S.Korea sees sharp foreign investment
growth
03:43 a.m. Jan 04, 1999 Eastern
By Yoo Choon-sik
SEOUL, Jan 4 (Reuters) - South Korea said on
Monday it expects to see a sharp 70 percent rise in
foreign direct investment this year but analysts said
labour and currency trends could pose problems for
foreign investors.
''Foreign investment will continue to grow as many
equity or asset sale talks will produce fruit,'' said Lee
Hahn-koo, president of the Daewoo Economic
Research Institute.
The finance ministry said in a statement it expects
foreign direct investment to top $15 billion during this
year, up sharply from a provisional $8.85 billion for
1998.
The 1998 figures, based on investment plans filed
with the government, represented 27 percent growth
from $6.97 billion in 1997, the ministry statement
said.
The brisk investment, if materialised, will give a great
boost to the nation's efforts to build up its foreign
currency reserves and stave off any new financial
crisis.
''Active foreign investment will be especially
important as it could make up for the expected drop
in the current account surplus,'' said Kang
Myung-hoon, an economist at the Hanwha Economic
Research Institute.
South Korea's current account surplus has been
forecast to dip to $20-$25 billion in 1999 from a
projected $40 billion in 1998, compared with an
$8.17 billion deficit in 1997.
Rebuilding its foreign currency reserves has been the
number one target for South Korea, whose depleted
foreign exchange reserves forced the country to
accept a huge International Monetary Fund-led
bailout in December 1997.
The ministry statement said foreign investors would
likely look in particular towards the nation's financial,
tourism and petrochemical industries for investment.
Government data showed 53.1 percent, or $3.46
billion, of the total investment plans received in 1998
were to take over existing business operations from
Koreans.
Major investors in 1998 included Amkor Technology
Inc and Fairchild Semiconductor Corp of the United
States, both of which agreed to invest $600 million
and $455 million respectively to acquire
semiconductor manufacturing operations in Korea.
The ministry statement said such trends would
accelerate as the restructuring efforts of the nation's
big business conglomerates, or chaebol, gain steam.
But analysts said the progress in chaebol restructuring
would at the same time mean a massive wave of
layoffs, which in turn could trigger strong resistence
from the unions.
''Last year most people generally understood
restructuring was a life-or-death matter but more big
layoffs could lead to increased protests from labour,''
said Kang of Hanwha.
The nation's unemployment rate soared to 7.3 percent
in November from 2.6 percent a year ago and
analysts have said the rate could swell to around 8.5
percent.
The figures are still moderate for most industrialised
economies but were unthinkable for South Korea
which had been used to persistent shortages in the
workforce.
The strengthening won could also hinder foreign
investment, as the rising value of the currency,
unsupported by any tangible improvement in
economic fundamentals, would make local assets
look comparatively expensive.
The won closed the year's first trading session at
1,186 per dollar on Monday, near last year's highest
level of 1,185 and sharply stronger from over 1,990
won in December, 1997.
Copyright 1999 Reuters Limited. |
