'Korea upgrading business practices'

Thilo Halter, president of the European Chamber of Commerce in Korea

By Choi Kyong-ae

The Korea Times has conducted interviews with four foreign business experts — Thilo Halter, president of the European Chamber of Commerce in Korea; Richard Dobbs, director of McKinsey Global Institute; former AMCHAM Korea Chairman Jeffrey Jones; and Advanced Capital Partners Chairman James Rooney — to see whether Park’s corporate policies are moving in the right direction. The following discussion has been reconstituted based on separate interviews, which were conducted through email and phone calls from July 29 to Aug. 1.

Q

What is your impression of the Park Geun-hye government's conglomerate policy in the first several months since it took office in February?

James Rooney: the government is trying to ensure that the country runs with a proper discipline and it's not just the conglomerates. It's the same with the ongoing investigation into slush funds raised by the former President Chun Doo-hwan. All kind of social regulations are being enforced much more honestly by Park Geun-hye government than I've seen in Korea for the last 10 years.

Thilo Halter: Korea has accomplished an unprecedented economic development within such a short period of time. Now the country is in transition to once again quickly catch up with other advanced economies. Again, Korea is in the process of upgrading business practices and systems. I am confident that Korea will be qualified to be one of the most advanced economies through this transition.

Are you standing for the authorities' aggressive investigation into big companies such as CJ for their misconduct?

James Rooney: If the companies are breaking the law or they are cheating or they are doing wrong things, then it should be dealt with according to proper regulations. President Park is also clamping down on the corruption within the government sector because this kind of corruption makes the country weaker.

Jeffrey Jones: If you look at what the tax office is doing, they are treating everybody the same, whether they are big companies, small companies, or individuals. As a general matter, if the authorities' investigations into wrongdoings of large conglomerates are implemented in a fair and transparent manner, conducting such investigations tends to improve the transparency and credibility of the Korean economy and creates a more favorable business environment. The enforcement must be fair and consistent to achieve this positive result.

What do you think of market concerns that the government's hard-line policy against conglomerates may dampen economic growth?

James Rooney: I think it is the opposite. Conglomerates have not been very efficient in using capital and they needed to change during last 15 years since the IMF crisis. Some of them changed but still some did not change. I think the government's strict policy toward them is a big positive for Korea. And I think it will actually stimulate the healthy economic growth by eliminating all kinds of moral hazards and corruption. As I've been watching closely this matter, I think we will see a stronger economic future in the near future.

Thilo Halter: Korea is not backpedaling but moving towards in terms of business practices and systems. The Korean government and the business community will surely find a solid business environment, which is built upon principle, trust and the rule of law.

Jeffrey Jones: The environment in the U.S. is not dissimilar to that of Korea except that the large companies in the U.S. do not have the same lopsided market share of the U.S. economy similar to the large companies in Korea.

How do you seek balanced growth between large companies and small-and medium-sized companies in your country?

Jeffrey Jones: The U.S. has had a consistent policy of supporting SMEs through a system of support through the Small Business Administration, helping small businesses to export though the Commercial Service of the Department of Commerce and to a limited extent tax policy providing favorable tax breaks to small companies. Even at the U.S. Embassy in Seoul, the Commercial Section of the U.S. Embassy has a number of programs intended to help small businesses throughout the U.S. to focus on the market in Korea, to develop business partners in Korea and sell their products in Korea.

James Rooney: The chaebol do not represent most of Korea's economy even though they look like a big elephant. So the government is going in the right direction supporting SMEs. If you look back on 50 years ago, there were only baby companies in Korea. No big elephants. Today's Korean economy is built on those small companies as they grew up to become large companies. We need to make the next generation of large companies partnering with small companies and the government has to work actively to support that with proper policies for successful babies in the future.

Richard Dobbs: Korean economy is going to need growth based both on large corporations and on SMEs. In particular, leadership of the service sector, where Korea is a long way behind, will need to come from the large corporations.

Thilo Halter: The majority of European companies - those in Korea included, are SMEs. European SMEs have been sources of innovation, R&D, and creativity for centuries, thus it is commonly recognised that SMEs are the backbone of the European economy. In Europe, companies that have fewer than 250 employees with annual turnover less than EUR50 million or annual balance sheet total not exceeding EUR43 million are considered as SMEs. And 99 percent of European businesses fall under this category. International companies are not an exception.

Do you have any tips for Ms. Park for a successful five year in office?

James Rooney: The government is absolutely going in the right direction. Korean economy has been growing slowly during the last 10 years. I expect if she does the proper disciplines for the country and has a social support from the people of the country, Korean economy will grow faster than expected. For conglomerates, they need to learn to respect their responsibilities properly.