[EDITORIALS]The money that’s going abroadLast year, Koreans spent a total of $20.7 billion overseas. It was the first time the amount had exceeded $20 billion, and it marked an increase of 12.5 percent over the previous year’s figure. Using 2004’s average exchange rate of 1,140 won to the dollar, this means that about 23.6 trillion won was diverted overseas by individual Koreans, and that figure doesn’t include money smuggled out illegally.
The mere fact that a great deal of money is being spent abroad can’t be criticized. Considering the growth of Korea’s economy and the progress of internationalization, it’s natural that the amount of money spent overseas should increase. Unlike in the past, when we suffered from chronic deficiencies in foreign exchange, Korea is now burdened with an overabundance of foreign reserves. The outflow of foreign exchange isn’t a problem in and of itself.
What should be noted, however, is that overseas expenditure and remittances by individuals in 2004 grew at more than three times the economic growth rate, despite the fact that domestic consumption suffered from severe stagnation.
Looking at the details of the spending, about half of the total, or $9.5 billion, turns out to have been for overseas travel. That was followed by remittances to overseas accounts ($6.9 billion) and by expenses for education and training overseas ($2.5 billion). This means people spent money overseas primarily for purposes of tourism and education, which they could have done at home.
The people who can afford to spend overseas are those who are in the high-income bracket. In other words, well-to-do people in our society have spent money overseas instead of at home. If half of what they spent abroad had been spent in Korea instead, the domestic economy might not have suffered as much as it did last year.
But even if we had bullied those wealthy people, or appealed to their patriotism, domestic consumption wouldn’t have revived. The problem lies in the fact that in Korea, the conditions and circumstances have not been created that would entice them to spend that money here.
Before inviting foreign investment to Korea, therefore, we have to make our tourism, medical and educational services more internationally competitive, and create an atmosphere in which Koreans feel at ease spending their money at home.