[VIEWPOINT]This is a good time to venture abroad“If you are a patriot, leave Japan,” urged an advertisement for a magazine I encountered on a subway train in Japan a few years ago.
It was highlighting a special report on Japanese businesses, which made their fortunes by advancing into overseas markets, and young talented Japanese who succeeded in overseas employment.
At that time, I didn’t pay much attention to the ad copy, but I realized its importance after I come across Japan’s international payments statistics a long time afterwards.
The money remitted to Japan by the companies and youths referred to in the advertisement is reflected in the income revenue on Japan’s current accounts.
The income balance is the difference between the earnings Japanese companies and individuals made overseas, and the money made by foreigners in Japan, remitted to overseas accounts.
Dividends, interest and wages are major items.
Countries that have a long history of advancing into overseas markets generally make large profits.
They are reaping the earnings from the seeds they have planted overseas.
Japan’s income balance surplus rose above its trade surplus for the first time in 2005.
That year, Japan’s income balance surplus was 12.6 trillion yen ($106 billion), surpassing the trade surplus of 9.6 trillion yen.
This trend continued last year; two years in a row, Japan has maintained an income balance surplus above its trade surplus.
This is the result of steady overseas investments.
The Japanese government has a statistical goal of raising its income balance surplus to 4.5 percent of the gross domestic product by 2030.
As a percentage of the GDP, last year’s is two times higher than that of 2005.
The strategy is to fill in the gap of surplus from trade and services with the income balance surplus, since Japan’s service revenue deficit is projected to increase while its trade surplus will not continue to be as high as in the past.
The Japanese call it “the vision for nation building through overseas investment.”
Korea is not yet in a position to rely on its income balance. The Korean government has just started to look for a way to spur overseas investment.
However, the timing is not bad. The current trend of a strong Korean won in the exchange market puts Korea in a favorable position in terms of overseas investment and mergers and acquisitions (M & A) of foreign companies.
The rapid rise in Japan’s income balance owed a lot to the appreciation of the Japanese yen that came after the conclusion of the Plaza Agreement in 1985.
Korea can also play big while enjoying the benefits of a strong won.
It is no longer merely a dream for Korean companies to aim for international grain majors as targets for mergers and acquisitions.
The total market prices of the U.S. companies Archer Daniels Midland Co. (ADM)and ConAgra Foods, Inc., are 19.53 trillion won ($20.1 billion) and 7.8 trillion won respectively.
And Bunge, a leading European agribusiness and food company, is even cheaper.
Calculating on the basis of last week’s stock prices, it is worth around $8.4 billion, which is around 7.8 trillion won.
It is worth about the same as such Korean companies as LG Card and S-Oil, and less than the price of KT&G, the Korean company that had a hard time under the threat of M & A by Carl Icahn; it is valued around 8.33 trillion won.
Therefore, instead of worrying over the opening of the market for agricultural products, it’s possible to imagine South Korea aggressively acquiring overseas grain majors.
The National Agricultural Cooperative Federation makes an income of around 1 trillion won a year, so it can afford to buy one.
Needless to say, mergers and acquisitions are not as easy as they sound. All I’m saying is we should open our eyes wide and look at the bigger picture.
For example, there are many Japanese companies for sale nowadays.
Recently, Victor Company of Japan, Ltd. (JVC), the company famous for video equipment, was put on the market for around 150 billion yen.
There are also many small to mid-sized components companies that are closing down because they cannot find a new owner. They may have old-fashioned management, but their technology is the best in the world.
Since Korean manufacturing industries do not have many component materials companies with high-standard original technology, the effects from mergers and acquisitions of Japanese companies will be great.
There are a lot of places for Korean companies to invest in, if they look around.
They can stop worrying about high oil prices if they jump into energy development of oil-producing countries. After all, we have already seen viable results in Vietnam.
New oil-producing countries in Central Asia such as Uzbekistan, Kazakhstan and Kyrgyzstan have a lot of room for development, too. If we meet success in investments in these countries, we will probably be able to make a substantial surplus in our income balance.
In other words, leaving Korea may be the right way for Koreans to contribute to the nation in the long run.
I look forward to seeing that the plan for activating overseas investments that the government will announce soon includes a long-term vision for overseas investment rather than just a short-term exchange rate countermeasure.
President Roh Moo-hyun’s “special plan to cope with a strong won” should be the result of such a plan, not its goal.
*The writer is the deputy head of the economic news team at the JoongAng Ilbo.
by Nam Yoon-ho