International -- Readers Report
PARTNERS OF CHAEBOL SHOULD BEWARE (int'l edition)
Thanks to "Psst! Want a piece of a chaebol?" (Asian Business, May 18), we know the cookie is crumbling with cash-strapped South Korean conglomerates, as the government attempts to enforce reforms. The unholy ties between the Korean government and the country's conglomerates are finally beginning to be broken.
The government now allows up to 55% ownership by foreigners in Korean companies. And even that cap will be removed to allow up to 100% ownership by foreigners by yearend. But foreigners flocking to Seoul with money to invest need to proceed with caution. In many countries, the average life span of joint ventures is 10 years. In South Korea, it's only two years. Often, foreign companies in joint ventures with chaebol have been treated as subsidiaries. The safest thing for a foreign firm entering into a joint venture with a chaebol is to have a majority stake and to have their own people keep control of the books.