By Ryu Jin
Staff Reporter
South Korean enterprises in China find themselves in a quandary in the changing business environment, which went from bad to worse recently due to toughening government regulations and decreasing incentives there, according to sources Wednesday.
An increasing number of Korean companies operating in the country feel the need to leave, with the Chinese government scrapping tax cuts for foreign enterprises and moving to oblige them to join the five major insurers.
Last weekend, 10 South Korean executives and employees of Segang Textile in Yantai, Shandong Province, which has about 3,000 local Chinese workers on its payroll, fled overnight.
``I heard that they ran away on Saturday after they were threatened by creditors the previous day,’’ a South Korean businessman in Yantai said on the condition of anonymity.
He added that the South Korean entrepreneurs in China find it increasingly difficult to liquidate their companies, as a growing number of local laborers as well as creditors see them as ``fly-by-night’’ businessmen.
In a report released Wednesday, the Federation of Korean Industries (FKI), the largest business lobby group in the country, suggested that the government should come up with proper measures to help the South Korean entrepreneurs in China.
``Small- and medium-sized firms, which try to withdraw from China, find themselves fettered by the complex liquidation procedure and bureaucratic delays,’’ an FKI official said. ``It is time for the government to roll up its sleeves to give them support.’’
According to a survey conducted late last year by the Ministry of Maritime Affairs and Fisheries and KOTRA, one in every 10 South Korean companies in China is considering withdrawing from the country due to a deterioration in the business environment.
One of the major concerns of the companies that are considering relocation is the increase in costs, as China is scheduled to have a new labor law go into effect from 2008, a further burden for the firms in addition to recent wage hikes.
Officials from the Ministry of Commerce, Industry and Energy said that they would dispatch a delegation to China for an on-site inspection in Shandong, Guangdong and other provinces later this month.
China was once called the ``land of opportunity.’’ But, under the changing business environment, the expression is becoming a phrase of the past for South Korean companies, which are trying to find better conditions elsewhere.