South Korea’s Technocratic Era: Promoting OFDI in AI, Energy, Infrastructure, and Defense with Strategic Focus on the Middle East
Korea Focus
Jiwon HaSenior Counsel, Korea Group
Inhye Park Business Development Lead, Korea Group
The inauguration of President Lee Jae-myung in June 2025 has marked a decisive shift in South Korea’s approach to global economic engagement. His administration has adopted a distinctly technocratic model of governance, anchored in evidence-based policymaking and long-term planning. South Korea’s position as a global technology leader—ranked sixth in the 2024 Global Innovation Index and dedicating nearly 5% of GDP to research and development—provides the foundation for this new strategy.
South Korea is now seeking to translate these domestic capabilities into outward foreign direct investment (OFDI) that directly supports the transformation agendas of Middle Eastern economies. Regional partners such as Saudi Arabia, the United Arab Emirates and Qatar are pursuing ambitious 2030–2035 strategies in digitalisation, energy transition, and industrial diversification. South Korea’s commitment of $73.8 billion to AI development, combined with advanced expertise in renewable energy, infrastructure modernisation and precision agriculture, aligns closely with these priorities.
Importantly, this strategy builds on decades of South Korea–Middle East cooperation. Since the 1970s, Korean companies have been integral to the region’s infrastructure and energy development. Today, that relationship has matured into sophisticated partnerships in high-technology sectors, supported by South Korea’s neutral diplomacy and institutional mechanisms such as Korea Trade-Investment Promotion Agency (KOTRA)’s dedicated regional offices.
South Korea’s OFDI is governed primarily by the Foreign Exchange Transaction Act and its Presidential Decree. These statutes define investment broadly, covering both equity acquisitions and contractual partnerships such as long-term supply agreements, technology transfer and overseas construction. The framework is intentionally flexible, allowing Korean companies to pursue diverse models of engagement with foreign partners.
For technology-sensitive projects, oversight is exercised under the Act on Prevention of Divulgence and Protection of Industrial Technology, with the Industrial Technology Protection Committee (ITPC) reviewing investments involving national core technologies. This ensures that South Korea balances global expansion with the protection of strategic assets. Institutional support is provided by KOTRA, which offers regulatory guidance and market intelligence, and by specialised agencies such as the Defence Acquisition Program Administration for defence-related exports and joint ventures.
Energy remains the cornerstone of South Korea’s Middle East strategy. The country imports around 70% of its crude oil and 40% of its liquefied natural gas from the region, ensuring that stable energy ties continue to underpin the relationship. Yet the focus today extends well beyond hydrocarbons. The December 2023 Korea–GCC Free Trade Agreement, one of only three such agreements signed by the GCC, provides a preferential trade framework that enhances market access for Korean firms and facilitates technology transfer.
At the same time, South Korea’s government has institutionalised dialogue mechanisms such as regular Korea–GCC summits, presidential envoys, and joint working groups. These initiatives reflect a deliberate move from transactional project competition toward long-term, structured industrial cooperation. By emphasising human capital development and knowledge-sharing—ranging from vocational training to cultural content partnerships—Korea also recognises the importance of soft power in sustaining strategic relationships.
South Korea’s technocratic era is reshaping its engagement with the Middle East.
Agriculture is emerging as a prominent field of cooperation. With food security a pressing issue across the Gulf, South Korea’s advanced smart farm technologies offer solutions tailored to arid environments. The Nongshim Smart Farm in Riyadh, scheduled for completion in December 2025, integrates vertical farming and greenhouse systems to produce high-demand vegetables for local distribution. In parallel, the ROK–Qatar Smart Farm Cooperation Committee, established under an October 2023 MoU, is validating Korean equipment for desert conditions and exploring large-scale investment cooperation.
Artificial intelligence and digital infrastructure represent another priority sector. The UAE’s National AI Strategy 2031 and Saudi Arabia’s Vision 2030 Digital Economy Plan are driving massive investments in AI, cloud computing and data localisation. Korean firms are well-positioned to meet this demand. Naver’s AI Data Centre in Saudi Arabia delivers localised cloud services compliant with data residency requirements, while Kakao Enterprise’s partnerships in the UAE provide AI-powered workplace and government solutions.
In energy, South Korea’s OFDI strategy is closely tied to regional decarbonisation efforts. Joint ventures such as the Samsung SDI–Masdar battery plant integrate Korean battery technology with UAE renewable capacity, targeting both regional EV markets and global supply chains. Meanwhile, Hanwha Q CELLS’ solar partnerships across the Gulf contribute directly to renewable energy targets, while South Korea’s hydrogen expertise positions it as a strategic partner in Gulf states’ ambitions to become global hydrogen exporters.
