For­eign com­pa­nies con­cerned about ris­ing com­pli­ance costs

The Korea Times - - NATIONAL - By Nam Hyun-woo [email protected]­re­

For­eign com­pa­nies are fac­ing grow­ing dif­fi­cul­ties in do­ing busi­ness in Korea be­cause the gov­ern­ment’s “in­con­sis­tent” poli­cies raise com­pli­ance costs, the lead­ers of for­eign cham­bers of com­merce said Mon­day.

Amer­i­can Cham­ber of Com­merce in Korea (AMCHAM) Chair­man James Kim and Euro­pean Cham­ber of Com­merce in Korea Pres­i­dent Christoph Hei­der made the re­marks at a for­eign firms’ sem­i­nar held by the Korea Eco­nomic Re­search In­sti­tute in Seoul.

The two echoed that Korea re­mains an at­trac­tive in­vest­ment des­ti­na­tion, but faces chal­lenges from other Asia Pa­cific na­tions such as Sin­ga­pore, Ja­pan, China and Hong Kong, due to such dif­fi­cul­ties.

Kim pointed out that nu­mer­ous for­eign firms are com­plain­ing about Korea’s high com­pli­ance costs, which re­fer to ex­penses that a firm in­curs to com­ply with reg­u­la­tions. To ad­dress this, Kim said pre­dictabil­ity and trans­parency in the gov­ern­ment’s au­dits or in­ves­ti­ga­tions should be en­hanced.

As an ex­am­ple of high com­pli­ance costs, Kim cited Korea’s new law of pro­hibit­ing work­place bullying, which took ef­fect in July but faced doubts over its am­bigu­ous def­i­ni­tion and ef­fec­tive­ness.

“In par­tic­u­lar, the CEO in many cases can be per­son­ally li­able for wrong­do­ing out­side of their con­trol,” Kim said.

“AMCHAM fully sup­ports the anti-bullying leg­is­la­tion’s goal of im­prov­ing the work­ing en­vi­ron­ment and elim­i­nat­ing bullying, but un­der the law, if re­tal­ia­tory or dis­crim­i­na­tory mea­sures are taken against vic­tims or those who re­port abu­sive con­duct, CEOs could face a max­i­mum three-year jail term and a fine of up to 30 mil­lion won ($2,555),” he said. “The law, how­ever, does not stip­u­late the pun­ish­ment for the per­pe­tra­tor of the bullying.

Hei­der said the gov­ern­ment’s cur­rent poli­cies dis­play a lack of “con­sis­tency, pre­dictabil­ity, re­li­a­bil­ity and trans­parency” and need im­prove­ments in these as­pects to re­tain the coun­try’s at­trac­tive­ness for for­eign in­vestors. Both Kim and Hei­der also noted dif­fi­cul­ties in the coun­try’s la­bor mar­ket struc­ture and re­lated is­sues.

“The con­sid­er­able rise of the min­i­mum wage in 2018 and 2019 eth­i­cally was a good thing,” Hei­der said. “Busi­ness wise, I rather see an evo­lu­tion or a de­vel­op­ment over time as the bet­ter ap­proach. You need to give com­pa­nies time to ad­just to a chang­ing en­vi­ron­ment.”

The coun­try’s min­i­mum wage showed sharp rises in the wake of the Moon Jae-in ad­min­is­tra­tion. In 2018, the statu­tory min­i­mum wage was 7,530 won per hour, up 16.4 per­cent from a year ear­lier, and rose 10.9 per­cent to 8,350 won per hour for this year. The min­i­mum wage had been ris­ing 6.4 per­cent on av­er­age be­fore the Moon ad­min­is­tra­tion.

Kim said, “Korea’s rigid la­bor mar­ket makes com­pa­nies he­si­tant to cre­ate new jobs.” On reg­u­la­tions, the two lead­ers stressed Korea-spe­cific reg­u­la­tions are se­ri­ously un­der­min­ing its at­trac­tive­ness. Korea ranked 30th out of 34 OECD coun­tries sur­veyed in the 2018 OECD Prod­uct Mar­ket Reg­u­la­tion, which mea­sures a coun­try’s reg­u­la­tory bar­ri­ers to firm en­try and to com­pe­ti­tion.

“Even if cer­tain Korean laws are based on in­ter­na­tional law, there are many changes or lo­cal amend­ments made which makes it dif­fi­cult for not only for­eign com­pa­nies to im­port but also for Korean com­pa­nies to ex­port,” Hei­der said.

Kim also said: “When Korea’s reg­u­la­tions are out of align­ment with global stan­dards, it cre­ates an un­even play­ing field for global com­pa­nies, which ul­ti­mately makes it harder for global com­pa­nies to ex­pand their in­vest­ments in Korea.”

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