(South) Korea to Combat Capital Flight(root cause: Roh)

The government is seeking to prevent massive capital flight led by U.K. and U.S. investors. In all, US$9.264 billion foreign investors had in stocks, bonds and dividends here left the country between the beginning of this year and Aug. 11, the most since the stock market was opened to foreign investors in 1992.

This is especially worrisome as the foreign funds are fleeing the country for good without re-investing here after they sell stocks and deposit the profits in domestic banks. Korea experienced a net outflow of $830 million in foreign capital in 2002 and $2.43 million in 2005, but this year the situation is precarious.

The government sent delegates to the U.S. to drum up investment in Korea, holding an investment blitz in Boston and New York on Friday and Saturday. The government will reportedly give its reading of the North Korean nuclear problem and other negative factors foreign investors consider the greatest risk to putting their money into the nation.

“The capital flight we are facing is too large in scale and too fast to believe that foreign investors are simply moving their investment after earning profits here,” a government official said. “We are closely watching the situation to see whether there are other reasons behind the phenomenon.” The government worries that if the trend goes unchecked, Korea will suffer an outflow of more than $10 billion of foreign investment this year.

The capital flight is led by funds from the U.K. and the U.S., who are sensitive about Korean distrust of offshore hedge funds and changes in the Korea-U.S. alliance. Between the beginning of this year and August 11, $4.958 billion from the U.K. and $3.176 billion from the U.S. fled Korea, accounting for 87.8 percent of the total. As for the U.K., net outflow was $2.47 billion last year. Among the $2.43 billion net outflow of U.S. funds last year, $1.8 billion or 74 percent took flight in the fourth quarter, after the National Tax Service published the result of its tax probes into six foreign funds operating here and the prosecution’s interest in the offshore investment firm Lone Star.

There are three main reasons for this, IMHO:

(1)deteriorating geopolitical situation: S.Korea-U.S. alliance in crisis, N. Korean siutation getting worse

(2)domestic economy ever worsening since 2003, no sign of getting better

(3)government's much publicized fight against "foreign speculators," which I thought would alienate international business community eventually(not that I have any love for outfits like Lone Star Fund.)

In the graph on the left, the ligh blue line is for inflow of U.S. funds, while the dark gray one for inflow of U.K. funds. Both were on the negative on Aug. 11.

Re #3

Pinko gov of S. Korea is trying to dissolve joint command structure, which is integral to smooth combined operation of S. Korean and U.S. troops.

Gov is also bankrolling many left-wing (civil) organizations trying to drive out U.S. bases.

People in this gov are hell to pay when there is a power change in S. Korea.

The south korean government opposes our attempts to stop the north from developing nuclear weapons. The center-left government in the south supports a policy of appeasement and payoffs instead, opposing financial sanctions like those we started putting in place last year. At the same time, we have reduced our troops and pulled them back from the border area, to impress upon the south koreans that they are responsible for their own security, and that sticking fingers in our eyes for domestic anti-American political purposes will have real consequences.

The fundamental tension involved, is that the US is worried about north korean nukes for reasons much larger than their potential use on the korean penisula (which the south discounts). We can't afford Kim to get nukes and give them to the Iranians e.g. The south koreans don't care. They think our nuclear umbrella will deter an actual direct north korean attack on south korea, and just want to reduce the chances of conventional conflict, or even confrontation of any kind.

In addition, we want south korea to assimilate north korea, in the long run, since we do not regard the north korean dictatorship as at all acceptable or sustainable. It can't even feed the people. But many in the south do not want to see a north korean collapse. Which it would cost them economically to clean up, which would complicate their relations with China, etc.

You might think simple korean nationalism and humanity would make them long for reunification with the rest of the korean nation. On the right that opinion is held, but not on the left. The labor half of the south korean left is deeply invested in commie drivel that views the north as much less monstrous than it actually is, likes to call the south korean right, the Americans, and the Japanese all a bunch of fascists, etc. You know the type from our own dems.

Useful post.

I am interested in the composition, size, and political power of the anti-Roh faction. Any thoughts you can share?

The idea Kim Jong Il embodies, seems to me, has deep historical roots. I am reminded of the pre-modern Korean kingdoms.

Leftism appears to be a longing for a sentimentalized and romanticized past of happy peasants and dutiful rulers, a sort of serfdom for the masses where the "people" are treated justly, that is, where the aristocracy and monarchy spend their time and assets respecting and taking care of the serfs. The model is of the ruler as a loving and self sacrificing "Daddy". The Czech model is "Good King Wenceslas".

A childish and foolish notion.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.