Foreign investment not a bad thingThere used to be a time when a small foreign capital investment was considered a guiding light of hope. In 1998, at the height of the foreign currency crisis, Koreans welcomed foreigners willing to invest in Korea. As the currency value of the Korean won fell, foreign investors saw great opportunities in Korea, and the Korean economy was able to prepare itself for recovery. It was a win-win game. I was a cub reporter at the time, and I remember the guideline to write about any foreign investment over $100 million. By today’s standards, those investments wouldn’t even be worth a news article.
So how do we perceive the sudden “buy Korea” trend that’s been in progress for 44 days now?
There are two ways of looking at it. Some feel complacent and ask why investors are arriving now when Korea has such solid fundamentals. Finance officials boast Korea’s ample foreign currency reserve, low short-term foreign debt and stable trade surplus.
However, skeptics say that it is a “feast only for foreigners” and individual investors have been alienated. They think there is an ulterior motive to exploit the Korean market and individual investors. Of course, their suspicions are not groundless. There have been a number of cases that stirred the market. We should learn a lesson from the individual investor’s loss after riding along the “buy Korea” trend too late. There are reasons to feel cautious since it is unclear who initiated the latest rally and why.
Nevertheless, we need to reconsider the deep-rooted antagonism against foreign investment. For instance, the stock market is not structured so that a gain for one is translated into a loss for another. It is fundamentally different from the derivative market, which is a zero-sum game. While foreign investors buy Korean stocks, the Kospi broke 2050 points, and Korean investors would have gladly sold their stocks, ending the nerve-racking wait.
The antagonism is, in fact, more serious in the real economy. Foreign businessmen say that the most difficult obstacle in doing business in Korea is the anti-foreign sentiment, not taxation or infrastructure. Koreans seem to have a strange victim mentality that foreigners will use advanced knowledge and capital to exploit Korea and leave. Even progressive-minded former President Roh Moo-hyun said that we need to get over the anti-foreign capital sentiment in order for the Korean economy to take a step forward.
Lately, U.S. President Barack Obama has been personally inviting foreign investments. The United Kingdom is to issue a sukuk, an Islamic bond complying with Sharia law, for the first time as a Western nation.
How about Korea? The foreign direct investment has decreased by more than 10 percent this year. I can’t remember the last time I saw news about a major foreign investment.
We need to figure out whether sluggish foreign investment is due to structural problems or our own xenophobia. Let’s go back to the mindset of 15 years ago, when we welcomed foreign investments, however small.
The author is a business news reporter
for the JoongAng Ilbo.
By YUN CHANG-HEE