European companies doing business in Korea have low confidence in the nation’s legislative and regulatory system, according to a report released here on Tuesday.
The report, released together by the European Chamber of Commerce in Korea and consulting firm Roland Berger, was based on a survey of 139 European firms‘ executives for two weeks in November. About 68 percent of the respondents have been doing business here for more than 10 years.
The respondents picked discretionary enforcement of regulations as the top obstacle in terms of Korea’s legislative and regulatory environment, with 53 percent of them showing dissatisfaction.
Citing the Korean government’s constant change in the rules of special consumption tax last year, “We need to have a reliable (business) environment for stable pricing, system and marketing strategies,” ECCK secretary general Christoph Heider said during a press meeting in Seoul.
“Although we may not leave the country immediately when the unpredictable regulatory environment persists, this can lead to revaluing doing business in Korea,” said Barbara Zollmann, secretary general of Korea-German Chamber of Commerce and Industry.
“(The need to improve system) is not only limited to foreign companies because security is important even to Korean firms. But, foreign companies are much slower to adapt to change because they have to consult with their headquarters,” she added.
Apart from the legislative system, many European companies expressed concerns about wage hikes. About 44 percent of the respondents said they feel negative about doing business in Korea in the next two years in terms of the rise in labor costs. Only 13 percent were positive on it.
Particularly, more than 70 percent responded that the automotive and financial services industries were most concerned about the outlook for labor costs in the next two years.
“Backed by strong labor union, some employees take it for granted that wage rises regardless of business environment, growth rate and productivity,” said a European company’s chief, who declined to be identified.
Despite such concerns, many European companies still view Korea as an important market because of potential growth, with 90 percent of the respondents saying the importance of the Korean market is either increasing or at the same level in their firms’ global strategy. About 57 percent of the respondents said they planned to expand their operations in Korea, compared to 49 percent in 2014.
By Shin Ji-hye(shinjh@heraldcorp.com)
