The government is said on the 13th to be pushing a plan to require security reviews even when foreigners invest with less than a 50% equity stake in corporations related to national security, such as semiconductors, defense, and aerospace.
Currently, a security review is required when a buyer seeks 50% or more of equity in domestic corporations, or becomes the largest shareholder even if the investment equity is less than 50%. If the Ministry of Trade and Industry (MOTI) determines in the security review that it threatens national security, it can order investment restrictions, equity divestment, and other measures.
Security reviews of foreign investment are set out in the Foreign Investment Promotion Act. The equity ratio rule is specified in the enforcement decree. The Ministry of Trade and Industry (MOTI) is pushing to lower the equity threshold for security reviews from the current 50%. Specific equity benchmarks are under review, it said.
The government is considering lowering the review threshold because competition among countries over advanced technology is intensifying, and it aims to strictly review the possibility of technology leakage by foreigners.
Major countries include investments with lower equity ratios than Korea as subjects of review. Japan requires prior notification for acquiring 1% or more equity in key sectors such as defense, strategic technologies, and critical infrastructure. France reviews acquisitions of 10% or more in strategic industries, and Germany reviews 10%–25% or more depending on an industry's importance. The United States can review even minority equity investments in corporations related to critical technologies, infrastructure, and sensitive personal data (TID).
A Ministry of Trade and Industry (MOTI) official said, "Security reviews between countries are increasingly tightening," and added, "Our government is also considering expanding the fields subject to deliberation along with pushing to lower the equity ratio."
Korea introduced a foreign investment security review system in Nov. 2021. However, there have been only six actual review cases. Of these, five were all conditionally approved. The case of Sinar Mas, a large Indonesian conglomerate seeking to acquire Hyundai LNG Shipping, is under review. The predecessor of Hyundai LNG Shipping is the liquefied natural gas (LNG) dedicated carrier division of HMM, and there are concerns that a sale overseas could hit national energy security.
Also, a system that allows the government to ex officio review whether an unreported investment by a foreigner harms national security was introduced in Aug. 2024. It was found that there were no cases of ex officio review conducted during the subsequent two years.
Accordingly, some noted the need to expand related reviews or deliberations. An industry official said, "If reviews and deliberations are strengthened for national security, it is also necessary to consider that foreign investment could shrink."