Korean Privatization Plan Tempts Foreign Investors

The doors for increased foreign investment in South Korea blew wide open in July when the government unveiled plans to sell its holdings in 11 major companies that are state-owned or heavily influenced by the government. Foreign buyers were considered among the most likely new owners of many of the firms. The jewel of the privatization program is Pohang Iron & Steel Co. (POSCO), the world’s second-largest steel manufacturer. POSCO is publicly traded, but the government holds a 26.7% stake, which will be up for sale. In conjunction with the sale, the government will dismantle controls on public ownership that could favor increased foreign interest in the giant steelmaker. The 30% limit on aggregate foreign interests in POSCO will be dropped and the cap on individual ownership now 1% will be raised initially to 3%, and to 5% in 2001. Other companies marked for quick privatization are Korea Heavy Industries & Construction Corp., Korea General Chemical Corp., Korea Technology Banking Corp., and National Textbook Co. Ltd. The firms to be privatized on a more gradual basis are Korea Telecom Corp., Korea Electric Power Corp., Korea Tobacco & Ginseng Corp., Korea Gas Corp., Daehan Oil Pipeline Corp., and Korea District Heating Corp. In another development, Kia Motors Corp., Korea’s third-largest automaker, which has been operating in bankruptcy, was put on the auction block. Kia already has significant foreign ownership, with Ford Motor Co. of the U.S. and its Japanese affiliate, Mazda Motor Corp., each owning 16.9% stakes.