South Korea Slips to Third in Investment Appeal

AMCHAM survey shows Hong Kong overtakes South Korea as a preferred Asia-Pacific regional HQ base

Members of the HD Hyundai Heavy Industries labor union chant slogans at the headquarters in Ulsan. (Photo courtesy of HD Hyundai Heavy Industries Labor union)

South Korea, which had consistently ranked second after Singapore in a survey on preferred destinations for attracting investment in the Asia-Pacific region, slipped to third place this year, overtaken by Hong Kong. The results confirm a perception that regulation and labor institutions are undermining Korea’s investment appeal.

According to the American Chamber of Commerce in Korea (AMCHAM) on April 15, results from its “2026 Domestic Business Environment Survey” showed that Korea ranked third in the assessment of competitiveness as a location for regional headquarters, with 11.8%, following Singapore (58.8%) and Hong Kong (17.6%). Korea had remained in second place behind Singapore since 2022, but its ranking declined in this survey.

AMCHAM commented, “This shows that Korea’s competitiveness in corporate activity and the investment environment is being evaluated as relatively low compared with major Asian competitor countries.”

The most frequently cited key constraints on attracting regional headquarters were labor policy and labor-market flexibility (71%) and regulations unique to Korea or with low alignment to global standards (61%).

Legal risks for management and regulatory uncertainty were also identified as major burden factors. These factors were found to affect not only short-term investment decisions but also companies’ overall mid- to long-term strategies.

In fact, 68.8% of respondents assessed the domestic regulatory environment as “restrictive” or “very restrictive.”

The current regulatory conditions are perceived as a significant constraint on corporate activity, and this perception is analyzed as contributing to a weakening of competitiveness in attracting regional headquarters.

Concerns are also continuing in future industrial sectors such as artificial intelligence (AI). Respondent companies pointed to the need for institutional improvements related to conditions for data use, cross-border data transfers, the clarity of AI regulation and governance, and access to cloud infrastructure and securing AI talent.

Still, the overall assessment of the business environment remained at a relatively favorable level, with a net positive of 23.4%. In addition, 46.9% of respondent companies said they plan to maintain their investment scale at the current level, and more than 60% responded that they would also maintain employment, confirming that a stability-focused management stance is strengthening.

Meanwhile, views were mixed on the level of preparedness for inclusion in the MSCI Developed Markets Index. Some assessed preparations as proceeding smoothly, but many viewed them as still insufficient or only partial.

As future improvement tasks, companies suggested ensuring predictability and consistency of regulations, strengthening alignment with global standards, and guaranteeing fair market access for foreign companies.

James Kim, Chairman of AMCHAM, said, “This decline in ranking is regrettable, but at the same time it is a signal calling for strengthened competitiveness,” adding, “As Korea remains a market with stability and growth potential, it has enough strength to rebound if it improves structural challenges such as regulatory predictability and labor-market flexibility.”

AMCHAM plans to present directions for policy improvement through the “Domestic Business Environment Insight Report,” scheduled for publication later this month.

It also plans to hold the “2026 Domestic Business Environment Seminar” on April 21 to discuss policy directions for improving the regulatory environment and revitalizing investment based on major issues, including the results of this survey.

Jung Suk-yee