approval / notification industries: Sectors where entry is possible but separate licensing is required
In practice, people lump everything under the word "excluded," but in actual screening, these three categories flow through completely different procedures.
Where to Find the Governing Law
The legal basis is spread across the Foreign Investment Promotion Act and the Ministry of Trade, Industry and Energy notification "Regulations on Foreign Investment."
Detailed classification is operated based on the Korea Standard Industrial Classification (KSIC) codes.
You can find the original statutes at the Korean Law Information Center, and you can check sector-by-sector opening status at the Ministry of Trade, Industry and Energy and Invest KOREA.
Caution: The notification is revised relatively often. Citing last year's reference materials as-is can immediately trip you up in actual screening, so check with the relevant authority.
Fully Closed Industries — Where Foreign Capital Entry Itself Is Blocked
This is the first area to verify.
Around 60 industries are classified as closed under KSIC, centering on areas tied directly to public interest, national security, and public health.
Representative Closed Industries
| Category | Example Industries | Notes |
|---|---|---|
| Administration / Legislation | Legislative bodies, judiciary, general administration | Public sector |
| Foreign Affairs / Defense | Foreign affairs administration, defense activities | National security |
| Part of Education | Some elementary, middle, and high school institutions | Non-profit school corporation area |
| Part of Finance | Central bank operations | Currency and credit area |
| Part of Broadcasting | Terrestrial broadcasting transmission | Separate legislation applies |
Once your business falls into this table, sole foreign entry is generally difficult.
The real review point becomes whether a workaround is possible through a joint venture or indirect investment structure.
What Happens When Sole Entry Is Blocked
In actual screening, equity structure, voting rights, and board composition are all reviewed together.
Even if equity is lowered on paper, there are cases where the entity gets reclassified as foreign investment because voting rights agreements tilt toward the foreign side.
Whether your own structure sits on this borderline is a point that requires case-by-case review.
Partially Open Industries — Where Equity Ratios and Joint Venture Conditions Apply
This is the area you'll run into more often than fully closed industries.
Partial opening typically comes with conditions like "foreign equity under 50%," "joint venture with a Korean national," or "separation of specific business areas."
Representative Restricted Industries and Conditions
| Industry | Restriction | Basis |
|---|---|---|
| Some meat wholesale | Entry under certain conditions | FDI Notification |
| Newspaper publishing | Foreign equity restriction | Newspaper Act |
| Magazines / Periodicals | Foreign equity restriction | Magazine Act |
| News service business | Foreign equity restriction | Separate legislation |
| Domestic air transport | Foreign equity under 50% | Aviation Business Act |
| Domestic regular passenger transport | Foreign equity restriction | Shipping Act |
| Part of power generation / transmission | Equity and market share restrictions | Electric Utility Act |
| Key telecommunications business | Foreign equity 49% or less | Telecommunications Business Act |
In practice, who holds which voting rights under whose name is more delicate than the ratios written in the table.
What People Often Miss in Equity Calculations
A frequently missed area is the summing up of indirect equity.
Calculations get tangled in structures where an overseas headquarters invests again through a Korean subsidiary, or where a foreign executive holds delegated voting rights.
If this part is weak, the application can be rejected at the foreign investment notification stage, or licensing can be revoked later.
Practical tip: Joint venture ratios must be recalculated on a "voting rights basis," not simply a capital ratio basis. You have to look at preferred shares, convertible bonds, and side agreements together to see the real difference at screening.
Industries Requiring Prior Licensing — Where Notification Alone Isn't Enough
It's most common for the foreign investment notification to clear but the sector-specific licensing to get stuck.
This is especially true in environment, food, medical devices, finance, transportation, and education.
Supervising Authorities by Field
- Food and health functional food: Ministry of Food and Drug Safety
- Medical devices and pharmaceuticals: Ministry of Food and Drug Safety
- Financial business: Financial Supervisory Service / Financial Services Commission
- Telecommunications and broadcasting: Ministry of Science and ICT / Korea Communications Commission
- Education: Ministry of Education / Metropolitan and Provincial Offices of Education
- Transportation and logistics: Ministry of Land, Infrastructure and Transport / Ministry of Oceans and Fisheries
Even with a lot of paperwork, when the supervising authorities differ, the procedures don't run in parallel.
It's not unusual for the licensing stage to take six months or more even after the foreign investment notification is complete.
Points Most Often Stuck in Practice
What looks simple on the surface but actually gets stuck most often:
- Notarized translation of the home headquarters' business registration and articles of incorporation
- Documents verifying directors are free of disqualifying causes
- Whether an actual lease agreement and facility standards are met
- Explanation of the source of funds and remittance flow
- Securing personnel holding sector-specific qualifications (pharmacists, architects, etc.)
