September 18, 2009
by Sean C. Hayes (Host of this blog)
This past week, Korea and my practice group lost a large multinational company to Hong Kong.
The client, who first hired a business consultant to conduct research on where to establish a regional headquarters, chose Hong Kong primarily based on the Index of Economic Freedom and its mention of Korea’s: “burdensome labor regulations” and “non-transparent rule making and law formulation; exclusionary social, political and business structures; and insufficient institutional checks and balances.”
Other negative implications included “piracy of copyrighted works”; “contracts … considered a matter of consensus”; and a “justice system [that] can be inefficient and slow.”
These were contrasted, by the consultant, with Hong Kong’s: “flexible labor regulations”; “foreign firms not seeing corruption as an obstacle to investment”; “strongly protected” contracts; a “legal system [that] is transparent”; and the emphatic mention that “foreign capital receives domestic treatment, and foreign investment is strongly encouraged.”
The consultant, based in the United Kingdom, advised the company to establish the regional headquarters in Hong Kong and forgo Korea and Japan. I don’t agree with the consultant’s conclusion, but most of his and the indexes comments are sound.
The company, surprised by the “labor inflexibility” and “anti-foreign capital sentiment,” requested an overview of Korean labor law and basic investment climate. The conference call led to a mention of the Ssangyong Motors fiasco ― an embarrassment that will have a lasting impact on investment sentiment for years to come.
Koreans and long-time foreign residents are tired of being held hostage by a radical liberal minority that is dedicated to returning Korea to its pre-industrialized past.
The present administration has proposed a bold step forward for Korea, but it is shackled by an effective, yet very small, radical liberal minority that seems more dedicated to moving Korea back to the ages where it was a sleepy backwater agricultural-based society envious of the wealth of the Philippines.
Back to the time when Korean construction companies were not world leaders, but were so lacking in skills that most major construction projects domestically were performed by foreign laborers and contractors. Back to the time when the largest Korean exports were not electrical equipment and autos, but humans and wigs.
Back to the time when the nation’s traditional liquor soju was bought not by the bottle, but by the shot. Back to the time when sleeping on the street was not a Friday pastime, but a necessity.
Many of us that are at the forefront of this fight for foreign direct investment (FDI) are dismayed when we see this radical liberal minority’s ability to manipulate the population into believing their anti-American, anti-free trade, anti-foreign capital, and pro-militant labor policies and often wish for a return to the time when the Park Chung-hee administration was not so willing to consider this as a mere sign of a vibrant democracy, but a sign, as it may be, of infiltration by North Korea into these radical liberal parties.
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