Lone Star Case Tests New Administration
By Jane Han
Staff Reporter
The high-profile Lone Star case is testing the willingness of the incoming administration to attract foreign investors.
A U.S. business group stressed Wednesday that foreign investors and international media are closely following the case, as many believe it will be a good indication of how South Korea will treat other investors in the future.
``Foreign investors do not see this as a single, isolated case, but rather as an example of the lack of predictability in the Korean market,'' Tami Overby, president and CEO of the American Chamber of Commerce in Korea (AMCHAM), told a New Year's press conference.
The U.S. buyout firm saw itself tangled in legal and tax disputes since buying a controlling stake in Korea Exchange Bank (KEB) in 2003 at a knockoff price, as speculations stemmed that the Dallas-based company lobbied Korean government officials in order to make the purchase.
Company Chairman John Grayken, who voluntarily flew into Seoul last week to testify in court, has consistently denied wrongdoings, but is currently being quizzed by local authorities under an unexpected 10-day travel ban from leaving the country.
As the case has widely been exemplified as highlighting the risks of doing business in Korea, Overby emphasized that the court should settle the issue as soon as possible ``in a manner consistent with international standards.''
``This case has a significant negative impact on foreign direct investment (FDI), at a time when Korea's FDI is already declining,'' she said, explaining that many foreigners don't understand why Lone Star is such a big problem in Korea.
While local critics have been echoing that buyout funds shouldn't make profit at the expense of troubled domestic companies, Lone Star officials have boasted its role in revitalizing the once distressed KEB, the nation's sixth-largest bank.
Overby said investors need to feel that if they invest in Korea and make a profit, people won't say that the profit is ``excessive.''
``There shouldn't be a negative conception of `excessive' profit,'' she said, hinting that she hopes such sentiment in Korea will change with the incoming Lee Myung-bak administration.
Further sharing the commerce chamber's expectations from the new government, AMCHAM Chairman William Oberlin summed up that the three must-have characteristics of state regulations are predictability, consistency and transparency.
He also underscored the not yet ratified KORUS free trade deal and the challenges _ mainly the beef issue and political agenda ― must be overcome to be approved by both countries' legislation.
``Every day that slips by makes it more difficult to pass. Sooner is better for all of us,'' said Overby, referring to the general elections here in April and the U.S. presidential election in November, both of which can hinder the ratification process.