By Kim Jae-kyoung
Staff Reporter



Finance-Economy Minister Han Duck-soo stresses the importance of foreign investment in an exclusive interview with The Korea Times at his office in Kwachon, Kyonggi Province, Monday.
/ Korea Times

The government will further improve the environment for foreign investors by easing regulations and providing incentives because investment is crucial for the country’s long-term growth, the nation’s top economic policymaker said.
Finance-Economy Minister Han Duck-soo said that sentiment against foreign capital among some Korean people does not correspond with the policies of the Korean government.

In an exclusive interview with The Korea Times prior to the 12th APEC Finance Ministers’ Meeting slated for Sept. 8-9 on Cheju Island, Han said that the government has never opposed foreign capital.

``Foreign capital is a critical factor for sustainable economic growth and the Korean government will continue its efforts to make its environment attractive to foreign investors,’’ he said.

``Foreign capital makes various contributions by increasing output and employment, and improving our competitiveness with leading technologies and high productivity,’’ he added.

He pointed out that as of 2003, foreign invested companies generated 13.7 percent of total sales and provided 8.7 percent of jobs in the domestic manufacturing industry.

``It is nonsense that Korean people are criticizing foreign investors operating here for their investment gains, while Korean investors make such gains in overseas markets,’’ he said.

``No country has been successful without active foreign investment. Investment gains by foreign funds here should be considered as a reward for risk-taking,’’ he added.

Citing the case of Newbridge Capital, he said that the Korean government is also a beneficiary of the sale of the Korea First Bank (KFB). The government held a 49 percent stake in the KFB at the time of the sale.

To attract more foreign investment, Han said that the government will continue to pursue financial deregulation and advance the financial supervision system.

``The Financial Holding Companies Act will be amended in the second half of this year to allow foreign financial companies to set up financial holding companies in Korea,’’ he said.

``And the government will start the process by preparing, by the end of this year, a proposal for consolidation of laws pertaining to capital markets,’’ he added.

Korea’s Growth Potential

Han said he is positive about the economic outlook for the second half as investment and consumption are showing signs of gradual recovery.

He forecast that while external uncertainties including soaring international oil prices still remain, the economy is expected to recover to near its potential growth level in the second half of this year and into 2006.

``The economic growth will hover around four to five percent in the latter half and will gain further momentum next year,’’ he said, noting that the International Monetary Fund recently forecast 5.2 percent growth for the 2006 Korean economy.

However, Han pointed out that the era of high growth is over and an annual growth of 7-8 percent has become impossible as the country becomes an advanced economy.

``Given the nation’s economic status, a five percent growth per year is fairly good. The current growth level is at around the 10th among the Organization for Economic Cooperation and Development (OECD) member economies,’’ he said.

``If we are to grow by around five percent every year, we expect per capita GDP to reach $20,000 level by 2008,’’ he added.

Regarding the economic condition, the top economic policymaker said that tangible improvements in the real economic indicators, such as July industrial activity, show that the Korean economy is steadily recovering.

Recording 10.9 percent in July, exports are expected to maintain double-digit growth for the rest of the year, and domestic demand also seems to be recovering, he added.

To achieve an early economic recovery, the government will keep the accommodative economic policy in tact by executing an additional 3.1 trillion won expenditure of funds and state-owned enterprises (SOEs), the ministry said.

``A supplementary budget should be made in a prudent manner as the current economy is showing signs of recovery,’’ he said. ``But additional tax reduction is deemed difficult considering the overall condition of tax revenue.’’

Dismissing concerns over weakening growth potential, Han said that the country’s potential growth rate sought by the government is still five percent.

For the economy to continue its growth in the mid to long-term, Han stressed that a sufficient supply of labor and capital be available and productivity enhancement must take place.

``We will encourage the economic activities of women through the implementation of Comprehensive Measures to Promote the Employment of Women within the second half of this year, and attract more foreign labor,’’ he said.

``While seeking to enhance capital supply by large domestic enterprises and SMEs (small and medium sized enterprises) and foreign investment, we will gradually shift from a factor-driven economy to an enhanced productivity-based economy,’’ he added.

Touching on the long standing screen quota issue, Han said that the screen quota is a system approved by the international community and the World Trade Organization and it contributed greatly to Korea’s movie industry.

``In an open society and at a time when the government is seeking for international openness, I think we have to exchange views and opinions about whether there is any other system to replace the current one,’’ he said.

kjk@koreatimes.co.kr