Infrastructure and smart city development continue to provide significant opportunities. Beyond traditional construction contracts, South Korea is offering integrated solutions that combine physical infrastructure with digital management. Hyundai Rotem is expanding its presence in metro and high-speed rail projects, while the Korea Land and Housing Corporation has signed MoUs on smart city planning and governance systems. These projects illustrate a shift toward comprehensive, revenue-generating partnerships that extend into long-term urban management.
Defence and aerospace are also critical sectors. Middle Eastern governments increasingly require localised defence production, and South Korea has responded with joint ventures and technology transfer arrangements. Hanwha Aerospace’s collaborations in the UAE cover missile systems and satellite technologies, while KAI’s UAV initiatives in Saudi Arabia combine Korean drone technology with local operational requirements. These partnerships often extend beyond equipment supply to include training, maintenance and long-term capability development.
The table below provides a consolidated overview of how South Korea’s OFDI approach aligns with the Middle East’s strategic priorities, highlighting current or emerging projects that anchor these partnerships:
Sector
South Korea’s OFDI Approach
Middle East Investment Demand
Current/Emerging Projects
Artificial Intelligence & Data
Establishment of AI R&D centres; investment in cloud and data infrastructure; expansion of Korean SaaS platforms
United Arab Emirates: National AI Strategy 2031; Saudi Arabia: Vision 2030 Digital Economy Plan; regional demand for data localisation
Naver Cloud AI Data Centre (Saudi Arabia); Kakao Enterprise collaborations (United Arab Emirates)
Energy Transition
Green hydrogen partnerships; export of solar and battery storage technologies; participation in large-scale decarbonisation projects
Saudi Arabia: Saudi Green Initiative (50% renewables by 2030); United Arab Emirates: Net Zero 2050; regional giga-projects including Neom (Saudi Arabia) and Masdar (United Arab Emirates)
Samsung SDI–Masdar Battery Joint Venture (United Arab Emirates); Hanwha Q CELLS solar partnerships (Saudi Arabia and wider GCC)
Infrastructure & Smart Cities
Smart mobility and railway systems; integrated smart city solutions; digital twin urban planning
Saudi Arabia: Neom and Qiddiya; United Arab Emirates: Smart Dubai; GCC-wide urban expansion programmes
Hyundai Rotem metro and high-speed rail projects (Saudi Arabia and United Arab Emirates); Korea Land & Housing Corporation smart city MoUs (GCC)
Defence & Aerospace
Joint ventures in aerospace manufacturing; defence technology transfer; establishment of MRO hubs
United Arab Emirates and Saudi Arabia: defence diversification strategies; mandates for localised defence production
Hanwha Aerospace collaborations (United Arab Emirates); KAI UAV initiatives (Saudi Arabia)
Agricultural Technology
Export of smart farm and vertical farming systems; climate-controlled agriculture adapted to arid conditions
Qatar: National Food Security Strategy 2030; Saudi Arabia: desert agriculture initiatives; GCC-wide food self-sufficiency strategies
Nongshim Smart Farm (Riyadh, Saudi Arabia); ROK–Qatar Smart Farm Cooperation Committee; regional demonstration smart farms (GCC)
South Korea’s “balanced diplomacy” allows it to maintain cooperation across the Middle East without becoming entangled in regional rivalries. This pragmatic positioning is an asset, giving Korean firms greater flexibility than competitors from countries more tightly aligned to one bloc.
The emphasis on technology transfer and capability development is also significant. Rather than focusing solely on market access, Korea’s OFDI involves joint research, talent development, and institutional capacity-building. This approach not only secures goodwill but also creates sustainable foundations for long-term economic partnership.
President Lee Jae-myung’s technocratic governance represents more than a change in style; it signals a substantive reorientation of South Korea’s global role. By channelling its technological expertise into outward FDI across artificial intelligence, energy, infrastructure, agriculture and defence, Korea is moving from the position of a fast follower to that of a recognised leader in technology-driven global partnerships.
For Middle Eastern economies, South Korea presents a unique combination of advanced innovation, investment capacity and political neutrality. In parallel, these partnerships strengthen South Korea’s energy security, broaden its export markets and consolidate its technological sovereignty. Their continued success will rest on political commitment, talent retention and institutional resilience, but the direction is already clear: South Korea’s technocratic era is reshaping its engagement with the Middle East and establishing the foundations of a durable strategic partnership for the decade ahead.
For further information,please contact Jiwon Ha and Inhye Park.
Published in October 2025
