Becoming more attractiveGlobal companies are fleeing Hong Kong after China’s execution of the Hong Kong Security Law and U.S. President Donald Trump’s revocation of certain kinds of special treatment for the city. The flight of enterprises from the hub of financial activities in Asia also means an exodus of capital. If the Moon Jae-in administration can attract the companies and the capital here, it can help revitalize a Korean economy hard-hit by the Covid-19 pandemic.
Other Asian countries, including Singapore, Taiwan and Japan, are trying to lure them in as well. Tokyo has implemented a visa waiver program for Hong Kong financiers, not to mention by offering them office spaces wholly free of charge. Singapore and Taiwan already succeeded in attracting some global securities companies.
However, Korea is less successful, excluding the most recent notable decision made by the New York Times to move some staffers of its digital news division for Asia to Seoul. But the government shows no signs of a concerted campaign to lure talent and capital to Korea, despite President Moon Jae-in’s pledge in May to “draw up drastic strategies to attract foreign high-tech companies and investments to Korea.”
A laid back approach will never bring global enterprises to Seoul. The Index of Economic Freedom announced annually by the Heritage Foundation shows Korea is ranked 25th, way below Singapore which is ranked at No. 1, Australia at No. 4 and Taiwan at No. 11. What global companies would come to a country with stifling regulations, a rigid labor market, an inflexible 52-hour work week, uncertainties in policies, and a notoriously high corporate tax?
Foreign enterprises are leaving Korea. While Korean companies’ direct foreign investment (DFI) hit a record high of $61.9 billion last year, foreign companies’ investments in Korea stopped at mere $23.3 billion. Korean companies overseas are reluctant to return home due to an unfavorable business environment. About 900 companies are reshoring back to the U.S. and about 700 companies returning to Japan each year. The number for Korea? Only 10.
The Moon administration announced its Korean New Deal project to create 1.9 million jobs by 2025 by spending a whopping 114 trillion won ($95.2 billion). If it induces companies in Hong Kong to do business in Korea, it can create jobs without emptying its coffers. To do that, deregulation and labor reforms are a must, even including the establishment of a special economic zone. Both people and money search for a place free from regulations. The government should find a lesson in that thought.