Impact of ARFP on Korea’s financial services

First published in The Korea Herald. A very important development in the first week of June that will bring huge benefits to the financial services industry in Korea has gone largely unnoticed here. Finance officials and regulators from six Asia Pacific Economic Cooperation members, including Korea, who are leading the development of the Asia Region Fund Passport concluded a week of meetings in Singapore to iron out the details of the proposal and announced that it was on track to be launched in 2016. The countries ― also including Australia, New Zealand, the Philippines, Singapore and Thailand ― aim to cut down on incompatible or overlapping financial regulations that may hinder the marketing of managed funds between participating economies. Six other APEC members ― Hong Kong, Indonesia,...

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Stock price limits and circuit breakers

First Published in The Korea Herald. Starting next month, the Korea Exchange will expand price limits and introduce market-wide circuit breakers that should provide some relief for stock traders and retail investors. Price limits and circuit breakers are used by many stock exchanges and regulators to counter severe price movements in financial markets, and Korea is no exception. Price limits are maximum percentages or values that a security or derivative contract can rise or fall in a trading day. Circuit breakers are trading halts triggered by sharp price movements, and can be imposed on either an individual financial instrument or the market as a whole. They were first adopted by the New York Stock Exchange and other U.S. exchanges in 1988.Circuit breakers had been recommended...

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Inadequate steps to boost foreign investment in Korea

First published in The Korea Herald. Last week, the Korean government announced plans to attract more foreign direct investment by more than 50 percent in three years by easing regulations and focusing support on five sectors, including cosmetics and pharmaceuticals. The Ministry of Trade, Industry and Energy said in a statement that industrial materials, petroleum products and food processing sectors would also be given strong support through regulatory changes. Korea received FDI pledges totaling $19 billion last year, up sharply from $14.5 billion in 2013, and now aims to increase the amount to $30 billion in 2017. Despite the sharp rise in pledges last year, South Korea still ranks low among high-income countries in the accumulated amount of FDI compared to the size of its economy. Moreover,...

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Korean workers’ tax burden not as bad as it seems

First published in The Korea Herald. Going by the recent debates on tax hikes in Korea and President Park Geun-hye’s firm resolve not to place “an additional burden on the public,” it would appear that the Koreans are being taxed heavily.Although it is true that economic growth is stagnant, and employment rates are not too rosy, a new report by the Organization of Economic Cooperation and Development has just shattered the myth that the tax burden in Korea is unusually high. The OECD report, Taxing Wages 2015, released on April 14, says the tax burden has increased in 23 member countries and fallen in 10 over the past five years. And guess which group Korea falls into?That’s right, from 2010 to 2014, the tax burden in Korea has declined, even as the middle class in most other developed...

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Labor reforms face hurdles in Korea

First published in The Korea Herald. The presidential office last week urged representatives of labor, management and the government to compromise on contentious reform measures aimed at providing greater flexibility in the labor market, a day after they failed to narrow their differences within the deadline. The Economic and Social Development Commission ― a consultative body comprising representatives of labor, management and the government ― had set March 31 as the deadline for concluding months of talks on overhauling Korea’s labor market. The discussions focused on the issue of the labor market’s dual structure ― the huge gap between full-time regular employees and nonregular workers ― pending topics like wages, working hours and retirement, the issue of partnership among tripartite...

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E-commerce opportunities surging in Korea

First published in The Korea Herald. E-commerce is rapidly transforming the way in which enterprises are interacting with each other, as well as with consumers, and growing rapidly across the globe. Korea is no exception and it has clocked rapid growth in recent years. According to Statistics Korea, in the business-to-consumer, or B2C segment, the online shopping transaction value reached 45.24 trillion won ($41.02 billion) in 2014, which increased 17.5 percent from 38.50 trillion won in 2013. The mobile shopping transaction value recorded 14.81 trillion won in 2014, which increased 125.8 percent from 2013. Furthermore, in a recent report that has been overlooked by local media, the United Nations Conference on Trade and Development has many positive things to say about Korea’s e-commerce...

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Deregulate lotteries to fund welfare

First published in The Korea Herald. There has been a heated debate in recent months about the need to raise taxes in Korea to generate revenue for the various government welfare programs to support the needy. While President Park Geun-hye has ruled out the possibility of raising taxes and is instead eyeing the “shadow economy” to get the much-needed funds, there is one other source that has been completely overlooked ― lotteries. Lotteries are of particular interest to public finance economists since they represent an important source of government revenue in many countries. As a significant contributor to the government kitty, they have been widely examined by economists focusing primarily on their revenue potential and desirability as a method of taxation ― in many countries they exceed...

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Dynamics of Korea-China economic relations

First published in The Korea Herald. The much-awaited Korea-China Free Trade Agreement was initialed in late February, taking a step closer to implementing what is seen as Korea’s most significant trade deal. The initialing came about three months after the two countries concluded FTA negotiations that began in May 2012, and is expected to eclipse its deals with the U.S. and the EU, as China is already its largest trading partner. China, the world’s largest destination for Korean goods, accounted for more than one-quarter ― $145.28 billion ― of Korea’s overall exports of $572.66 billion in 2014. The next biggest national-level markets for Korean exporters are the United States at 11 percent and Japan at 6 percent. According to news reports, the agreement, currently written in English,...

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