Doors open to foreign cash - South Korea

Business Asia, May 17, 1999

Korea is allowing foreign investment on an unprecedented scale as the Kim Dae Jung Government tries to negotiate the country out of its worst economic downturn, an East Asia Analytical Unit (EAAU) report has found.

The report found Korea's foreign direct investment (FDI) liberalisation initiatives introduced since 1997 had boosted FDI to account for almost US$9 billion in 1998, more than double the 1996 figure.

The Korean Government is aiming to increase FDI to US$15 billion this year after levels rose 27 per cent last year.

By 2003, the government wants FDI to account for 13 per cent of gross domestic product.

Director general for the Korean Ministry of Commerce, Industry and Energy's International Trade Relations unit, Mr Kim Jong Kap, said almost 99 per cent of Korean businesses were now open to foreign investors.

"The government and the people's perception (to FDI) are changing dramatically," Mr Kim said.

"In the past, we saw foreign investment as a necessary evil because we did not want to be seen as a closed market.

"Now we feel that FDIs are going to be a major factor which will help invigorate the Korean economy."

Korea had traditionally shunned foreign investment, but since the crisis in 1997 the government has actively pursued FDI by removing discriminatory regulations and laws which discouraged investors.

Changes have included the enactment of the Foreign Investment Promotion Act 1998 (which streamlines foreign investment procedures and laws), extended and expanded tax initiatives for foreign investors, removed limits on shareholdings in domestic firms and corporate bonds, and allowed hostile cross-border mergers and acquisitions.

Korea will now also allow foreigners to own land and to participate in large public enterprises and industries.

The Korean Government has set up the Korea Investment Service Centre (KISC) to assist with investment inquiries, licence and permits, and post investment issues and problems.

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