Police Director-General Ronald Dela Rosa said the policemen detained Jee Ickjoo with a fake arrest warrant last October with the intent of holding him for ransom, but killed him the same day. He said they then extracted a ransom payment from Jee's family without telling them Jee was dead.
The victim's cremated remains have been found in a funeral parlor, officials said.
He said one of the policemen has since surrendered.
Dela Rosa said he is regularly updating the South Korean ambassador on developments in the investigation.
South Korean officials have expressed alarm over the killing and other attacks on Koreans in the Philippines. Dela Rosa said the suspects used President Rodrigo Duterte's anti-drug crackdown as a cover to carry out the kidnapping.