Current Ceiling to Be Fully Scrapped by End of This Year


By Kim Sung-jin
Staff Reporter



Vice Minister of Finance and Economy Kwon Tae-shin, center, keeps a straight face prior to an emergency meeting to discuss steps to curb the appreciation of the won against the dollar with senior ministry officials and the Bank of Korea early in the morning at the Korea Federation of Banks headquarters in central Seoul, Friday. The government plans to ease rules to encourage the flow of dollars out of the country as a means of stabilizing the currency market.
/ Yonhap


South Korea will fully liberalize outbound real estate investments for Korean individuals and businesses this year.
The Ministry of Finance and Economy (MOFE) said Friday that it would instantly raise the $500,000 ceiling on direct investments for purchasing overseas real estates to $1 million, and the cap on Korean businesses’ direct overseas investment to $10 million, from current $3 million.

The measures are aimed at coping with the recent, rapid gain of the Korean currency by easing the foreign currency oversupply. The foreign reserve glut is fueling the strengthening of the Korean won, according to the ministry.

The bold step is forecast to accelerate and widen Korea’s capital account liberalization.

The Bank of Korea predicts that Korea’s capital account liberalization ratio would rise to 85.1 percent in 2006 from 59.4 percent last year. The ratio for 29 Organization of Economic Cooperation and Development (OECD) member countries average at 89.3 percent.

The U.S. tops in capital account liberalization with its ratio standing at 95 percent, trailed by Japan (86.1 percent), Germany (89.1 percent) and the U.K. (86.1 percent).

The MOFE said the government has decided to boldly scrap all outbound investment limits by year’s end to encourage Koreans’ overseas investments.

With recent rally of the won pushing the Korean currency to an eight-year high Thursday, senior officials from economic ministries and the Bank of Korea held an emergency meeting to discuss the sudden sharp appreciation of the won at the Korea Federation of Banks headquarters in downtown Seoul early Friday morning.

Vice Minister of Finance and Economy Kwon Tae-shin said the government would not ``sit idle’’ looking at the volatile market conditions, and mobilize all possible tools to stabilize the foreign exchange market.

The won is trading at values that have never been seen since the 1997 Asian currency crisis. The won closed at 987.30 per dollar Thursday, the strongest since Nov. 14, 1997. The won began trading at 995 per dollar Friday and closed at 988.1 won.

Noting that the won’s rally since last month is “worrisome’’ and “abnormal,’’ Kwon said, ``if the won continues to appreciate further, the negative impact of the appreciation on our economy could grow too.’’

``To quickly stabilize the foreign exchange market and minimize the negative impact on the Korean economy, we will use all powers granted to the financial authority,’’ Kwon said.

To prevent the transitory gush of inbound foreign currencies from strengthening the won further, the government said it would temporarily curb unnecessary attempts to raise funds through foreign loans, while tightening its regulations for foreign exchange speculations.

In line, the government decided to abolish the ceiling on the premium benefits of the Korea Export Insurance Corp.’s foreign exchange fluctuation insurance for small and medium enterprises, (SMEs) to let SMEs better cope with the swollen foreign exchange risks.

sjkim@koreatimes.co.kr