Rep. Kang Seoghoon of the  ruling Saenuri Party makes a speech at the Seminar on Global Management Strategy for Financial Assets held on Sept. 3 at the National Assembly Hall in Yeouido, Seoul.(Photo:Saenuri Party)

Rep. Kang Seoghoon of the ruling Saenuri Party said the Korean economy made enormous strides in growth since 1962, when the First Five-Year Economic Development Plan launched by the government. He made the comment in a keynote speech at a seminar on the global management strategy for financial assets on Sept. 3 at the National Assembly Hall in Yeouido, Seoul. 

The scale of nominal GDP expanded 4,060 times, from 365.8 billion won to 1,458 trillion won, with per capita GNI rising to 2,968 million won from just 14,000 won. During the past 52 years, the Korean economy grew at the pace of 7.7 percent on average.

Korea has been an attractive market for both domestic and foreign investors during its high growth era. For example, the stock index expanded 20 times since. The stock index rose 10.5 percent on average in the past 30 years. The stock market had a value of 12.5 billion won in 1965 and it sits at 1,268 trillion won today, making it the 14th largest in the world.

From 1987 to 2014, corporate bonds yielded 9.4 percent on average, with issuers credit ratings staying at around AA- on average.

But the high growth rates for the Korean economy came to an end with the low-growth, low-inflation since then. Economic growth from 2000 averaged around 4 percent annually, and this year, the growth rate is not expected to exceed 3 percent, made worse by the MERS outbreak. The outlook for the future became dimmer with forecasts ranging around 2 percent growth for the coming five to 10 years.

The country may have come to a point where it can no longer earn enough revenue to pay for annual retirement funds, mutual aid funds and other retirement funds. Domestic investors may now have to turn their eyes overseas and diversify their investment risks.

Another worrisome matter is that Korea’s exports, a strong pillar for the economy, are falling along with the world trade volume contracts. Total shipments of goods and services overseas from Korea fell for seven months in a row until July, although the trade gap remains in surplus due to reductions in imports.

The devaluations of the Japanese yen followed by the Chinese yuan have worsened Korea’s export conditions. As such, what Korea has to do to boost the value of the currency is to expand foreign investments.

Korea’s foreign investments have been smaller in scale than foreign investments in Korea, and the government has been doing its best to help expand overseas investments, fully aware of the need to boost overseas investments now. Our overseas investments expanded from $4.8 billion in 1994 to $206.3 billion in 2014, expanding 29.7 percent on average annually during the 20-year period, while foreigners invested $589.9 billion in stocks and bonds in Korea in 2014 from $34.9 billion.

The government overhauled the taxation system on domestic capital invested overseas, including the exemption of taxes on domestic funds invested overseas, which is sure to spur investments of domestic funds in foreign stocks and bonds.

“I, as chairman of the National Assembly Taxation Subcommittee, will examine the details of the purpose of the tax system reform to see if the reform can do the intended job of expanding Korean investments overseas, especially, in securing the party’s agreements on the tax system reform,” Rep. Kang said.

The legislator also pledged to help Korean investors diversify their investment risks and boost their earnings from overseas investments through the reforms of the systems and policies on the investments. 

He said many problems lay in the way of boosting profits from overseas investments by Korean investors; they must be backed by professionalism on the part of both investors and financial institutions. 

This is where the seminar comes in to discuss various ways to make overseas investments safe and profitable, the legislator concluded.