South Korea financial authorities on Wednesday pledged to create a level playing field for foreign and domestic investors, and to apply regulation in a reliable and rational way, as Asia’s fourth largest economy pursues its goal of becoming a major financial centre in the region.
The government has identified financial services – and asset management in particular – as a key area of future growth for manufacturing-reliant Korea, and has begun liberalising its economy and promoting greater liquidity in its markets as a result.
However, foreign investors have recently expressed doubts about the ability of Korea to become a hub while populist outrage against foreign takeovers and profits becomes increasingly loud.
Kwon Tae-shin, vice finance minister, said Wednesday that the Korean government would continue to improve its regulatory system and open foreign exchange and capital markets.
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“The financial hub strategy must go hand in hand with further opening of the market and our efforts to attract more foreign investors,” Mr Kwon told the Asian Financial Centres conference in Seoul, organised by the Financial Times.
Foreign investment was critical to boosting growth, technology and jobs in the Korean economy, he said.
“Recently, some investors have mistakenly suggested that we are pursuing anti-foreign investment policies,” he said. “Quite to the contrary, I can say with full confidence the government is committed to providing a level playing field for all companies regardless of nationality.”
The government would also protect lawful profits made by foreign companies, which were the “well deserved fruits of risk-taking activities,” Mr Kwon said.
Foreign investors have complained about moves to tax profits made through pre-agreed havens with which Korea has double taxation treaties, and have been dismayed by the regulator’s calls for more defensive measures to help Korean companies fend off unwanted foreign attention.
Yoon Jeung-hyun, governor of the Financial Supervisory Service, on Wednesday conceded that Korea’s regulatory cost still weighed heavily on foreign investors.
“We would like to change this,” Mr Yoon said. “So as we continue to reduce the number of regulations, I believe that we must raise the ‘quality’ of regulations to more effectively reduce the real – as well as perceived – regulatory cost foreign investors feel in Korea.”
A key part of this was implementing regulations in a more transparent and predictable way, he said.
“It is said that Korea’s regulations sometimes give regulators excessive leeway in interpreting and enforcing rules and regulations,” Mr Yoon said. “Unexpected regulatory changes are also said to inflate the cost of doing business in Korea for foreign investors. We will do all we can to avoid this.”
The FSS would strive to make sure regulations were reliable, rational and met global standards.
“We completely reject anti-foreign bias and will look for global standards wherever possible,” he said. “As we do so, however, I hope that foreign investors will hold a balanced perspective on our policy objectives and try to understand the unique circumstances and constraints we face at home.”
