[EDITORIALS]The Economy Is at StakeWhile declining semiconductor prices and trade disputes over steel and shipbuilding are dimming the export outlook, Korea's government, the business sector and unions are not even trying to cooperate, opposed to one another over restrictions on business and labor. This is the situation in which reports surfaced that officials in a major Korean company had proposed that the firm move its head office abroad. We don't think the company will pursue this idea. But the fact that the firm considered the move indicates the state of Korea's business environment.
A number of surveys conducted by either domestic or foreign institutes shows that Korea's business environment is flawed seriously. In ranking of the business environment in 25 countries tallied in the May issue of Forbes magazine, Korea placed 18th, lower than Taiwan, Malaysia and China. The Swiss-based International Institute for Management Development ranked Korea 31st among 49 countries on ease of doing business.
According to recent polls, about one half of foreign companies operating in Korea held negative views on investment in Korea, though they have an advantage over local firms in taxation. They said the biggest obstacles to investment in Korea are problems from labor-management relations and the government regulation. According to a recent JoongAng Ilbo poll of Korea's 30 biggest conglomerates, only five said they were somewhat satisfied with the government's new plan to relax restrictions. The survey indicates that the plan has failed to inspire companies, though the government announced the plan last month, saying, "We took a decisive step to raise morale of local companies."
As globalization progresses, movement of capital and labor will become more free and companies will also move to countries with good business environment. That's why the United States is considering abolishing corporate taxes and why the member countries of the Organization for Economic Cooperation and Development are lowering business taxes.
Korea also has taken steps to improve the business environment, abolishing 6,000 regulations directly after the 1997-98 foreign exchange crisis and establishing the "one-stop civil affairs office." But it leaves much to desire, compared with other countries.
The Organization for Economic Cooperation and Development complained about Korea, saying Korea's reform is just to meet short-term goals. Actually, the reality in Korea is that 100 visits to government offices are required to complete construction of a factory.
The government must make fundamental changes in the business environment, as we have pointed out so often. Most of all, the government should abandon its current attitude toward companies. It seems as though the government does not trust the business community. The government should minimize regulations so that local companies can display their maximum ability.
Regarding labor issues, the government should make the labor market as flexible as possible and settle unemployment problems on market principals and a social welfare program. The government has contradicted itself, not permitting job cuts, but demanding rigorous corporate restructuring. It should abandon such attitudes. Leaving labor disputes to be resolved by independent negotiations between management and labor, the government should take a firm attitude toward illegal strikes.