International | Apr 07 2006
South Korea has grown to become the world’s 11th largest economy, with forecasts for growth in GDP of about 5% for 2006 indicating its run of strong growth is set to continue.
There are some clouds on the horizon though as popular opinion is turning against foreign investment as overseas investors profit from their holdings in and bids for Korean companies.
The issue is one of a level playing field, as while there are some protective measures in place for some industries and companies others remain open for foreign investors, though for how long no one knows.
Officially, the government states market principles should be the guiding factor, but at the same time it is believed to be considering extending such protection beyond the media, telecommunications and electricity sectors, which are currently protected by foreign takeovers.
Current examples are opposition to the takeover offer by Carl Icahn for tobacco and ginseng company KT&G, as well as an investigation into the profits made by US investment company Lone Star when it bought into Korea First Bank a few years ago.
The issue is causing foreign investment levels in South Korea to fall, with direct foreign investment for the March quarter coming in at US$2.2bn, down almost 30% from the figure a year earlier.
For a country where the level of its economy is above that of its society generally, the creation of such an environment could prove problematic as investment money may be tempted elsewhere, particularly given the ongoing optimistic outlook for growth in both China and India.
