Economic Crisis Can Prove to be Opportunity for Korea
It is no secret that the world economy is struggling today. As we live in an integrated global economy, it is impossible for countries to overlook the difficulties that the United States and other economies are facing.
Around the world, foreign investments are being reduced and are heading back home to shore up their corporate balance sheet while consumers are becoming more cautious in their spending. With over 70 percent of Korea's GDP tied to exports, it is inevitable that the Korean market would be affected by the economic crisis.
However, it is times like this that many economists view as an opportunity to implement needed change to ensure future competitiveness and create new opportunities.
In the United States, we witnessed the collapse of Lehman Brothers as it recorded the largest bankruptcy in U.S. history at that time.
The ``Big Three" automakers are hoping to receive a bridge loan and insurance giant American International Group (AIG) received a $150 Billion bailout package from the government. After much chaos and disorder in what seemed to be the first phase of this international economic struggle, we now see governments working to come up with long and short-term plans to revive their economies.
Pragmatic governments are also realizing that this is no longer the time for political games and are placing the task of revitalizing their economy as top priority.
As we begin to see increasing market stabilization through these efforts, economies will enter the second phase of this crisis during which it will be critical to implement difficult, but much needed policy changes to ensure that once the world economy is back at full strength, they are not left behind.
Even in Korea, we are witnessing numerous efforts of the current administration to establish healthy global best practices to regain the confidence of the Korean market. The foreign business community appreciates such endeavors.
During the past year, we have seen ongoing efforts to ratify the Korea-U.S. Free Trade Agreement (KORUS FTA), and this is definitely a positive move in the right direction.
The recession in the United States is creating a ripple effect on the global economy. Korea is beginning to realize that it needs to do more to enhance transparency of its market, making it a more predictable and attractive market for foreign investment, if it wants to continue with the economic success it has seen in the past several decades. In this current global economy there is no room for discriminatory regulations or new non-tariff barriers.
Consequently, there is no better time than now to boost Korea-U.S. trade which in 2007 was valued at over $82 billion.
With strong competition coming from the world's fastest growing economy in China and the world's second largest economy in Japan, it is essential for Korea to seek ratification of this agreement in order to ensure its global competitiveness.
The unstable labor situation in Korea is another obstacle the government must deal with swiftly to help revitalize the economy. This has been a frequent complaint of both foreign and domestic investors alike.
Among the current 30 OECD member countries, Korea is the only country to have recorded decreasing foreign investment for three years in a row. Foreign Direct Investment (FDI) in 2004 was $12.8 billion but decreased to $10.5 billion in 2007.
Korea is becoming increasingly less attractive to foreign investors. One of the main reasons is due to the lack of labor flexibility. In an economic crisis such as this, companies need to quickly adjust to the business environment in order to survive.
With labor flexibility, companies who lay off workers when the economy is bad will hire more when the economy gets better. But this is not possible without a solid public safety net.
Attracting further foreign investment, while maintaining existing investments, would undoubtedly help revitalize the economy.
However, the current labor environment in Korea is considered by many to be inflexible and expensive. Labor issues must be dealt with in a less confrontational and more cooperative manner. In a crisis like this, labor and management need to view each other as partners and not enemies, and must work together to develop a mutually beneficial relationship. Illegal and violent demonstrations alarm foreign investors.
When pictures of these confrontations are covered by international media, it only serves to further harm the image of the Korean market as an investment destination.
These images send out a negative message that Koreans do not respect authority and do not respect the rule of law. This is not a message Korea wants to send out to potential investors.
History has shown that Koreans have displayed great ability in times of crises. Koreans fully understand the importance of being strongly integrated in the global economy, and this is why they are world leaders in many industries.
The government has demonstrated that it understands this by trying to synchronize local regulations with global standards. As we look forward with hope to the end of this economic challenge, we need to ensure that we take the right approach for the future of Korea's economy. If so, Korea shall bloom once again and prosper in the coming years.
The writer is chairman of the American Chamber of Commerce in Korea (AMCHAM). He is also the president of Boeing Korea and vice president of Boeing International.