Addressing reporters at the 12th Asia Pacific Economic Cooperation (APEC) conference, Han stated that sustained foreign investment is crucial for economic growth and stable international capital movement is a common goal of the 21 nation APEC group.

However, Han added that foreign investors should not be subjected to different rules to those used by domestic investors.

Han's comments come soon after the finance ministry announced that it will seek to tighten tax rules on capital gains earned by foreign funds operating in the country but which are based offshore. The decision came as part of the government's 2005 tax reform plan introduced by the Ministry of Finance and Economy (MOFE) last month.

Under this plan, to be submitted to the National Assembly in October, the government will tax foreign funds headquartered offshore, if their Korean operations transfer such gains to them.

"In principle, we will first levy withholding taxes on capital gains and interest income made by local corporations or foreign funds registered in tax havens abroad," Deputy Minister for Tax and Customs Kim Yong-min explained.

"Then, if such funds submit documents proving that a company in a tax haven is a real investor of a local corporation, not a bogus company within three years, the government will return their tax payments," he added.

Recent figures released by Korea's National Taxation Service have revealed that last year US$8.9 billion was invested in Korea from territories that it classed as tax havens. Of this total, US$6.6 billion was said to have originated from Labuan, US$1.6 from Bermuda, and US$700 million from the British Virgin Islands.

The Korean government is also seeking to tighten up a number of double taxation treaties to restrict tax benefits enjoyed by foreign companies and investors.