Speaking about Invest Korea Plaza and international business
This is the second part of a two-part series interview with Chung Tong-soo, head of Invest Korea -- Ed.
Q: Please tell us about your difficulties when inducing foreign capital. And also comment on your requirements for promoting work efficiency in the Korean government and relevant organizers.
A: Korea is an attractive destination for foreign direct investment (FDI) and does not discriminate against overseas capital. Yet, there has been some controversy over the role of foreign capital in the Korean economy, but we wish to say unequivocally that we welcome all investors, and the government does not and will not discriminate against foreign capital. To get investors to turn their attention to Korea, we have an ambitious plan in place. You are all probably familiar with Invest Korea, which has been revamped to become a more efficient organization dedicated to assisting foreign investors.
We are well aware that foreign investors are concerned about labor issues. In response to those concerns, the government has endeavored to create a mutually beneficial labor culture that settles disputes through practical dialog. More specifically, we organized a team under Invest Korea to take charge of assisting foreign-invested companies to resolve labor conflicts and establish a friendly business relationship. As an example, the Federation of Korean Trade Unions has set a precedent of cooperation by joining investment promotion teams.
Also, we aim to improve not only business conditions but also the living environment because we recognize businesses will thrive if the people doing the business and their families are happy with the quality of life. Recognizing the difficulties foreigners may face, we have worked to streamline the investment process. One such measure involves assigning a 'Project Manager (PM).' The PMs provide one-on-one consultations to foreign investors, guiding them through each stage, from the initial planning to actual business operations. So-called 'Home doctors' make on-site visits to provide assistance and identify grievances of existing foreign-invested companies. This kind of attention will help companies to reinvest in Korea.
Furthermore, along with the foreign business community, we have already resolved 42 items, up to the third quarter, after having identified a total of 151 issues. Two of the more pressing issues involve the establishment of foreign schools and the call for more efficient immigration procedures. Like parents everywhere, we understand the desire to secure quality education for our children. The government's contribution will total 10 billion won to set up a top-notch international school in Seoul's Hannamdong.
And we established an exclusive desk at immigration where visas are processed for foreign investors.
Q: Please evaluate the performance of rival countries like China and Korea's countermeasures.
A: While Korea can't offer foreign investors the same market size as China or the same low level of wages, a new assessment of non-economic factors representing the broad sweep of the investment environments of the two countries points to a clear edge held by Korea.
Korea's strongest advantages over China lay in technology, R&D capability, intellectual property protection, communications, health care, and immigration procedures. If the prime concern of a foreign investor is to reduce cost, then any choice between Korea and China must necessarily lead to the latter. However, an investor in a high-tech area of business and searching for a partner would be better advised to consider Korea since the country excels over its rival in the areas of information technology (IT), labor productivity, semiconductor production, LCD output and consumption, mobile phone manufacture and use, and the level of wireless communication.
Q: What else does Korea offer to foreign investors
A: In addition, Korea offers investors a far more sophisticated financial infrastructure in which to operate, one that allows transactions involving small amounts by Internet, on-line banking or via credit cards.
When it comes to logistical capability, both China and Korea are well equipped. China, for example, is home to some of the world's leading ports to mention Shanghai, the world's second largest, as well as Shenzen, Qingdoa and Tianjin. However, the Korean ports of Incheon, Busan and Gwangyang are major handlers of freight in their own right, boasting some of the most advanced cargo-handling facilities in the world. In fact, Busan attracts cargoes going to and from China since Chinese ports do not have the capability to handle certain volumes. In sum, the quality of its facilities and its geo-strategic location ideally position Korea to assume the title of the logistical hub of Northeast Asia.
Health care is another area where Korea outshines China. Local services are rapidly improving with major hospitals now providing international clinics staffed with English-speaking personnel in order to serve the foreign population. Some 40 percent of foreign respondents in a recent survey declared themselves satisfied with Korean health care services, up markedly from a 27-percent rating a mere three years ago in 2003. Furthermore, an increasing number of patients from neighboring countries are traveling to Korea for specialized medical services such as infertility treatment or plastic or spinal surgery. The quality of health care in China is generally lower than in Korea. What's more, the quality varies widely, with huge differences in expertise between urban and rural areas. Many rural hospitals refuse even to treat foreigners and small hospitals do not accept foreign health care insurance. The Chinese government in response has established facilities exclusively for foreigners in major hospitals. Private Westernized clinics run by non-Chinese operate in the chief cities of Beijing, Shanghai and Guangzhou.
The first impression that travelers often receive of a foreign country is the welcome they receive at an airport immigration desk. For this reason, Korea has devised an immigration system lauded to be one of the most convenient in the world. Mindful of the importance of foreign investors to the future of the Korean economy, a special immigration desk has been put in place at Incheon International Airport so that their entry can be processed without having to wait in line. If a foreign company makes an investment in excess of US$500,000, the company's executives are entitled to receive the Korean equivalent of a Green Card. China offers no such advantages to foreign investors. Instead, all foreign visitors are requested to acquire a one to five-year residency permit on entering China with a Z-visa. However, since it is difficult to obtain a permit for two years or longer, most foreign executives settle for a oneyear permit that they renew every year.
Q: Is there anything else you can say about the advantages Korea offers to foreign investment
A: One of the most startling differences between Korea and China is in the level and quality of communication. No country in the world can match Korea for its Internet infrastructure or for its level of Internet use and access. Connection to the Internet in Korea is swift and permits sending and receiving large-volume files. Some 77 percent of Koreans have Internet access, a stunning 17 million play on-line games (30 percent of the world market), while 80 percent of the population owns a mobile phone.
In addition, the rise of mobile technologies such as WiBro and Digital Multimedia Broadcasting promise to make Korea a truly 'ubiquitous' society where information technology is accessible any place, anywhere and any time. Internet access has not spread widely in China, being available only in a few large cities.
China has some 160 million Internet users, second only to the United States, but they represent a penetration rate of only 10 percent.
Moreover, only half of this number has broadband Internet connection. This state of affairs has obvious ramifications for the ease with which business might be done.
A 2005 report by Arthur D. Little revealed that transportation systems, productivity, level of globalization, industrial structure, infrastructure, and living environment were far superior in Seoul to what obtained in Beijing and Shanghai. The potential that these noneconomic advantages offer foreign investors is immense. It is these strengths, therefore, that the Korean government through its agency, Invest KOREA intends to promote a new generation of inbound investment.
