Open-door policy spurring imports, outside investment in South Korea
In liberalizing imports and areas of permitted foreign investment, South Korea aims to achieve ''the level pertaining in advanced industrial countries'' by 1986.
This objective was spelled out earlier this year by Deputy Prime Minister Kim Joon Sung, who also heads the Economic Planning Board. At the end of last year, 74.8 percent of the Korea's industry categories were ''liberalized.'' Importers usually need to get permission from the Ministry of Industry and Commerce to go ahead with import plans. Liberalization means that they no longer have to get government permission. Mr. Sung says the government wants to raise the categories of industries that are liberalized to 78 percent this year.
With the two-way trade volume expected to exceed $110 billion by 1986, including an estimated $56 billion in imports, Seoul is agreed that the less the government needs to interfere, the better. Last year saw an overhaul in policy in favor of minimal controls, including a three-phase liberalization plan.
In Phase 1, there will be free import of noncompetitive raw materials in which South Korea is obviously deficient. There will also be items for which there is no competitive Korean industry, or items like textiles. Local companies are highly competitive on world markets when it comes to textiles and don't need special protection.
The second phase calls for liberalization to be extended to imports of machinery, electrical and electronic products, petrochemical and metallic products, and other items considered beneficial to national welfare and the standard of living.
Major manufactured goods and luxury consumer items will be the last to be freely admitted. President Chun Doo Hwan is stressing a more austere life style which discourages ostentatious displays of wealth and the frittering away of vital foreign currency resources on expensive imported nonessential products.
After 1986, only agriculture and ''strategic'' industries are expected to remain under government protection.
At the same time, the government has indicated it will use a system of flexible tariff rates, rather than quantity limits, to control the flow of imports in liberalized sectors.
Diplomatic analysts point out that this will give government considerable leeway in determining just how open the Korean market is to become.
In another new policy departure, the government now plans to announce two or three years in advance items that are to be liberalized. This is to give local companies time to prepare to meet the increased competition.
The government's aim of 90 percent import liberalization by 1986 is regarded by American embassy officials in Seoul as offering considerable opportunities for US businesses.
A recent embassy report noted that ''demand will continue to be strong for American industrial raw materials, heavy machinery, and industrial and scientific products with high-technology content.
''Korean manufacturers recognize the need to upgrade the quality of their products, especially those designed for the overseas market, and US firms can compete very effectively here for sales of items such as computers and peripherals, medical instruments and equipment, analytical and scientific instruments, energy conservation systems, food processing and packaging equipment, construction and telecommunications equipment, and special machine tools.''
The shift to less official control is equally evident in the area of foreign investment. More and more industrial sectors are being opened up, many of them permitting 100 percent foreign ownership.
In November, control over foreign investment was shifted from the Economic Planning Board to the Finance Ministry, and the latter immediately began moves to dismantle a complicated apparatus of approval and licensing inherited from the Park era.
Officials say the aim is to have the majority of industrial sectors subject to ''automatic approval.'' The paper work is being drastically simplified and, in many cases, passed over to designated banks to handle, especially when the amount of investment involved is not large.
''Up to now, 427 of the 855 industrial categories have been opened to foreign investment, and we expect this to have been expanded to 600 by the middle of this year,'' says Kang Woo Lee, director of the ministry's international banking bureau.
''For geopolitical reasons, 70 percent of all investment so far has come from Japanese and American companies. But from now on we want to see more diversification. Missions will be sent out this year not only to the United States and Japan but also to Europe, many parts of Asia, and even the Middle East to seek more investment capital.''
Previously, the government tried to channel all investment into a few strategic areas. But now in principle the cash is allowed to flow where it wants , although the hope is that most will end up in the machinery, electronics, energy, and other technology-intensive industries.
New areas to be opened up soon include pharmaceuticals, food and beverages, distribution, and services.
Although many foreign companies were said to have been deterred from investing in Korea because of political instability in 1979 and 1980, Finance Ministry officials insist the figures prove otherwise.
In 1977 foreign equity participation in local industries to the tune of $79 million was approved. This rose to $151 million in 1978, did indeed dip somewhat in 1979 ($117 million), but picked up in 1980 to $141 million and stayed up ($ 146 million) last year.