In theory, benefits from internationalization of economic
transactions derive form the maximization of efficiency in the
distribution of world economic resources transcending national
boundaries, Korea's pursuit of outward-looking economic growth
at the early stages has had the effect of overcoming scarce
natural resources and an small domestic market. Presently,
pursuing internationalization has the larger economic significance
of maximizing total economic efficiency through introducing
autonomy and competition, and qualitatively improving the role
of the Korean economy in the world.
The Fifth Republic is pursuing liberalization in every field
as a national policy Especially in the economic dimension, the
government is actively pursuing internationalization to overcome
protectionism abroad and to facilitate industrial restructuring,
Without balanced development of the financial sector and the
real economy, the growth and development of the total economy
is destined to be restricted. Therefore, Korea's task is to
consolidate a new financial system that encourages autonomy
The Korean government's recent removal of differential
treatment of foreign bank branches and allowing them to
compete under the same condition as domestic banks is an
important step toward full internationalization of the financial
industry. Instead of passively protecting domestic banks by
strengthening regulations on foreign banks. the efforts to
improve the competitiveness of the Korean financial industry
have made much progress, Considering advanced countries'
growing pressures for the opening of financial services, such an
active approach seems to be appropriate.
Conflict between external and internal economic interests can
be minimized when opening the financial market, if financial
internationalization occurs after the preconditions have been
fulfilled. Therefore, we must consider the following factors in
promoting financial internationalization.
First, financial internationalization should be carried out
flexibly considering prevailing conditions. It should be in
harmony and kept in close relation with trade, foreign exchange,
and capital liberalization policies. In principle, export
competitiveness should be improved before trade liberalization,
the current accounting should be balanced before foreign
exchange liberalization, and the base for domestic financial
liberalization should be consolidated before financial
Second, because the opening of the financial market is
premised on free competition with international financial
institutions, strengthening domestic financial institution's
international competitiveness is very important. Therefore, the
size of domestic financial institution's capital and assets should
be enlarged to the international level. Management should be
carried out under strict commercialism to improve profitability.
Along this line, the government must promptly consolidate the
various insolvent loans of financial institutions. Since
international finance is highly knowledge-intensive, financial
manpower and substructures such as business and information
management systems must be improved.
Third, suitable supervision of foreign banks is needed to
promote foreign bank branches' sound management. to maintain
domestic financial system, and to secure effectiveness of
financial policy. Even in countries such as the U.S. and West
Germany, where the internationalization of financial market is
well developed, there are some peculiar regulations. In fact,
foreign banks in Korea are multinational banks and their
accounting system is quite different form ours. Hence, obtaining
the necessary date and supervising finance are very difficult.
Therefore, the monetary authority should carefully analyze
various information concerning capital, profit, and market share
of foreign banks branches to determine whether they properly
follow the law.
Lastly, Korea's opening of the financial market should also
be carries out in relation with other policy areas such as trade
and technological transfer.