By Lee Hyo-sik
Staff Reporter

The government will ease rules restricting purchases of overseas properties to encourage individual and foreign investors to invest more abroad, a move to spur the outflow of funds amid bloated foreign exchange reserves and a stronger won against the dollar.

It will unveil details of deregulation measures, including the lifting of regulations on overseas property investment by the end of June to further liberalize flows of capital out of the country, the Ministry of Finance and Economy (MOFE) said Monday.

The government has recently launched a public-private joint taskforce composed of government ministries, universities and research institutes, to map out a comprehensive set of measures to deregulate restrictions on outgoing investment.

Local investors will be allowed to purchase overseas properties through real estate investment trust funds managed by the asset management firms, an MOFE official said.

The government is also studying ways to relax rules requiring the domestic institutional investors to obtain prior approval from the regulators for the trading of financial derivatives products in overseas markets.

Various state funds are expected to invest more easily in foreign stock markets.

It plans to expand the limit of individuals’ foreign investment, currently set at $1 million, while drastically easing regulations restricting housing purchases overseas.

Under the current rules, individuals are allowed to buy a house or apartment for the purpose of residing in foreign countries for more than two years, with the value of the house restricted to $300,000.

A local media reported yesterday that the ministry would allow Korean parents to purchase houses for their children studying in foreign countries. But the ministry rejected the report, saying it has never considered such measures.

Many Korean parents have been complaining that the restriction does not reflect the reality as they had no other choice but to use illegal means to buy houses for their children enrolled at schools in foreign countries like the United States and Canada.

The government has recently shifted its policy from focusing only on bringing in foreign capital into the country and limiting an outflow of capital to promote overseas investment by domestic individuals and companies.

A change in the government policy is mainly attributable to an accumulation of a large amount of foreign currency reserves and rising trade surpluses, which have strengthened the value of the Korean won against the U.S. dollar over the past year.

The Korean government has heavily intervened in the domestic and foreign currency markets to keep the value of the won low against the greenback by buying dollars.

The intervention is aimed at keeping a stronger won from hurting competitiveness of exports overseas.

It has resulted in an ``excessive’’ increase in the amount of dollars the government holds as reserves, incurring hundreds of billions of won for interest payments each year on state bonds it issued to purchase dollars.

leehs@koreatimes.co.kr