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Foreign direct investment in S.Korea seen up

SEOUL: South Korea said on Monday foreign direct investment plans doubled to $627 million in February year-on-year, as a country once highly protective of its assets keeps the welcome mat out for foreigners.

With prized companies such as Daewoo Motor and Samsung Motor on the international auction block for later this year, analysts say South Korea's approved foreign investment plans could well exceed the target of $16 billion for the year.

Local reports have said the sale of the two auto companies would bring in a combined $7.5 billion.

Foreign purchases of existing Korean companies had been expected to slow this year with a smaller number of firms up for sale, as the economy had recovered from the severe financial crisis of two years ago.

But fresh government incentives and bright prospects for the economy would keep the momentum going, economists said.

"If this trend keeps up, coupled with lined-up sales of big companies like Daewoo Motor and Samsung Motor, foreign direct investment should be able to surpass the $16 billion goal," said Park Byeung-kwan, an economist at LG Economic Research Institute.

The Ministry of Commerce, Industry and Energy said on Monday foreign direct investment plans for the first two months of this year totalled $1.75 billion, up 37 percent from $1.28 billion for the same period a year earlier.

February's $627 million of approved investments was more than double the $310 million recorded in February 1999, it said.

South Korea attracted a record $15.5 billion in foreign direct investment in 1999, nearly double that of 1998..

BIG INVESTMENTS KEEP POURING IN

The biggest investment plan, submitted in February, was German insurer Allianz AG's planned purchase of a 12.5 percent stake in Hana Bank for $158 million, the ministry said.

Another notable investment was by Internet portal Yahoo! Inc which announced last week it would invest an extra $60 million in its South Korean subsidiary, Yahoo! Korea.

KOREA REMAINS ATTRACTIVE

Despite the good start, economists and ministry officials said foreign purchases of Korean companies or assets would be limited this year because a smaller number of firms are up for sale. The bulk of foreign investment this year could come through new projects and ventures, they said.

"We had quite a big number of sales last year and the year before that as many companies underwent restructuring after being hit with the financial crisis in late 1997," said a senior official in charge of foreign direct investment at the ministry.

"But that's not going to be the case this year," he said.

South Korea was ravaged by a chain reaction of corporate bankruptcies in 1997 that rippled through the financial system and prompted a massive bail-out led by the International Monetary Fund.

Many Korean conglomerates, or chaebol, were forced to sell off prized assets to scale down their bloated empires.

Last year, South Korea announced new incentives including tax breaks and lifted foreign investment restrictions in sectors such as publishing, distilling and casinos.

"South Korea is still considered one of the top Asian countries favoured by foreign investors due to the benefits provided and bullish economic prospects," said Park of LG.

The central Bank of Korea has forecast 7.2 percent gross domestic growth for this year, compared with an estimated 10.2 percent rise for 1999.-Reuters