Korea Liberalizes Foreign Investment Rules, July 1998

Washington, DC, July 7, 1998 - On June 22, 1998, the Korean government announced its plan to introduce a new "Foreign Exchange Transaction Act" which will remove the existing restrictions on foreign exchange transaction and investment in two phases beginning April 1, 1999.

Before the implementation of the new act, the government is revising the Foreign Exchange Management Regulation, effective July 1, 1998, in order to increase foreign capital inflow, promote exports, and provide business enterprises broader access to international capital market.

There are no more limits on the foreign ownership of private (non-state-owned) listed stocks.
The limits on aggregate foreign ownership and individual ownership of state-owned public companies have been raised.
There are no more prohibitions on foreign ownership of unlisted stocks, bonds, and other short-term securities, including certificates of deposit, repurchase agreements, money market funds, and beneficiary certificates with short maturities sold by securities firms.
Foreign investors are no longer prohibited from buying and reselling the same stock on the same day.
Foreign investors are no longer prohibited from trading bonds over-the-counter, although foreign investors must purchase and sell such bonds through brokerage houses.
There are no more limits on foreign participation in public stock offerings. Foreign investors were limited to the purchase of unsubscribed portions of public stock offerings.
Korean securities firms are no longer prohibited from opening margin accounts for foreign investors, although the purchase of state-owned public companies through margin accounts is still prohibited.
In addition, the Korean Ministry of Finance and Economy (MOFE) has proposed a new Foreign Investment Promotion Act and revisions to the Foreign Exchange Control Act that would, among other things, abolish the designated foreign exchange bank system so that foreign investors will not be required to handle all of their transactions through the same, single foreign exchange bank based in Seoul.