More important than the documents themselves is the explanation of the fund flow.
Even with money in the account, if the source of funds is weakly explained, things unravel immediately.
For accurate fees and procedures, please confirm through expert consultation.
Free consultation: 02-363-2251 / KakaoTalk: alexkorea
Checking Your Industry by KSIC Code First
A serious review starts from confirming the KSIC code.
Even within the same "wholesale business," opening status splits depending on the detailed code.
Code Verification Procedure
- Search the 5-digit code closest to your business at Statistics Korea KSIC Classification
- Confirm the foreign investment opening status of that code at Invest KOREA industry search
- Re-confirm restriction or closed status in the annex to the "Regulations on Foreign Investment"
- If licensing is required, contact the supervising ministry in advance
A single line of code is clearer than pages of writing.
If the code is ambiguous, classification restarts from scratch at the screening stage, which doubles the time required.
When Code Classification Is Ambiguous
Composite businesses, new industries, and platform businesses don't fall cleanly into KSIC classifications.
In those cases, you need to go through prior inquiry with the Ministry of Trade, Industry and Energy or KOTRA Invest KOREA to finalize the classification.
In a recent similar case, a platform operator's code classification shifted from "wholesale" to "information service business," and the opening conditions changed completely.
How your own business will be classified can vary case by case, so a separate review is needed.
Foreign Investment Notification and Registration — Confirming Excluded Industries First
Industry verification comes before the notification itself.
Notification Flow Summary
| Step | Content | Supervising Authority |
|---|---|---|
| Step 1 | Confirm KSIC code and opening status | Investor |
| Step 2 | Foreign investment notification | Foreign exchange bank or KOTRA |
| Step 3 | Capital remittance and currency exchange | Foreign exchange bank |
| Step 4 | Corporate establishment registration | Competent registry office |
| Step 5 | Business registration | Competent tax office |
| Step 6 | Foreign-invested company registration | KOTRA |
| Step 7 | Sector-specific licensing | Supervising ministry by field |
If industry verification doesn't end at Step 1, every step after it wobbles.
Common Reasons for Rejection at the Notification Stage
- Filing a notification despite the industry being classified as closed
- Equity ratio calculation errors (omission of indirect equity)
- Insufficient evidence of fund sources
- Missing apostille or consular verification on home-country documents
- Business plan inconsistent with the actual KSIC code
Fees vary case by case, so we'll guide you precisely during the free consultation.
Frequently Asked Questions (FAQ)
Q1. If my business falls under an FDI excluded industry, is entry into Korea completely impossible?
Complete impossibility is limited to closed industries.
Partially open industries may still allow entry through joint ventures or equity adjustments, and licensing industries are handled through separate procedures.
The first step is confirming in advance which category your industry falls under.
Q2. How do I check whether my industry is an excluded one?
First finalize the 5-digit KSIC code, then check the opening status in the annex to the "Regulations on Foreign Investment" and the Invest KOREA industry search.
For composite businesses, the code classification itself becomes the issue, so case-by-case review is needed.
Q3. Is the joint venture ratio based on capital or voting rights?
The principle is voting rights.
Even if the capital ratio is low, the entity can be reclassified as foreign-controlled depending on voting rights agreements, preferred shares, or convertible bond structures.
If this part is weak, licensing can be revoked after the fact.
Q4. Can I start business immediately after completing the foreign investment notification?
The notification is just the starting point — sector-specific licensing is required separately.
In food, medical devices, telecommunications, finance, transportation, and education, the supervising ministry's licensing process can take an additional several months.
Q5. Can I just put foreign executives in place and route equity through Korean nationals' names?
Nominee-trust structures may violate the Foreign Investment Promotion Act.
In actual screening, voting rights, fund flows, and side agreements are all reviewed together, so superficial workarounds aren't recommended.
Q6. If the notification is revised and opening status changes, what happens to existing corporations?
In principle, existing registrations are maintained, but new standards apply when capital is increased or industries are added.
The outcome differs depending on when your corporation was registered, so separate verification is needed.
Need an Expert Consultation?
An FDI excluded-industry determination can split on a single line of KSIC code.
Whether it's closed, restricted, or subject to licensing changes the procedure, the timeline, and the cost entirely.
VISION Administrative Office handles foreign investment notification, corporate establishment, and sector-specific licensing all in one process.
- Phone consultation: 02-363-2251
- KakaoTalk: alexkorea
- Email: 5000meter@gmail.com
- Address: 3F, 324 Toegye-ro, Jung-gu, Seoul (Seongwoo Building), 04614
- Office: VISION Administrative Office
Fees vary case by case, so we'll guide you precisely during the free consultation.
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