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Foreign Capital Dominance in Financial Market - “Give Priority to Domestic Hands”

Foreign Capital Dominance in Financial Market - “Give Priority to Domestic Hands”

Posted January. 04, 2004 23:15,   

한국어

“The Korean financial market will face trouble if foreign funds take full control over it,” Chairman of Korea Fair Trade Commission Kang Chul-kyu said on Saturday. “To prevent side effects of undue entrance of foreign capital, we seriously have to give consideration on giving priority to domestic institutional investors when selling Korean banks,” he said.

Chairman Kang said this in the “2004 Economic Policy Symposium” presided by Donga Daily Newspaper Economy department as he expressed his concern of the rapid encroachment of foreign capital on Korean financial market after the financial crisis.

He said, “In principle, it is not right to screen the nationality of funds in a global economy. However, there is an exception in a key industry of a country and as financial industry falls under the category of quasi-public goods, it can be included in the key industry”

“Influx of foreign funds may increase the transparency of financial statements and management of financial companies and take on a positive role of introducing sophisticated risk management methods,” he said and emphasized, “Nevertheless, we also have to consider the possible side effects such as risk posed to the system when foreign funds rapidly flow out of the country and a leak of know-how in domestic industries to foreign countries.”

As alternatives, Chairman Kang suggested the following: impose duty on minimum financial functions maintenance of foreign capital,endow priority to domestic institutional investors when selling domestic banks, reinforce inspection on the stability and character of foreign capital, give priority to bank capital rather than funds when selling domestic financial institutions to overseas, and others. Jwa Sung-hee, the president of Korean Economic Research Institute (KERI) promoted building an environment for equal competition between foreign capital and domestic capital saying, “In a way, dominance of foreign capital over the Korean financial market stems from the government policy of discriminating foreign capital from domestic capital.” Prof. Chung Chang-young of economics department in Yonsei University emphasized, “We need to follow the principle of open economy but we shouldn’t allow foreigners to harvest the fruits alone from the growth of financial sectors.”



Ki-Jeong Ko koh@donga.com