ΆΓ Setup of Foreign Investing Firms on Sharp Rise

 KoreaTimes 2000.07.21

Foreign investors have begun to opt for direct investment into domestic enterprises through, for instance, setup of incubating investing firms, although they previously preferred indirect investment by taking part in various funds.

The investing companies with foreign major shareholders number eight, six of which were established this year, according to the Small and Medium Business Administration (SMBA).

For one thing, Citicorp of the United States made 100 percent investment for Citicorp Capital Korea last month while ADL poured 20 percent of the total capital for ADL Partners in March this year.

``Foreign investors rushed to take part in investing funds in the past, but they have begun to opt for the direct investment through the establishment of the investing companies,'' said an SMBA official.

As of the end of 1997, the portion of foreign investment into the funds, which mainly took the nature of investment cooperatives, reached 223.8 billion won, or 41 percent of the total. But 1998 saw not a single of new foreign entry into the fund.

Two foreign investing companies were newly set up last year, led by a Taiwanese corporation and an ethnic Korean residing in the United States.

Such trend has continued up until the end of last year. Of 461.8 billion won the investment cooperatives obtained, only 6.3 billion or 1.4 percent came from foreign investors.

During the first half of this year, 5.7 billion won or 1 percent of the entire 615.6 billion won investment came from foreigners.

In contrast, foreigners invested 38.4 billion won to set up six new investing companies.

The organization foresaw a growing number of foreign investors will rush to new concerns in Korea, mainly led by foreign banks and consulting enterprises in the future.

``Many of the foreign companies are equipped with knowhow and network needed to set up the new investing companies based on their experiences in the process of investing into venture companies,'' said the official.

Domestic investing concerns have been alerted due to the move by their foreign counterparts, as the latter are regarded to have superior capability in terms of capital possession and management.

But some firms express hope that the advancing of the foreign companies will help the domestic companies sharpen competitive edges as it will prompt them to develop investing and funding methods.

``Against this backdrop, the incubating investing sector is expected to see a great change starting next year, amidst intensifying corporate restructuring,'' said the official.

He forecast many of the related parties will seek survival through tie- ups with the aim of listing with the KOSDAQ market.