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[Editorial] Eldon Suggests Way Toward Economic Revival

Posted January. 07, 2008 07:53,   


One of the biggest problems of the Korean economy is redundant regulations in the financial service industry,” says David Eldon, a veteran financier and the sole foreign member of the presidential transition committee.

His comment sounds familiar. Many financial experts and media have repeatedly argued for financial sector deregulation for years, and not without a detailed list of examples. The Roh Moo-hyun administration, however, has been obsessed with the leftist myth of a state-led economy and market, and has kept ignoring the voices of “Eldons in Korea.” Advocates of deregulation to attract more foreign investment have been disapprovingly dubbed patrons of speculative foreign capital by leftist policy-makers. Those who suggested incentives to encourage corporate investment have been condemned as pawns of huge conglomerates.

Eldon, who co-chairs President-elect Lee Myung-bak’s special committee for strengthening national competitiveness, also says the Korean market needs to be as open as Dubai, United Arab Emirates. Former Finance and Economy Minister Sa Gong-il, the committee’s other co-chairman, says a more aggressive open-door policy is inevitable for sustained growth of the Korean economy.

Eldon says many foreign investors contacted him with great interest after hearing of a foreign member on the transition committee, though failing to mention if such interest materialized into investment. We hope he can produce tangible results from his contacts. The election victory of Lee itself has positively influenced the sentiment of foreign investors toward Korea. Rumor has it that the transition committee will soon achieve a “surprising result.”

Over the past few years, Korea has been the least-favored investment destination among its peer group, which means the competitiveness of the Korean business environment has severely lagged behind those of its competitors. If it were the other way around, Korean companies would have invested more domestically than elsewhere. They have a stockpile of cash amounting up to 300 trillion won (320 billion U.S. dollars), but are unwilling to make further investment.

“We would certainly invest in our home country rather than elsewhere only if the business environment is equally friendly,” said Lee Seung-cheol, executive director of the Federation of Korean Industries.

Equal priority should go to encouraging more investment from Korean companies as well as from foreign investors. Domestic firms should receive the same favors as foreign companies, which current regulations do not allow. One of the major policy contradictions of the Roh administration is the introduction of many regulations disadvantageous to domestic companies and frequent hostility shown toward foreign investors. The new administration should level the playing field for both types of companies, and in a way that encourages their investment. The key to reviving the economy lies in bold deregulation and opening, a view which many experts as well as Lee and Eldon share.