[NOTEBOOK]To the Financial Times’ editorThe Financial Times, one of the world’s leading economic newspapers, is beloved by economic experts in Korea. Its in-depth analyses and balanced views used to be a compass for Koreans who pursued an open-market economy. The newspaper was particularly good in helping Korea overcome difficulties after the foreign exchange crisis of 1997-98.
But the Financial Times’ recent reports on Korea have shown a totally different attitude from the past. The moment I unfolded the Financial Times on March 31, I was astonished.
On the front page, the lead story blared, “Seoul’s new rules anger overseas investors,” and on the third page, a commentary was titled, “Ambivalence towards foreign funds draws strong criticism.” And an editorial had the headline: “Shackling Foreigners: Economic Nationalism Threatens Korea’s Future.” It’s rare to see news articles with such provocative headlines in the Financial Times.
Since I have had many complaints against the government’s economic policy, I read the lead article with interest. But while reading it, I could not help uttering, “No, this is wrong.”
This article discussed the “5-percent rule” for the securities market, which Korea’s financial authorities began to enforce on March 29.
As you may know, the “5-percent rule,’’ or stock exchange rule, requires shareholders to disclose whether they intend to influence the management of companies they invest in, as well as details on how they raised the capital, when they acquire 5 percent or more of a company’s shares with the purpose of taking part in the company’s management.
The Financial Times severely criticized the enforcement of this rule, quoting people who said Korea’s new 5-percent rule is a “draconian” regulation created suddenly to control foreign investors and because of a “schizophrenic” attitude toward foreign investment -- having one foot on the accelerator and the other on the brake -- Korea cannot become a financial hub.
But this is a biased view. The 5-percent rule does not target foreign investors alone. Until now, when one purchased a 5 percent or more stake in a company in Korea, all he or she needed to do was just report that the purchase was intended for “simple investment” or “participation in management.” There are no 5-percent rules like this in the world.
Shouldn’t “fair game rules” work for the market economy to run properly? In the Korean stock market, these rules have not worked so far. Investors who aim to exert influence and control over the management of a company could be like snipers in the forest, hiding their entities completely, while the company under attack is exposed like prey in the open field.
Individual large investors in Korea took full advantage of this loophole: They inflated share prices by publishing a notice of their participation in management and then left the market after selling their shares all at once.
The new 5-percent rule corrected this defect. It wasn’t sprung upon foreign investors either. Korea’s rule is partially modeled after the United States’ 5-percent disclosure rule that is accepted as a “global standard.” Our country adopted it after studying the case for over a year.
The regulations of the United States’ 5-percent rule are so numerous that they are said to fill up an entire book. In England, the home base of the Financial Times, a disclosure rule is applied when an investor buys more than a 3-percent stake in a company. I also wrote in a feature article a year ago that the problems with the 5-percent rule of the Korean stock market must be straightened out. If what the Financial Times reports is true, I must have suddenly turned into a schizophrenic.
Korea’s economic experts I meet these days say in one voice, “The Financial Times has become strange. It is seriously lopsided and overly emotional.” They even say, “The newspaper seems to fancy itself a spokesperson for some speculative funds from Europe.”
I’ve heard the Financial Times has 1 million subscribers in 140 countries. It is difficult to build readers’ trust, but it is more difficult to restore trust once it is lost. As one of the readers of the Financial Times, I am concerned that if the number of reports that gloss over the actual situation of a country are accumulated, they may breach the tradition and honor of the Financial Times. I earnestly ask the newspaper to start crafting balanced reports about Korea.
* The writer is a deputy business news editor of the JoongAng Ilbo.
by Kim Kwang-ki