Korean businesses lose their thirst for booze
The Ministry of Culture and Tourism said earlier this month that Korean companies spend approximately 5 trillion won ($6 billion) every year on entertaining clients.
A large proportion of this money is spent on boilermakers and beer in shady room saloons.
According to the Hanmi Accounting Corporation, Korean companies spend around 61 percent of their business hospitality budget on alcohol. Giving gifts and taking clients or business partners on tours accounted for just 7.7 percent, and only 2.6 percent was spent on tickets for cultural events.
However, starting this month, a new tax system will be introduced that the Culture Ministry believes will help reduce alcohol-based business entertainment and save companies a lot of unnecessary expenditure and tax payments.
The new law will allow companies to deduct some of their spending on cultural forms of entertainment such as musicals, movies, sports, theater or art exhibits from their total tax bill.
Drinking is not tax deductible but, in future, any company that spends more than 3 percent of their entertainment budget on cultural pursuits will be able to use one-tenth of the cost as a tax deduction.
This will, according to the Culture Ministry, reduce the tax bills of companies and boost spending on culture.
The Culture Ministry said earlier this month that the new tax regulation will create from 160 billion won to 500 billion won worth of new demand for art and culture.
Some smaller companies have already tried to move away from alcohol-based entertainment.
Picsel, an information technology firm with its headquarters in Scotland, and Global Research, a survey company, are among a few pioneers that have eschewed alcohol when it comes to entertaining clients.
This is an interesting choice because small companies tend to spend a high percentage of their entertaining budget on alcohol than bigger competitors, because drink has long been considered by traditional Korean businessmen as a quick way to strengthen a personal relationship.
Kim Sun, a business development officer at Picsel Technologies, said his company has avoided alcohol in its business relationships since it was founded. Alcohol spending is also prohibited at company functions, including those aimed at boosting morale or strengthening ties between employees and management, which many other Korean companies regard as a sacrosanct practice.
The same rules apply to overseas branches of Picsel.
“Our company founder is of Pakistani descent and he was born and raised in Glasgow, Scotland,” says Kim. “Before founding this company he helped teenagers with their alcohol problems.”
Picsel’s policy has forced Kim to be creative in the context of a culture where alcohol is a pervasive force, even in government departments. For example, the Korean Productivity Center, a government body that is supposed to increase the efficiency of government departments, treats alcohol almost as a religion.
“Drink is everywhere at KPC,” said a source familiar with KPC’s culture. “At KPC’s training center there are soju parties almost every night. We were told that nobody can work at KPC unless they drink.”
KPC employees recently took clients on a trip to Japan where government money was used to pay for all-night binges. This is not an option that’s open to Picsel.
“We take them out to nice restaurants,” Kim said. “We usually pick rare or unusual places like an Indian restaurant where our clients can experience a different kind of culture,” Well-established customers are taken to the company’s headquarters in Scotland.
Kim has not had any complaints from his clients. “They are my guests so I choose what to order,” Kim said. “And we buy them expensive dinners, which makes it hard for them to ask to go drinking at expensive bars.”
The goal when entertaining clients, Kim said, is to communicate and to buy time to talk business without being interrupted by competitors. “Alcohol was once the best way to buy that time,” Kim said. “Today the best alternative is golf.”
Companies are moving away from alcohol-centered business deals partly because the number of alternatives has increased. “People didn’t drink because they liked it,” Kim said. “It was because they had no choice.”
Kim said alcohol has also lost out as business practices have changed.
“In the past, school ties and hometown relationships were very important when it came to winning business contracts,” Kim said. “Today clients look for better quality and good value rather than personal ties.”
This has helped people to focus on the quality of the product rather than the number of boilermakers they have been bought.
An influx of women into the business world has also made a difference.
“A friend of mine who works in advertising told me that most of his clients are women from the fashion industry,” Kim said. “Those women prefer cultural entertainment or a simple glass of wine to boilermakers.”
The younger generation of business leaders is also more interested in self-improvement.
“They spend their time attending dance classes or taking up a new language or joining a sports community,” he said. “They have less time for drunkenness.”
Kim acknowledges that alcohol still has power, especially among old-school businessmen.
“Without alcohol, it is hard to move on to the next level with some clients or business partners,” Kim said. “Alcohol still has the power to strengthen personal relations that alternatives have a hard time replacing.”
Ji Yong-keun, the president of Global Research, said he ordered his employees to stop buying alcohol for clients at the end of 2004.
“I felt that alcohol was inappropriate in a business setting,” Ji said. “I strongly believed that there were other better ways to win sales.”
Ji said he is a devoted Christian with an ethical aversion to drinking. He used to work for a major corporation and served alcohol to win business deals, but he found the process repellent.
“Most business entertainment starts with dinner and then moves on to room saloons where women serve boilermakers,” Ji said. “Some clients then move on to prostitutes.”
Ji said he would rather buy his clients a 100,000 won or 200,000 won dinner. They might occasionally sip wine or drink beer but the night ends there. At other times he gives his clients concert tickets or hotel packages.
He also offers them 50,000 won to 100,000 won massage programs that do not involve sex. “The clients find it interesting and fun to be massaged while discussing various subjects,” Ji said.
Ji’s company has also found golf packages tend to be a cost-efficient alternative to drinking.
“A person might spend 1 million to 2 million won at a room saloon, but it costs only 1 million won to take clients on a round of golf,” Ji said. “It’s cheaper than drinking at a room saloon and a good way to get fresh air.”
Ji said there were some initial complaints from his employees.
“I was able to uphold the no-alcohol policy because in a small company like ours the will of the owner is strong,” said Ji. “Employees had to follow.”
Today none of his clients expect Ji to entertain them at room saloons. “They are used to being served with healthier entertainment,” Ji said. “They can get alcohol and women from someone else.”
He said that his goal is to let his clients know that he cares about them.
“They recognize that I don’t entertain them with alcohol, but I do other things for them,” Ji said. “Entertaining with alcohol is is no longer mandatory in Korean business.”
Since the no-drinking rule was introduced Ji has seen his company’s profits climb.
He now believes there is no relationship between alcohol and profit.
“There is only loss,” Ji said. “I think the pleasure-seeking drinking culture should disappear,” Ji said. “If you go home drunk after fooling around with a woman, that’s a sure way to break up a family. The drinking culture should cease to exist.”
By Lee Ho-jeong Staff Writer/ Daniel Jeffreys Features Editor [email@example.com]