S.Korea fears beef protests driving away investor

  • South Korea
  • 07/04/2008
  • CNN News

South Korea’s prime minister said on Tuesday violent street rallies against a U.S. beef import deal are harming the country’s international credibility and driving investors away.

Prime Minister Han Seung-soo issued the warning at a cabinet meeting as he renewed a pledge to crack down on protests that have grown increasingly violent and led to the arrests of more than 130 people over the weekend.

“The daily protests are making foreign investors avoid direct investment in Korea and also discouraging investment by domestic businesses,” Han said. “The credibility of South Korea’s economy is worsening rapidly.”

South Korea’s benchmark stock index is already under pressure from weakening economic growth and fears of mounting stagflation. The index fell 0.5 percent as foreign investors sold a net 166 billion won ($159 million) worth of stocks on Tuesday, the 17th straight day of net selling.

Han’s comments echoed alarm that nearly two months of protests against the deal to resume imports of U.S. beef might speed up the flight of capital from South Korea as part of a larger movement of funds from emerging markets to safer havens such as U.S. Treasury bonds.

Analysts say the prospect of prolonged protests could mean further delays for President Lee Myung-bak’s plans to implement pro-business reforms and could mean overseas investors keep their money out of the country for some time.

Adding to his woes, the Bank of Korea on Tuesday forecast the fastest inflation in a decade this year and the slowest growth since 2005, as soaring commodity costs and weakening exports hurt Asia’s fourth-largest economy.

South Korea and U.S. trade officials said last week they had reworked a beef import deal first struck in April. The deal sparked massive street demonstrations that broadened into protests against Lee’s leadership.

The demonstrations caused support for Lee and his four-month-old government to plunge.

South Korea was the third-largest export market for U.S. beef until shipments were halted in 2003 after an outbreak of mad cow disease in the United States.

Last week, the country started processing its first batch of U.S. beef to enter under new quarantine rules designed to allay Korean fears of mad cow disease by limiting imports to beef from younger cattle and banning risky parts of the cattle.

That led to a resurgence of protests that at the weekend involved a clash between an angry mob wielding steel pipes and riot police, resulting in scores of injuries on both sides.

Retailers have been slow to snap up the product to put on their shelves, mindful of a repeat of the backlash last year following a brief resumption of imports of boneless U.S. beef.

The prime minister’s office bought about 12 kg (26.5 lb) of U.S. beef from an importer on Han’s request, local media reported on Tuesday.

Han has ordered the police and prosecutors to use “all available instruments” to crack down on violent and illegal protests and restore law and order.

“What may have started as peaceful candle-lit rallies have now changed so much that there is hardly any sign of good intentions left, and the level of violence has exceeded the reasonable limit,” Prime Minister Han said.

Organisers have promised more rallies on the weekend, despite a surprise raid on their offices by the police at daybreak on Monday. Their leaders are on the run from the police who want to question them if they instigated violence.