[Editorial] Who Will Own the Republic of Korea Companies?

China’s Nanxing Group was selected as a preferred negotiator for the takeover of Ssangyong Motor Co. This shows a switch of positions between Korea—which popped the champagne cork too soon—and China—which has developed continuously as new industrial nation. This is also a clear contradiction between two countries; Korea is vigorously calling itself the hub of Northeast Asia while China is making the world its factory by ending the era when it was the factory of the world.

If Ssangyong Motor Co. is taken over by foreign capital, three out of five motor companies in Korea become foreign companies. Foreign ownership in Samsung Electronics Co., Kookmin Bank, POSCO, and Hyundai Motor Co is more than 50 percent. The foreign ownership of financial institutions, the main engine of the domestic economy, is 37 percent. Despite such foreign capital making inroads into domestic market, as the government is instigating, the ownership of Republic of Korea Co. is no doubt in danger.

The increasing influence of foreign capital into the Korean economy was imperative to some extent. However, the problem is that the quality of foreign capital flowing into the domestic market is low and the amount of it is too high. What we expected from foreign capital was the creation of new opportunities in the job market, the entry of advanced technology and management skills, and the development of domestic industry in cooperation and competition with foreign counterparts. However, now such worthwhile investment shows sign of decrease. Instead, foreign capital for M&A and fluctuating stock investment are prevailing in the domestic market.

We cannot regard the country as a nation-state if the primary decisions of major companies and banks are determined by foreign influence. Capital can cross the borders freely. However, it has nationality. The sudden outflow of capital after the financial crisis hit Korea hard may be the best example. Thus, it is problematic that government officials still say, “Now, it is time to stop distinguishing whose capital it is.”

The current rules limiting total equity investment levels and stake holding, which are hampering domestic investment, should be abolished. Otherwise, the Korean market will be dominated by foreign M&A capital. Can’t Korean capital compete with its international rivals on the same footing even on its own soil?