An investment-friendly environment comes first

Overly rigid regulations, often unfound elsewhere in the world, are hamstringing Korea from ascending to an Asia-Pacific business hub. A forum hosted by the American Chamber of Commerce (Amcham) in Korea on Tuesday to deal with the local business environment emphasized the need for the government to build a predictable business environment if it wants to raise investment appeal for the country. Earlier in the year, Amcham Korea sent its proposal for a roadmap to promote Korea to President Yoon Suk Yeol through its Asia-Pacific Regional Headquarters report.

Among the key drawbacks the report cited with regard to investments in Korea were unpredictability in government policies on tax and regulatory actions. Foreign enterprises hesitate in locating their regional office in Korea due to the risk of their chief executives being exposed to lawsuits and penalization from the Serious Accident Punishment Act and other stringent regulations on workplace accidents and tax-related issues. The rigidness in labor market conditions like the mandatory 52-hour workweek rule is another setback.

What Amcham pointed out has been repeatedly raised at home and abroad to help fix the problem. Still, the conclusion of the report demands greater attention from the government given the need for change in the business environment to help multinational companies do business in Korea.

A poll on nearly 800 American members of Amcham Korea shows that they chose Korea as the second best candidate to host their Asia-Pacific regional headquarters after Singapore, citing its significant economic size and advanced industrial power in chipmaking, EV batteries and other supplies, as well as rich internet platform options. Korea’s appeal has also grown amid the strategic decoupling from China.

Korea must maximize its appeal to draw global companies. It needs to remove regulations that are out of sync with global standards and eliminate uncertainties in public policies. The government needs to mitigate the excessive legal burden on executives of foreign companies. At the same time, the government should keep pushing labor reforms to ease the deep-rooted rigidity in the labor market.

Singapore is home to around 5,000 Asia-Pacific regional bases of multinational corporations and Hong Kong to 1,400, whereas the number is fewer than 100 in Korea. When companies arrive, jobs and capital come with them. In that case, Korea’s influence in the global industrial map also can broaden together with gaining economic vitality. Instead of setting the rhetorical goal of turning Korea into an Asian economic hub, the government must take proactive actions to achieve the goal.