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Market Opening Plan Delayed Indefinitely

Posted October. 10, 2009 07:50,   


The government has indefinitely postponed the implementation of a market opening policy concluded last year because of the flood of dollars in the country.

The won-dollar exchange rate fell to an annual low of 1,164.50 yesterday.

In the second half of last year, the government had announced a plan to allow foreign investment in more sectors to attract more dollars. Experts say the decision to delay the market opening policy is shortsighted.

The Strategy and Finance Ministry and the Knowledge Economy Ministry had announced last year a new policy to lower entry barriers to foreign investment in 29 sectors. Their plan even contained details on the completion of research by the end of last year, talks with relevant ministries, and a gradual opening plan for release next year.

A report obtained by ruling Grand National Party lawmaker Kim Gi-hyun said foreign airlines now own a considerable share of Korea’s international air transport business and directly compete against domestic companies.

The report also said the limit on foreign investment of 50 percent in the sector is meaningless since international air transport is classified as a business that can be immediately opened to foreign competition.

It urged the gradual opening of periodical publications, broadcasting excluding terrestrial, barley farming, meat wholesaling except for beef, and domestic air transportation. Power generation (excluding hydroelectric), electric sales and news were cited as areas not to be opened or liberalized later.

As of this month, however, the government has postponed the opening indefinitely. A Knowledge Economy Ministry official said, “It’ll be hard to pursue the policy for the time being. The policy will be treated as a long-term agenda and separately pursued by relevant ministries.”

The reason cited by the ministry was an abundance of dollars. The amount of dollars circulating in the Korean market has jumped due to the surge in the trade surplus and foreign direct investment.

Additionally, several ministries say certain key industries should not be completely opened to foreign investors.

The government is trying to limit the won’s rapid appreciation to help domestic exporters maintain their export competitiveness.

The Strategy and Finance Ministry will ask state-run companies to refrain from borrowing money from overseas lenders, and urge banks not to issue too many bonds to overseas investors to prevent dollars from flooding the Korean market.