7.2 trillion won. You might not be able to grasp this sum really. With this money you could purchase 8089 55-pyeong apartments of the popular CityPark in Yongsan, or buy 9 per cent of South Koreas number one (according to market capitalization) sort of Samsung Electronics and would become second large stockholder right next to Samsung Life Insurance. According to the stock exchange the listed 372 companies are going to distribute a huge amount of money to the stockholders through March and April that equals 1 per cent of the GDP of South Korea. Could not by chance this money push the ignition switch of the domestic market that was creeping despite the brisk export market, since it will go straight to the pockets of the stockholders? Before you put your hopes in such high bets, you should keep in mind, who the owner of the pockets are. Since, dividends to be paid out in March and April go into the pockets of the foreigners. That is the same as it was last year. And so it was in 2001 and in 2002. Background last year was the nuclear standoff from North Korea and fraudulent accounts of SK Global, in 2002 it was the slowdown of South Koreas economy, and in 2001 it was the liquidity crisis of the Hyundai Group and the rumor of a Japanese crisis. However, from 2001 on every year in March and April the won-dollar exchange rate was high throughout the year. In other words, the won value dropped. Jo Mun Gi, vice director of a bureau at the Bank of Korea, points out to the corporations’ dividends at closing of accounts in December. “Under the pretext of foreigners’ dividends there were sent $2bn in 2002 and $3bn in 2003 overseas. Out of these there will be an outflow of about 60 to 70 per cent in March and April due to the closing of accounts of corporations in December.” About the rumor that Japan would increase the demand of South Korea’s Dollar at the settlement of accounts in the first quarter, he said: “First of all, we lend the money in dollars and then pay back in dollars anyway. On top of that, since due to that the Yen becomes stronger, it’s missing something, if you try to explain it as a primary factor of the Won’s weakness.” In other words, beside domestic and foreign political and economic variables the transferred dollar dividends of domestic companies in March and April are a main factor.” To what scale must the dividend transfers be, that it even influences the exchange rate? If you take a look at the scale of money the Bank of Korea has sent to ‘dividends destinations’ it were $357.50m in 1998, $820.00m in 1999, and jumped to $1.57bn in 2000, and $1.91bn in 2001. In 2002 signs of calming down could be observed with an outflow of $2.06m, but went up 46 per cent last year again accumulating to $3.01bn. Foreign dividends increase 28 per cent Also this year dollar outflow will increase compared to last year. According to a report filed by the stock exchange on March 25, total dividends equal in the business year 2003 to \7.2tr, rising 22.8 per cent compared to the business year 2002. Increase rates of foreigners’ dividends even with \2.1tr growing to \2.7tr stepped up 28.5 per cent. Calculated in dollar this sums up to more than $2.3m. This is the total sum of dividends by stock exchange listed corporations. If you calculate with about 28 per cent increase of foreign companies listed at the KOSDAQ and FDI companies compared to last year, the money that will flow out in March and April as foreign dividends will be about $3.8bn. The core of the problem is not that too much money would flow out because of foreign dividends. It is more that the average South Korean people will not benefit to the same degree of domestic companies’ profit and dividend increase as the foreigners. This causes polarization of business and also of the income. “Compare the increase rate of nominal GDP with the increase rate of total sum of dividends,” Choi Hee Gab, chief researcher of Samsung Economy Research Institute, suggests. Ok, let us compare the increase rates from 2001, 2002, and 2003. While the total sum of dividends of listed companies in the settlement of accounts in December came down from 52.9 per cent to 22.8 per cent, South Korean nominal GDP fell from 10 per cent down to 5.4 per cent. How different will be the feeling of business conditions in this situation of somebody, who earns money only by earned income and somebody, who earned money by dividend income? “While normal Koreans taboo investment in stocks, they cannot enjoy dividend earnings, being a kind of money market earning. This is one reason, why usual people have rather cautious about business conditions, even though exports are booming and the stock market is prospering,” Choi chief researcher explains. Since financial income is not distributed, as it should, business conditions are polarized even more. Even though there are many companies doing well, if these companies’ employees are not enough, earned income will not increase and domestic business will not revive. Samsung Electronics, which has 55,000 employees, has a monthly operating profit of \1tr. However, dividend profit or market profit margins are different. Even without being employee of Samsung Electronics you can share the fruits of Samsung Electronics’ profit increase and stock price rise. Samsung Electronics decided to distribute \886.6bn this year. Stock prices, which were \300ts last year in March, went up to the \540ts mark. Only if personal financial income increases, polarization can be prevented Economy experts indicate that income structure has to be modified in order to increase the financial income of Korean citizen, if you want to free yourself from the polarization trap. If you look at the ratio of earned income and financial income during the 80s in the USA, it was 60 to 40, but in 2001 the financial income increased and the ratio became 55 to 45. In South Korea in the 80s the ratio of earned income to financial income was 93 to 7 and changed to 95 to 5. The ratio of financial income even fell. “If this trend goes on, polarization of business conditions and income will even deepen and due to the fact that the domestic market cannot grow, the economy growth rate will be hit, too,” Choi senior researcher said. The Roh-government said it would utilize the ESOP (Employee Stock Ownership Plan) system in order to promote allocation of financial income. But, how many people are working at companies listed at the stock exchange, the KOSDAQ market, or at firms that are going to be listed? The guess is, not much to be effective. “In the US, which is a country with a high developed finance industry, the ratio of common individuals’ investments like mutual funds is high, but also various kinds of stock investment in pension funds are high. The money, which is earned with pension funds stock investments is transferred to the individuals, and so the ratio of individual financial income is high,” Kwon Seong Il, senior researcher at Jeil Investment Securities said. In other words, in the US there is a twofold structure of earned income and financial income, since people are enabled to earn money with indirect investment items as for example mutual funds and pension funds etc. If employees are not bound only to their earned income, also rigidity regarding mobility concerning the working place will be reducible. In that sense, to share the fruits of financial income with the foreigners is actually a way of making ‘my’ money, and it is a an absolute necessity for the growth of ‘my’ country in the long run.