[VIEWPOIINT]Keeping companies in KoreaLate last month, I had the opportunity to make a presentation about my company at an information session for foreign investors at the Blue House. The president hosted the event to try to boost foreign investment, and I had to inform the audience that my company had decided to relocate most of its manufacturing plants abroad because of the inferior business environment here. I felt as if I had just betrayed my country.
The business sector and the media have already expressed concerns about the possible exodus of manufacturing plants, and no one will deny that the phenomenon has already hit the economy and is rapidly spreading. Manufacturing has long been the mainstay of domestic economic development, and the sector has employed a major portion of the workforce. The ups and downs of the manufacturing sector have more influence on the market than those of any other sector, and that is why the relocations matter so much.
The Clinton administration concentrated on the information technology and financial industries to overcome an economic slump, but its relative lack of attention to the manufacturing sector backfired. When the decline in manufacturing competitiveness led to rising unemployment, the succeeding Bush administration returned to a weak dollar policy in order to boost the competitiveness of the manufacturing sector. Japan is another example of a country trying to revive its manufacturing sector. The Japanese government has invited back the companies that have left the country. After all, the manufacturing sector is the mainstay of the national economy.
I heard one economic official saying at the Assembly’s inspection of government ministries that it is inevitable that some manufacturers with low competitiveness will relocate elsewhere. If we give up the fields with low competitiveness, we would lose even more industries. In fact, the companies that moved to China were mostly in the low-tech processing industry, but now even the high-tech companies want to leave the country.
My company is currently building a plant in China with the sponsorship of the Chinese government. But having another factory in a foreign land is not the best return one could hope for. Personally, I would like to do business in my homeland, provided that the business environment improves.
Imprudently diagnosing the situation and impatiently giving up a certain industry would only aggravate the outflow of companies. We cannot afford to neglect the situation any more. What we need now is a government-level plan to prevent the manufacturing sector from becoming hollow. The government should start by studying why some companies chose to relocate abroad. The grand visions of a Northeast Asian economic hub and balanced economic development are only viable dreams when we have competitiveness.
We need foreign investment that would put manufacturing plants in Korea and export the products abroad. But we need to think again about investments that greedily eye the domestic market. One of the companies that attended the Blue House meeting said that it wanted to invest in a discount superstore in a local town but decided to invest 5 billion won ($4.3 million) in China when it encountered unfriendly local bureaucrats. We should welcome the decision. Probably, the local government wanted to protect the livelihood of local merchants who would be threatened by the entry of superstores. They must also have been burdened by the idea that local capital might leak to other regions.
Before complaining about the uncooperative bureaucrats, the company should have offered an incentive to the local merchants that could partially make up for the possible loss the local economy would suffer. I could not agree with the foreign company, which unilaterally blamed the local government for the rupture of the deal.
After the painful experience of the financial crisis, we have greeted foreign investors with an unconditional welcome. But now we need to learn to distinguish the wheat from the chaff. Before attracting foreign investors, the government should work to resolve the difficulties Korean companies experience. If we were given the same benefits that go to foreign investors, a lot of us would not choose to relocate elsewhere. If the government creates an ideal environment in which to do business, a considerable portion of the 400 trillion won in “floating capital” would be funneled to companies instead of flocking to real estate.
A good environment for national companies would naturally attract foreign investment. The most urgent and desperate task is to keep domestic capital from leaking out. Unless a crack is fixed, a broken water jug will leak no matter how much water is poured in.
* The writer is president of Human & Technology Co., Ltd and chairman of Korea EMS Industry Committee. Translation by the JoongAng Daily staff.
by Jeong Kuk-kyo