Foreign Money
On June 29, the Korean government released its plan for the promotion of overseas investment and reform of the foreign exchange market. According to the plan, which is expected to be implemented next year, no documentary evidence at all has to be submitted to banks for overseas remittance and foreign exchange withdrawal and even a foreign credit of more than US$500,000 does not have to be brought into Korea within three years.
Koreans’ foreign direct investment (FDI) increased from US$3.4 billion to US$24.7 billion between 1999 and last year. Nevertheless, the FDI-to-GDP ratio stood at 17.9 percent at the end of last year, much lower than those of advanced economies (47.1 percent) and developing countries (18.7 percent). This was because of not only the conservative investment attitude of Korean companies but also the Foreign Exchange Transaction Act that restricted overseas investment in many cases.
The government is going to overhaul the act for the first time in 16 years while coming up with various measures to encourage investment abroad. For instance, tax-exempt overseas stock funds are provided along with financing assistance for international M&A utilizing the Exchange Equalization Fund. In addition, the duty of prior notification applied to small-scale FDI and overseas real estate acquisition is repealed while the follow-up management of such cases is simplified. When it comes to foreign currency transactions entailing no actual transfer, the maximum amount requiring no report is raised to between US$10,000 and US$20,000.