This is the third and last in a series of articles on how the Fair Trade Commission (FTC), powerful enough to be referred to as “prosecutors in the business sector,” can improve its regulatory practices. ― ED.
By Park Si-soo
The Fair Trade Commission (FTC) is accused of being biased and vindictive toward foreign companies, making them reluctant to invest more in Korea.
Executives from foreign investment companies argue that the regulator often appears to have reached its own conclusions before it begins any investigations.
They feel that FTC probes are not balanced and end up stigmatizing non-Korean firms as “villains,” thus reshaping the industrial ecosystem to give more benefits to “homegrown” enterprises. Information technology companies with great influence on the domestic market are most vulnerable to such practices, they said.
These complaints flared up after President Park Geun-hye pressed state bodies, including the FTC, to come up with ways of attracting as much direct foreign investment (FDI) as possible in a bid to revitalize the sagging economy.
The government aims to draw $20 billion this year, up 5.3 percent from last year’s $19 billion.
“Whether the government is consistent and balanced in applying rules is one of the most important factors we consider ahead of making a decision on investment,” said a foreign investment company executive. “Sadly, Korea doesn’t get a high score in this category.”
She asked not to be identified because of fear of retribution against her firm by the FTC.
“I remember the FTC trying to punish our company with some contract terms, which it didn’t take seriously in earlier supervision. We had to make an extravagant ‘donation’ to the government to settle the case. Back then, we considered filing a suit (against the FTC) to get compensation, but did not because it would only have made the situation more complicated and fray the company’s relationship with the FTC” said the executive.
“The feeling I had back then was that the regulator didn’t firmly adhere to its own principles and stance. Instead, its stance was easily swayed by external influences,” she said.
Another foreign investment company official voiced a similar view, saying the FTC tended to adjust its stance according to dominant opinion.
“I have found the FTC vulnerable to external influence, especially from political circles,” he said.
Experts said it’s not something new that state regulators were criticized for being treacherous.
In a survey of 201 foreign investment companies in Korea last year, 33 percent of them cited “inconsistent state policy” as the primary reason for being hesitant to make new investment in Korea, said the Korea Chamber of Commerce that conducted the survey.
Nearly half of them said they would reduce their domestic investment should the administrative uncertainty continue. Nearly 48 percent of them found nothing improved in terms of the investment environment over the past three years, while 33 percent said the situation turned worse during this period.
In another survey released last year at the World Economic Forum in Davos, Switzerland, Korea was ranked 133rd out of 144 countries in the category of transparency within government decision-making.
FTC spokesman Kim Sung-ha denied the allegations against the regulator, saying it is playing by the rules and applying policies in a fair and balanced manner.
“Being consistent, fair and balanced is the primary goal of the FTC,” he said. “We have never been lopsided while carrying out our mission.”
Kim said the FTC is always attentive to voices from foreign investment companies, calling them “important members” of Korean society.
Meanwhile, the FTC recently said it would tighten monitoring of global IT giants throughout this year, apparently targeting Google, Apple and Facebook, to stave off their possible abuse of power using their dominant position in the market.
To that end, the regulator set up a special task force dedicated to the ICT sector comprising experts and veteran investigators.