[EDITORIALS]Labor is key to investmentKorea attracted direct foreign investment in 2003 of $6.5 billion, a 29-percent decline from 2002. For the past four years, foreign investment has fallen, and last year was only 40 percent of the inflows in 1999. Last year’s results were also the lowest level of foreign investment since the financial crisis of 1997.
For a country with poor financial resources like Korea, the inducement of foreign capital is vital for economic growth. Foreign investment will create new jobs and make economic recovery possible. It is worrisome when foreign investment drops off, and the reason is not that multinational companies shrank from new investments because of the Iraq war. China recorded 12 percent growth in investment inflows last year.
Why do investors shun Korea? Of course, the influence of China is large. China can provide large pieces of land at cheap prices and cheap labor with a stable labor market. Moreover, the Chinese government, both at central and local levels, tries to win the hearts of foreign firms, solving problems on the spot. Naturally foreign investments grow there.
In comparison, Korea’s investment environment has deteriorated. High labor costs, expensive land prices, bureaucratic arrogance and regulations, and opaqueness of government policies abound. Endless labor disputes and violent struggles drove even domestic firms overseas. Last year we lost 40,000 jobs, the result of sluggish investment. If this continues, we cannot expect a revival of consumption or an economic recovery. Our next generation could find itself in the same situation as many South American countries.
The government has presented proposals like cash subsidies and eased regulations to foreign investors. But the more urgent is creating stable labor-management relations and restoration of confidence in our labor market. According to an opinion poll by the Korea Trade-Investment Promotion Agency, potential foreign investors were almost unanimous in saying Korea’s labor disputes had an effect on their corporate thinking. We have to make 2004 our first year without labor disputes. Labor and government cooperation will allow us to survive.