Freedom for banking may boost investments

Nowhere is the South Korean government's retreat from excessive control of the economy more visible than in the banking industry.

''Privatization'' of city banking is in full swing - though some foreign bankers say there's still a long way to go.

During the rule of the late President Park, the government was the biggest shareholder in the country's five commercial banks and dictated which industrial sectors and companies were to get loans.

In the late 1970s, however, the top-ranked Commercial Bank was allowed to go public. Last year the government sold off its shares in the Hanil Bank. The three remaining banks - Cho-Heung, Korea First, and Seoul & Trust - are expected to go public in the next year or so. Foreign banks - up to 42 branches now - are being actively courted.

A top banker explained: ''The government has finally admitted the Korean economy has grown too big for it to control. Of all the industries, the banks were the most backward. Now they will be on their own, to raise funds and to lend to whomever they want.'' Government planners in the past have grumbled that Korea's domestic savings levels, for reinvestment in industrial expansion, are below those of rivals like Japan and Taiwan.

The privatization program will still leave the government with eight specialized banking institutions, such as the Development Bank, Exchange Bank, Export-Import Bank.

But it is looking to the private sector to play a much bigger role in mobilizing the massive funds needed to carry out South Korea's ambitious five-year plan.

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