Battling Korean Protectionism
The battle between protectionists and open-market advocates in Korea is moving to another front--mobile phones. SK Telecom Co., South Korea's biggest mobile-phone operator, is about to sell a $1.2 billion rights issue that foreign shareholders say will dilute their stake and hamper any possibility of a takeover. At a time when efforts to sell two Korean banks to foreign investors have bogged down, the SK Telecom imbroglio highlights the hard time Korea is having in economic reforms.
Tiger Management Corp., a U.S. hedge fund that is the third-largest shareholder of SK Telecom, recently applied to the Korean courts for an injunction blocking the issue. The civil court rejected Tiger's request even though Tiger had support from an external auditor and three outside directors of the company, including Nam Sang Koo, a finance professor at Korea University appointed to ensure transparency at SK Telecom.
An investor rights group, the People's Solidarity for Participatory Democracy, immediately stated it will appeal the court ruling. A competitive Korean economy needs foreign investment to bring in fresh ideas and new capital. Korea is only now recovering from its worst recession in modern history, brought on in large part by the insularity of its biggest corporations. Korea should not make this mistake twice.
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