Foreign Firms Faring Better Than Domestic

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Foreign Firms Faring Better Than Domestic

Since the International Monetary Fund(IMF) bail out descended on the Korean economy, foreign groups investing in Korea are enjoying a lot more benefits than before pre-IMF days while domestic companies are moaning under a mountain of debt.
Internal companies lost most of their working capital and profits due to high interest rates imposed by domestic banks on the excess debt they had accumulated while external investors had the capital and were just searching for a market to invest in.
Korean business groups now find themselves saddled with fixed assets such as real estate which they can neither unload or nor borrow on. Foreigners avoided the over-inflated real estate market and tended to be more liquid.
According to the Bank of Korea on December 23, the current account surplus rate of foreign- invested companies in the first half of 1998 was 3.8 percent whereas domestic enterprises struggled with a minus 1.1 percent. This means that for every 1,000 won in sales foreign firms earned 38 won while their domestic counterparts lost 11 won.
In the post-IMF period it is a company's debt ratio which determines benefits given by financial institutions.
Domestic companies were hurt by the high interest rate atmosphere as they floundered under a 414 percent debt to equity ratio in the first half of this year: Foreign groups' rate remained at 231 percent which meant they were able to borrow money at lower interest rates while at the same time enjoying healthy gains from their non-fixed assets. In general, domestic firms borrowed more and issued a larger amount of corporated bonds.
In terms of productivity ratios, the value added amount per employee was 37,333 dollars for foreign-invested firms operating in Korea and 26,583 dollars for majority-owned Korean companies.
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