Investment should be internationalRecently, I attended a press meeting with Barings, a British financial company, and an interesting fact captured my attention. Emphasizing Barings’ connection with Korea, the company claimed that it almost won the bid to build the Seoul-Busan railway in the early 1900s.
Barings had helped the United States finance the Louisiana Purchase. The company paid attention to the railway industry in the early 20th century and made a great fortune by entering the business in the U.S., Russia and Argentina. Joseon’s railway project must have seemed an attractive business opportunity.
The firm appointed Colonel Sir William Bisset to Korea to survey the geography of Joseon and left a detailed record. The reports stored in the Barings Archive in London contain amazing information. The paper titled “Seoul-Fusan R” provides accurate and detailed topography, characteristics and possible tunnel locations in each region connecting Seoul and Busan. Also, he listed industries that would benefit from the railroad for each city. And the route he drafted is not much different from the current Seoul-Busan railway. He also offered an alternative route. Barings worked with HSBC and ambitiously pushed the project, but it went to pieces due to Japan’s arrival.
Capital often goes beyond the border in search of profit. Just as Barings surveyed the Joseon railway, Korea’s National Pension Service must be busy seeking attractive investment opportunities abroad. But their overseas venture is growing slowly. With over 400 trillion won ($359 billion), the National Pension Fund is one of the three largest pension funds in the world, but 85 percent of its investments are made within the country. Among the overseas investments, alternative investment, such as real estate, makes up a mere 3 percent. The National Pension Fund has purchased major buildings and real estate in other countries, but not much profit has been realized.
In contrast, the pension fund has become the “super whale” in the domestic market as it holds more than 5 percent of 220 listed companies. The fund is likely to grow up to 2.465 quadrillion won to swallow stocks and bonds of Korean companies aggressively.
I don’t mean to criticize the fund’s investment in Korean companies. But it will likely go into a deficit from 2044 and is expected to run out of money by 2060. The prospect of the shock on the market from selling off the stocks and bonds in the process is horrifying.
We don’t have to look far to understand a successful case. Australia’s Macquarie Group entered Korea’s privatization process early on and constructed the Incheon Airport Highway, enjoying a 10 percent return. The success was made possible thanks to thorough preparation, detailed strategy and large foreign investment.
About 110 years ago, Sir Bisset came to the faraway land and surveyed the mountains and rivers of Joseon. His memos can teach us how to invest in the future.
*The author is a business news writer of the JoongAng Ilbo.
by Yoon Chang-hee