Project Web -- Status

The sectors in which we may expect the vast majority of Korean investment to occur are mining, services, and industry. In 1998, foreign investment in Chile grew 14.5% in relation to 1997, which was $5,997 million. TABLE 4 shows that investment was mainly in sectors such as mining (39%), services (33.5%), and industry (9.4%). The mining sector has been the most important area in which the foreigners invested from 1974 to 1989. However, since the 1990s foreign investments in Chile has been diversified into sectors like services (basically financial services), electricity, water, gas, and industry. The most important investors are Canada, the United States, and Spain.

The Korean government imposes domestic regulations on direct investment abroad. This partially explains why Korean direct investment in Chile for the period 1974-1997 was only 0.06% of the total.[1] Although those restrictions are to be substantially lifted in 2001, the Chamber needs to demand that the Chilean government pay attention on it.

With respect to the Chilean firms’ investment in Korea, there seems to be relatively less to gain through an FTA, since the restrictions on foreign investment in Korea have been substantially lifted since 1984. In fact, most of them were quite recently eliminated due to the financial crisis in 1997. The bond and equity market is fully opened; restriction on foreign ownership of real estate is lifted; purchase of Korean stock without consent of its board is permitted; hostile M&A by foreigners are being authorized. The “negative list” restricts investment only in areas such as radio and television broadcasting, supporting air transport activities, workmen’s accident compensation insurance and other social security insurance, etc.[2] One of the signals that the Korean investment market is opening to the world is that the share of foreigners in the Korean stock market is growing and that the influence of them is also increasing (TABLE 5).[3]

However, allowing for the fact that investment of Chilean enterprises in foreign countries from 1990 to first quarter 2000 (shown in TABLE 6) has been decreasing,[4] an FTA with Korea could stimulate diverting and increasing Chilean investment abroad.

As can be seen in TABLE 7, Chilean investment in foreign countries is concentrated on energy and industry. Among those, energy-related industries such as electrical power generation, petrol, and distilling of ethyl alcohol are potentially beneficial to Chile. As the energy sector in Korea has been open for competition since January 1999,[5] it may be attractive to analyze potential business opportunities in this area.

[1] Government of Chile, Foreign Investment Committee.

[2] The European Commission, Market Access Sectoral and Trade Barriers Database; The U.S. Trade Representative, National Trade Estimate Report on Foreign Trade Barriers, 2000.

[3] Han Deuk Lee, Rising Foreign Influence in the Korean Stock Market, Korean Economic Briefing, LG Economic Research Institute, March 1999. Login with ID:
baeikjun and Password: 04170417.

[4] Chilean investment in foreign countries has decreased, because of following reasons: Regional recession (since 1998), More expensive financing, Decrease in privatization activity in Latin American countries, and Multinational companies (MNs) taking control of some Chilean enterprises, which have important investment abroad. Chambers of Commerce of Santiago, Foreign Investment Abroad, September 2000.

[5] Newswire from Dow Jones Interactive Database.