Koreans fear bargain hunt by foreigners

Business Asia, Sept 21, 1998

South Koreans are troubled by a growing sense that their nation is "up for grabs" as foreign investors seek bargains in the embattled economy.

Mr Kum Jin Ho, a former South Korean Trade Minister and the current chairman of the International Trade and Business Institute, said Korean conglomerates and banks "have to turn to foreign investors since few domestic investors have sufficient resources".

"In many cases, foreign investors tend to offer much lower prices than expected," he said.

"It seems as if the entire nation of Korea, including its public corporations, banks, companies and real estate, are all up for grabs.

"Therefore, there are sometimes public concerns about the possibility that many essential industries may be taken over by foreign interests."

Speaking at an Australia-Korea Business Council seminar, Mr Kum claimed Korea now had an import liberalisation rate of 99.9 per cent.

He said rice and eight beef-related items were the only import sectors still significantly controlled by the government.

"In the past, mere lip service was given to liberalisation. However, this is no longer the case," Mr Kum said.

Signs of stabilisation or change are emerging in the Korean economy.

Mr Kum said foreign currency reserves of US$40 billion had been accumulated faster than set down by the International Monetary Fund.

Korea's much-criticised chaebol, or conglomerates, were now required to reduce their debt-equity ration from the current average of 400 per cent to 200 per cent. Cross guarantees among chaebol subsidiary companies have been banned.

On the employment front, layoffs have been legalised, opening the way for corporate restructuring.

Sounding a negative note, Mr Kum said South Korea's unemployment rate of about 7 per cent was likely to grow, causing social instability in the absence of a welfare safety net.

He said the government required US$3.8 billion a year to establish such a net.