Foreign business groups warn Korea’s law risks investment

As the ruling Democratic Party of Korea pledges to pass the controversial Yellow Envelope Law at the National Assembly’s plenary session on August 4, foreign business groups are raising alarms, with some even threatening to withdraw from the country.

The American Chamber of Commerce in Korea (AmCham), representing about 800 companies, released a statement Tuesday, expressing “serious concerns about the bill’s negative impact on Korea’s business environment and investment attractiveness.” A day earlier, the European Chamber of Commerce in Korea (ECCK) cautioned that investment pullback could occur in a worst-case scenario.

The law would greatly expand labor rights by allowing subcontractor unions to negotiate directly with main contractors and limiting damage claims against unions, even for illegal strikes. It also broadens the definition of labor disputes to cover business decisions that affect working conditions.

AmCham argues that the legislation exposes companies to unlimited legal liability without providing effective tools to manage strikes. The group warned that main contractors might be forced to negotiate with hundreds of subcontractors or face strikes related to overseas investment decisions.

Critics say the law would drive away foreign investors in an already rigid Korean labor market. Some companies have left Korea over labor regulations and union conflicts. AmCham Chairman James Kim warned, “Ahead of Korea hosting the 2025 APEC summit, the government should consider what message it’s sending.”

Despite economic risks, the government and ruling party appear set to push the bill forward, under pressure from labor unions. Meanwhile, other countries are strengthening their competitiveness: Japan is offering 4.5 trillion won in subsidies to TSMC, and Taiwan is providing administrative support to attract Nvidia and AMD research centers. Korea, by contrast, risks undermining its global standing with legislation moving in the opposite direction.