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Korean Gov`t Gets 6.5 Rating for `Biz Friendliness`

Posted July. 06, 2009 10:22,   


Foreign companies operating in Korea have given their host government an average 6.5 out of 10 possible points in a business friendliness rating.

The figure suggests they believe the Korean government is less business friendly than its Chinese and Japanese counterparts.

This is part of the findings from a survey of 60 foreign companies operating in Korea jointly conducted by The Dong-A Ilbo and the Knowledge Economy Ministry June 15-30. On business friendliness, 40 percent of the companies ranked Japan, Korea and China in that order, followed by those who picked China-Japan-Korea with 23 percent and Japan-China-Korea with 22 percent.

Those who said “Korea-Japan-China” comprised seven percent, and those who chose “China-Korea-Japan” three percent. The study suggests that 67 percent of the foreign companies picked Japan as the most business-friendly and 26 percent China, while only seven percent chose Korea.

Foreign companies showed a proactive stance on investment in Korea, however. Despite the global economic downturn, 31 companies (52 percent) said they will increase investment in Korea this year. When the timing of investment was adjusted from “this year” to “in the future,” the number of companies that plan to increase investment in Korea increased to 39 (65 percent).

The key reasons for investing in Korea included highly skilled human resources (48 percent), excellent IT infrastructure (38 percent), and geographical advantages (22 percent).

Foreign-based companies reduced their investment in Korea 38.2 percent in this year’s first quarter from the same period last year due to the global economic crisis. They increased investment in Korea 62 percent in the second quarter, however.

Lee Dong-keun, head of the trade and investment department at the Knowledge Economy Ministry, said, “Foreign investors were taking a wait-and-see stance amid the global recession, but have started investment in earnest as they perceive the growth potential of the Korean economy.”

On hurdles blocking investment in Korea, foreign companies cited excessive regulation (50 percent) and taxes (43 percent). Based on the survey results, Dong-A interviewed officials from more than 10 companies to get examples of excessive regulations. They said obligatory bank lending to small and medium-size enterprises, vehicle tax systems, restriction of plant construction in the Seoul metropolitan area, and pricing regulations on new drugs.

This indicates the difficulty for the Korean government and foreign companies to narrow their differences on regulation. Dr. Lee Seong-bong, a professor of business administration at Seoul Women’s University, said, “Inconsistent government policy and excessive regulations must be removed and adjusted,” adding, “But Korea cannot afford to meet all demands of foreign companies, including obligatory bank lending designed to protect small and medium-size enterprises and the working class and the drug pricing policy, which constitute the government’s policy orientation.”

Militant unions and language barriers were considered to be less of a barrier to foreign companies, with eight percent singling out these choices each. Kim Seon-jae, vice chairman of the Korea Foreign Company Association, said “Militant labor-management relations and the strict employment system were considered the biggest barriers among foreign-invested companies in Korea over the past 10 years. But since labor disputes have declined following the financial crisis originating in the U.S., labor relations have become a less of an issue.”

lovesong@donga.com achim@donga.com