The financial sector plays a key role in the functioning of a market economy. This
was dramatically illustrated by the Asian crisis since 1997. The financial service trade
interests us as a subject of international trade and also for its implication on the
development of the financial sector.
This paper is about the liberalization of financial service trade in
Korea. Following this introduction, Section 1 briefly reviews the benefits,
costs, and risks of the liberalization of financial service trade, as they
appear in the literature, and Section 2 discusses what it takes to realize
the benefits of trade in developing countries. Section 3 describes Koreas
liberalization measures of financial service trade before and after the
financial crisis. Section 4 discusses the trends in financial service trade
in Korea and tries to see what benefits were there from the limited
liberalization before the crisis, and Section 5 concludes the paper.
Its focus is on the financial services other than insurance, mainly the
banking services, as banks occupy the central position in Koreas financial
sector, and on two modes of service trade, cross-border and commercial
presence, as the other two, namely, consumption abroad and presence of
natural person are of relatively little importance in the financial service
* Mattoo (1999) reports that the financial service trade through
commercial presence was two times or more as large as the cross-border trade
while the other two modes were insignificant in the case of the U.S., the
only country which reports the trade through commercial presence on a regular basis.