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Investment Flowing Away From Korea

Posted September. 25, 2006 07:04,   


The amount of money Koreans spend to make direct investment overseas, such as building factories in foreign countries, is much more than the amount of money foreigners use in direct investment in Korea. In other words, Korea is seeing an exodus of “factories” Also, there are more and more foreigners selling off their stocks in Korea’s stock market.

According to the National Statistical Office, there were 81,000 more people who left Korea than those, including Koreans and non-Koreans, who came in to live more than 90 days in Korea last year. Among them, 86.7 percent were under 20 years of age. Last year was the first time when the number of Koreans going to overseas countries to study was over 100,000.

Economic experts are concerned that the so-called “well-educated” people are flowing out of Korea en masse.

Earlier this year, Hynix Semiconductor invested $200 million, or 190 billion won, in Hynix ST Semiconductor Ltd., which is an investment corporation in China. An official of Hynix Semiconductor Ltd. said, “The Chinese government’s suggestion that it will lend us $1 billion in loans was very tempting. Also, many other policies designed to induce investment were attractive”

During the first half of the year, Koreans’ foreign direct investment was $7.08 billion while foreigners’ direct investment in Korea was $4.917 billion. Also, since the government is coming up with deregulations in foreign property investment, foreign direct investment made by Koreans is expected to increase.

Foreign investors are also slipping out of the Korean stock market.

It is because the investors are selling off Korean stocks and Korean investors are aggressively investing in foreign stocks and bonds. The stock investment index showed that the outflow excess was an unprecedented $16.4 billion, or 15 trillion won, from January 2006 to July 2006.

Experts say that nobody can criticize those who build factories and expand their investment in overseas countries. However, if there is a continuous outflow of the best brains, money, and factories, Korea will face a “hollowing out in economy”

Yoo Byeong-gyu, the chief researcher of Hyundai Research Institute, said, “Korea should open the service sectors such as financial, education, and medical market to other countries in order to enhance the nation’s competitiveness. That is the way to prevent the drain of talent and money.”

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