Value context and insight. lkm@koreatimes.co.kr
Why companies leave Korea
By Lee Kyung-min
Militant labor, regulations, rising costs force firms to invest more abroad
By Lee Kyung-min
Korean companies are expanding investments overseas to build plants and other facilities while remaining reluctant to do the same at home due to labor-friendly government policies, regulations and soaring costs, experts said Friday.
They say the trend has put Asia's already-flagging fourth-largest economy on a steeper-than-expected downward spiral, leading to more job cuts and delayed economic recovery.
Yun Chang-hyun, an economist at the University of Seoul, said firms simply find it hard to do business here due to corporate inefficiency, defined by militant labor unions only seeking to protect their vested interests, which he considers the core culprit behind fast-deteriorating profits.
“Under the current structure and laws governing labor policies, corporate competitiveness is designed to be undermined,” he said.
“Businesses cannot find an incentive to make investments or capital injections in a country where unions' collective actions trump the businesses motivation to generate profit. The sad thing is, the businesses cannot do anything about it ― they might never.”
Yonsei University economist Sung Tae-yoon said businesses may deem it best to move overseas to avoid management risks and excessive regulations altogether.
“Unions threaten frequent strikes, a way for them to leverage deals to increase wages and gain more benefits. And it works here unlike other countries,” he said.
“Companies have to prioritize making a profit. Demands from unions are essentially driving them out of the country.”
The bleak assessment is in line with data from the Ministry of Economy and Finance which showed Korea's investments in foreign countries totaled $41.9 billion (48.6 trillion won) in the first nine months of 2019, up 21.6 percent from the year before.
The record-high nine-month figure is set to break the annual investment amount of 50 billion won for the first time.
The figure came despite a $12.7 billion investment in the July-September period, which dropped 5.8 percent from the year before.
The slide was led by manufacturing ― the key growth driver of the Korean economy. The sector collected $3.1 billion in investments in the third quarter, 32.5 percent less than the year before.
By contrast, the financial industry including insurance businesses invested $5.3 billion overseas, up 10.6 percent from the year before, while the real estate industry used $2.16 billion, up 61.2 percent from a year earlier.
The figures are contrasted with a plunge in domestic investments.
Bank of Korea data showed the country's facility and construction investments in the first nine months of 2019 dropped 9.4 percent and 4.6 percent from a year earlier, respectively.