S.Korea to boost services, foreign investment to spur economy

SEOUL, Sept 9, 2009 (AFP) - South Korea will offer foreign investors more incentives including a bigger stake in its services sector as it prepares for economic recovery from the global downturn, a minister said Wednesday.

"The Korean economy is showing early signs of recovery, so-called 'green shoots'," said Strategy and Finance Minister Yoon Jeung-Hyun, crediting government stimulus measures and an easing of international financial strains.

Yoon, in a speech to the European Union Chamber of Commerce, noted the stock market was now higher than before the Lehman Brothers bankruptcy a year ago.

The economy grew 2.6 percent in April-June from three months earlier, the highest rate among members of the Organisation for Economic Cooperation and Development in the second quarter.

"I believe that the current crisis provides the Korean economy with a new opportunity for another take-off," Yoon said.

He pledged reforms to raise competitiveness, such as corporate restructuring and resolving non-performing loans in the financial sector.

Plans to privatise 24 public institutions would be speeded up along with moves to spur corporate investment and create a business-friendly environment.

Yoon said the government would offer the world's most generous tax credits for research and development in source technologies and new growth engines.

The minister said foreign investment rose 32 percent in the first seven months compared to last year but "much still remains to be done for Korea to be a more attractive investment destination."

He promised greater incentives, such as full exemption from rent on land in foreign investment zones dedicated to parts and materials production.

The government was using its "low carbon, green growth" policy as a new growth engine and would develop the services sector to reduce dependence on manufacturing.

Regulations on foreign entry into key service industries such as education and health care would be eased.

However, Yoon cautioned that the trade-dominated economy still faces "a high level of uncertainty" given the risk of a double-dip recession and volatile oil and other commodity prices.

"There is also the fact that recent signs of economic recovery in Korea do not seem to stem from the private sector," he said.

The minister said Seoul would maintain active fiscal and financial policies until the economy is firmly on a recovery track.

Yoon said South Korea, as next chair of the G-20 meeting, "is now leading coordinated international efforts against protectionism" and would push to conclude a range of free trade pacts.

Seoul already has agreements with India, Chile, Singapore, the European Free Trade Association and the Association of Southeast Asian Nations.

A free trade pact was signed with the United States in 2007 but needs ratification by the legislatures of both countries.

Yoon said South Korea hopes its trade pact with the European Union, now in the final stage of negotiations, will go into effect in the first half of next year.

Swedish Prime Minister Fredrik Reinfeldt, whose country holds the EU's rotating presidency until December 31, said in July the European side could finalise the pact before the end of the year.

Source: AFP

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