ΆΓ  [Roundtable Debate]

KoreaTimes 2000.11.21  

On the Occasion of the 1st anniversary of the founding of the Investment Ombudsman office today, The Korea Times, jointly with the Hankook Ilbo, recently held a round table discussion at the Grand Intercontinental Hotel on ways to promote foreign investment and overall business climate in Korea.

participants were Shin Kook-whan, minister of Commerce, Industry and Energy (MOCIE); Jeffrey Jones, president of American Chamber of Commerce (AmCham) in Korea; Jacques Beyssade, president of the European Union Chamber of Commerce in Korea; Nobuya Takasugi, CEO of Fuji Xerox; Jun Young-wook, professor of Chung-Ang University and Ombudsman Kim Wan-soon. Ombudsman Kim emceed the discussion. -ED

Shin Kook-hwan
FDI Policy to Be Strengthened

As one third of entire investment in Korea is comprised of foreign direct investment (FDI), the foreign investment has been a major factor for the promotion of the Korean economy especially at this time when the corporate restructuring is underway.

In recognition of the value of FDI, Korea is now making efforts to adopt international standards and promote information and technology industry, in particular. The role of the Korean economy, alongside those of Japan, China, and Russia will become greater in facilitating the world economy.

Korea is seeking to play a central role in Northeast Asia in the 21st century and the Korean government is poised to make every effort to make Korea a better place to do business. This will eventually include North Korea in the long term.

Korea welcomes all types of FDI. The focus of economic restructuring is based on learning advanced management expertise skills and know-how from foreign companies thus FDI will play a larger role in determining the success of the restructuring process.

For example, in the manufacturing sector, Hewlett-Packard and Nokia have made big money in Korea. Through hosting of the ASEM, Korea proved it can be a leader in the world market especially with the World Cup events nearing.

Since 1997, Koreans have begun to accept a new paradigm of doing business and is currently transitioning to this new philosophy. Economic cooperation between North and South Korea will be further promoted and in the process they would need to pursue balanced industrial exchanges.

Jeffrey Jones: Biz Climate for Foreign Companies Improves Considerably in Korea.

Although previously Korea was known as difficult place to do business due to the negative treatment received by the press, the government and the consumers in general. For example, the press has criticized foreign banks for making profits in Korea. In the past, Koreans thought that foreign banks were exploiting the poor, weak Koreans. Now there is more acceptance of the idea that foreign businesses are good for the Korean economy, in terms of collecting corporate taxes, for instance.

I believe the Kim Dae-jung administration has made the regulatory environment favorable for the foreign companies to do business here. Overall public attitude has now changed for the better as the public understands that when foreign businesses make money, so do the people, economy and government.

The incentives provided to business in the form of tax and land are now any different from America. The positive change in attitude toward FDI has been significant, thus the haves acted as the primary motivating factor encouraging foreign companies to invest in Korea. When foreign businesses succeed in a country FDI will inevitably increase also. The same can apply to Korea.

The habit of blaming the government only must be stopped. Korean people must focus blame on self. Koreans must keep the law. They tend to break the law too much. They must operate in a more open and transparent manner.

Jacques Beyssade: Attitudes of Consumers and Government Need to Be Changed.

The European companies realize that Korea in many fields is an important market and they are confident that in the long run, with the Kim Dae-jung administration's leadership, the outlook for the countries is positive. Korea managed to convince EU of its commitment to globalization and deregulation in the area of foreign investment.

Korea's regulatory and legal areas have made significant progress in reaching global standards. However lingering negative attitudes of consumers beyond the control of the government are hard to change. One of the most problematic points is changing the attitudes of local government officials. I think gradual education of Korean people regarding the globalization is very important.

Nobuya Takasugi: Japanese Companies Have Negative View on Korea's Labor Issues

Regarding the steady increase in Japan's investment into Korea especially after the 1997, I can say that there are three factors. First, Korea has the relatively well established infrastructure. Second, the Korean government's role in attracting FDI has intensified. Third, Korea has high-quality manpower. In the market, gross domestic product (GDP) has continued to increase while the Korean public has been highly consumer-oriented.

Additionally, the creation of Korea Investment Service Center (KISC) and the Ombudsman Office has helped attract further foreign investment. Kim Dae-jung administration has been taking steps to allow introduction of Japanese culture into Korea.

But what concerns us the brewing labor-management strife. Many Japanese people have negative image of this problem.

Jun Yong-wook: M&As Positive Investment on Economy, Not Outflow of National Wealth

From a short-term perspective, the impact of foreign investment on domestic business sector appears to be negative. It tends to drive out or buy out domestic company thus decreasing Korean wealth. And dividend, transfer pricing outwards to home countries hurt national wealth. But M&As replace existing facilities and thus do not hire new workers as would Greenfield investments where employees are hired. Thus, Greenfield, in the short-run, is positive compared to M&As. However, in the long-run investment from M&As would increase over time. ^Also, where in the case of failing domestic firms like Daewoo Motors whose employees would definitely have been released, at least foreign firms taking over will still keep the current workers employed, thus M&As are a positive influence. The scarcity of Greenfield type investment is also due to the scarcity of land in Korea. Thus, the Korean government does not easily approve business construction permits which limits Greenfield investments.

The FDI worldwide has been focused on developed countries, sharing 75 percent of the total $865 FDI in 1999. Asia's share of FDI decreased from 14 percent in 1998 to 12 percent in 1999. But Korea's share of FDI increased from 0.6 percent in 1998 to 1.2 percent in 1999. Although in the past, Greenfield investments predominated, M&As now account for 80 percent of the total investment.