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| 6. INVESTMENTS I. Analysis on Current Situation and Potential Benefits -- II. General Recommendations and Specific Concerns II. General Recommendations and Specific Concerns The
Chamber has to recommend that the Chilean government not be stuck on dealing with elimination of
barriers related to investment in Korea.
First of all, the Korean investment market is relatively more open than other
areas. Second, restrictions on investment in industries such as energy and
financial services, in which Chile is relatively competitive, are already
lifted. Moreover, Korea is in the long term seeking to make additional regional
agreements and planning to open its market more broadly. Putting the same level
of importance and endeavor in reducing the barriers concerning investment as the
barriers concerning general trade such as agriculture is inefficient, because
benefits from the FTA would be in the end shared by the other countries, too.
Within
this boundary, the Chamber should advise the Chilean government
to find ways to give Korean authorities an incentive to eliminate the
regulations on Korean direct investment and financial transfers abroad.
It is expected that reduction of those regulations will stimulate Korean
investment in the industry sector. It
is also worthwhile to pay attention to the Korean tax system, since it is
generally unfavorable to foreigners.
First of all, a taxation treaty with Korea is essential, because Korea imposes
capital gains taxes on Korean stock transactions by companies from countries
without such treaties. The complexity caused by the lack of coordination of
Korean tax authorities and customs authorities is another problem. The tax
authorities may find a low transfer price, which will increase the profit of
Korea, but the customs authorities may insist on high transfer price to get more
duties. Furthermore, The Korean government still has right to limit repatriation
in exceptional circumstances, when balance of payments has serious deficit,
interest or exchange rate sharply fluctuates, or stability of financial market
is seriously harmed.[1] Attention
should be also paid to the ways to induce investment in information technology
(IT) in Chile, since Chile launched a program to promote and attract investments
in IT. This effort, announced in September 7 by Jose de Gregorio, Minister of
Economy, includes a series of incentives aimed at strengthening the country’s
links to the world’s IT production and distribution networks and consolidating
itself as major springboard to provide technology products and services to the
rest of South America. Korea,
as one of the leading countries in IT business, may be a stimulation to develop
Chile’s IT industry. Chile has achieved an extremely attractive position in
this area due to the leadership that it enjoys thanks to its modern
telecommunications infrastructure and to the policies it has implemented to
promote the massive adoption of the Internet, especially in education and
business. This has been particularly enhanced by Chile’s advantages in terms
of high levels of human development, quality of life, and education, as well as
by the presence of world-class teams in the fields of biotechnology and software
production. [1] The European Commission, Market Access Sectoral and Trade Barriers Database. |
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