In October of last year the Financial Supervisory Service (FSS) performed an inquiry into illegal foreign currency exchange, focusing on banks. It announced Sunday that it had found 16 companies and 82 individuals had engaged in illegal activity, and that 69 branches at 11 banks had either tacitly consented to the activity or gave their help. Perhaps because the foreign currency market is now fully open, the amount of illegal activity continues to increase. There has to be better management of foreign currency.
There's no way to completely block money from leaving the country. As long as the country has chosen a policy of development that is internationally oriented, preventing money from leaving the country is neither possible nor is it desirable. Lately, however, the problem of cash leaking out of the country has become serious. That is invariably going to be a loss for the national economy, most particularly because it means money that could be used in Korea for consumption and investment is slipping out and overseas. That will lead to problems for the sustained growth of our economy. That is not something to take lightly just because the country has amassed US$200 billion in foreign currency reserves.
To begin with, there needs to be strict control over illegal foreign currency transactions. As revealed in the FSS's investigation, there are more than a few companies and individuals putting money overseas without going through the legitimate procedures, by purchasing real estate or golf club memberships in foreign countries. Reportedly there are some who take money acquired illegally and launder it overseas or use offshore means to avoid inheritance and gift taxes. There also needs to be an overall review of market opening polices beyond just foreign currency policy. That will be necessary because other major means of capital flight include "study overseas" and "travel expenses." It makes you wonder whether the tone of the government's policy is the right, since its approach is to have openness be at the center and reform play a supporting role with ideas like reducing the amount of cash that heads overseas by having foreign schools and hospitals set up shop in Korea.
The Hankyoreh, 24 January 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Foreign Currency Policy Needs Review |
