Seoul, Mar 12: South Korea's economic condition is still "grave and cruel" and the solution is to attract more foreign investment, President Kim Dae-jung said on Thursday."We should engage in diplomacy to lure (foreign) investment to overcome the currency crisis and raise our global credibility," the president said during a ceremony to appoint a new vice minister for foreign affairs and trade.
"There are some positive opinions from overseas about the state of our economy but our reality is grave and cruel," he said.
Exports were crucial to the nation's economy but foreign investments were necessary to pay Korea's annual interest bill of $15 billion, the president said.
"Only then can the currency be stabilised and interest rates fall," Kim said. South Korea was forced to accept a record bail-out from the International Monetary Fund last December, narrowly averting national default. In exchange for rescue loans, the IMF has required Korea to maintain high interest rates until its battered currency, the won, stabilised. Kim said economic ministers had discussed on Wednesday the lifting of restrictions on hostile mergers and acquisitions and real estate purchases by foreigners. Those discussions should be "good news" to foreign investors, he said. South Korea recently revised its regulations on mergers and acquisitions to allow foreigners to buy up to one-third of a company's shares without the prior approval of the target firm's board of directors. The previous limit was 10 per cent.
Members of the president's inner circle have suggested eliminating all restrictions on hostile mergers and acquisitions by foreigners. The president also said reforms of big conglomerates, or chaebols, should be led by the banking system. "The government should not be the one holding the key to chaebol reforms. The banks should hold the key," he said. But banks must undergo reforms of their own in order to achieve that goal, he said.
Analysts welcomed the president's remarks, but said his words needed to be followed up with action before foreign investors flocked to South Korea. "There's a big difference between talk and action," said Dan Harwood, regional director for ABN Amro Asia Ltd in Seoul.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
