Impact and Concerns over Foreign Investment in Korea
The Samsung Economic Research Institute (SEI) notes that the growing presence of foreign capital in Korea's banking sector and stock market might have a negative impact on the Korean economy. The institute warned that the government needs a more selective in attracting foreign direct investment and must strengthen safeguards to protect the economy.
In a report, "Truth and Falsehood About Opening to Foreign Capital," the SEI said that one-tenth of Korean listed companies face a threat to management since foreigners are the majority shareholders.
The report said that Korean capital has been suffering from reverse discrimination since the Asian financial crisis. Following ths crisis, South Korea lifted barriers to foreign capital and offered incentives in return for investment.
According to the Korea Hreald, foreign direct investment in Korea rose in the first quarter at the slowest pace since the fourth quarter of 2003 after the government reduced tax breaks for overseas investors, the Ministry of Commerce, Industry and Energy said yesterday.
In addition, the Korean government reduced the terms of tax breaks for foreign investors from 10 years to 7 years.
Foreign investment in the first quarter 2005 includes Standard Chartered Plc's $1.73 billion purchase of Korea First Bank.
The Samsung institute argues that Korea needed quality (foreign) capital-- money flowing into the country, accompanied by state-of-art technologies, and fostering job creation.
According to the SEI report, non-Korean firms held stakes as major local shareholders in 53 of 499 listed Korean companies by the end of 2004.
Moreover, as of October 2004, 138 companies listed foreigners as the second-largest shareholder. Many experts feel this put these companies at risk of takeover.
The SEI said foreign holdings surpassed 30 percent in 18 of the 20 largest Korean companies by market value. More importnat, foreign shares exceeded 50 percent at seven companies, including Samsung Electronics Co., POSCO and Hyundai Motor Co.
Foreign holdings in Korea's 10 biggest industrial groups reached 46.9 percent at the end of 2004
The Samsung institute also took issue with banning local conglomerates from owning banks.
In Korea, industrial capital cannot hold more than 10 percent of a local bank while their voting rights are limited to less than 4 percent.
The SEI argues that such a rule was made obsolete years ago in the United States.
In a report, "Truth and Falsehood About Opening to Foreign Capital," the SEI said that one-tenth of Korean listed companies face a threat to management since foreigners are the majority shareholders.
The report said that Korean capital has been suffering from reverse discrimination since the Asian financial crisis. Following ths crisis, South Korea lifted barriers to foreign capital and offered incentives in return for investment.
According to the Korea Hreald, foreign direct investment in Korea rose in the first quarter at the slowest pace since the fourth quarter of 2003 after the government reduced tax breaks for overseas investors, the Ministry of Commerce, Industry and Energy said yesterday.
In addition, the Korean government reduced the terms of tax breaks for foreign investors from 10 years to 7 years.
Foreign investment in the first quarter 2005 includes Standard Chartered Plc's $1.73 billion purchase of Korea First Bank.
The Samsung institute argues that Korea needed quality (foreign) capital-- money flowing into the country, accompanied by state-of-art technologies, and fostering job creation.
According to the SEI report, non-Korean firms held stakes as major local shareholders in 53 of 499 listed Korean companies by the end of 2004.
Moreover, as of October 2004, 138 companies listed foreigners as the second-largest shareholder. Many experts feel this put these companies at risk of takeover.
The SEI said foreign holdings surpassed 30 percent in 18 of the 20 largest Korean companies by market value. More importnat, foreign shares exceeded 50 percent at seven companies, including Samsung Electronics Co., POSCO and Hyundai Motor Co.
Foreign holdings in Korea's 10 biggest industrial groups reached 46.9 percent at the end of 2004
The Samsung institute also took issue with banning local conglomerates from owning banks.
In Korea, industrial capital cannot hold more than 10 percent of a local bank while their voting rights are limited to less than 4 percent.
The SEI argues that such a rule was made obsolete years ago in the United States.
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