In an annual Business Confidence Survey conducted late last year by the European Chamber of Commerce in Korea and Roland Berger, the majority of European businesses in South Korea voiced concerns over the increasing difficulties of operating in Korea’s highly regulated business environment.
The ECCK is a nonprofit, nonpolitical organization of European companies operating in or related to Korea with roughly 340 members striving to increase their presence in world’s 11th-largest economy.
In a poll of 131 European executives, 60 percent said business in Korea had become more difficult. According to the survey, the discretionary enforcement of regulations and unpredictable legislative environment are also widely considered to be some of the major obstacles for European companies doing business in here.
However, despite negative reviews regarding Korean protectionism in some areas, 61.8 percent of the companies stated they were “content” or “very content” with their performance in Korea. Half also stated they were planning to expand their operations this year.
|Jean-Christophe Darbes, European Chamber of Commerce in Korea chairman, speaks during an interview with The Korea Herald on Tuesday at ECCK headquarters in Seoul. (Park Hyun-koo/The Korea Herald)|
Jean-Christophe Darbes is the president and CEO of BNP Paribas Cardif Life Insurance in Seoul and is also the chairman of the ECCK’s board of directors.
Darbes, who has been working in Korea since 2009, joined the ECCK board as treasurer in October 2013 and was elected chairman in February 2015. As his two-year term ends this month, Darbes discussed the chamber’s biggest accomplishments during his tenure, along with his take on the country’s operational hurdles for EU companies.
“What the EU companies are finding in Korea is a positive atmosphere, for sure. Korea is an industrial country, it is striving to develop business and wealth so the context of business is positive,” said Darbes in an interview with The Korea Herald on Tuesday at the ECCK headquarters in Seoul.
“But in terms of mindset, and for sure in terms of economic policies, we have encouraged globalization, we have encouraged exchanges, and we have encouraged increase of global trade,” he continued. “And that’s why we may see EU companies facing some misunderstanding in Korea because we are not at the same level of a globalization mindset.”
Since the introduction of the EU-Korea FTA in July 2011, South Korean investments in the EU have increased substantially from $13.9 billion in 2010 to $21.6 billion in 2014. EU investments in Korea also increased from $39.9 billion to $46.5 billion.
Korea is currently the EU’s ninth-largest export destination for goods, whereas the EU is South Korea’s third-largest export market.
“We are obviously satisfied (with the FTA), because the more economies that are linked, the better it is for everybody,” says Darbes. “It’s an increase in investments in both areas. It’s creating relationships, it’s creating business, it’s creating an increase in tourism.”
“I think that because of this positive atmosphere we have seen more and more EU companies coming to Korea, in particular, since the FTA introduction,” said the chairman.
“However, operating conditions are much tougher than in other OECD (Organization for Economic Cooperation and Development) countries,” Darbes added, noting that one of the main concerns among EU companies in Korea is the issue of balance. “When Korean companies are investing in the EU, it’s quite easy ... it’s not balanced.”
The results of ECCK Business Confidence Survey showed that 57 percent of the respondents named discretionary enforcement of regulations as either partially or highly significant, while half of the companies cited the unpredictable legislative environment as partially or highly significant.
“We need to be reasonable. We are foreign investors, we are not being forced to operate in Korea, and compared to a Korean company, we have a chance to be mobile. Our assets can leave Korea if we are not satisfied,” says the chairman.
“I do respect the local regulations. Why? It is right that the regulations in Korea are a little bit different, I would say tougher, but they are always very smart. I do believe that the current regulations in Korea, if you look at the past of Korea, it has produced what we see today. Meaning, strong economic growth, good organization, stability, etc. So we cannot complain about this.”
Darbes, however, explained that while taking into consideration the cultural and economic context of Korea as a factor for its regulation policies, he stated that these regulations policies cannot remain static.
“And that is why the government in Korea has engaged to deal with deregulation, in particular, the financial sector,” he said. “So we have to be a little bit patient and suggest change. ... I think it’s a lost battle to complain and to fight against a regulation.”
Aside from ongoing disputes over public procurement policies, a number of EU company executives have voiced concerns over the country’s ongoing political scandals involving the current administration creating a sense of political uncertainty as a deterrent to business confidence.
In response to political concerns impacting the European business community, Darbes is on the other side of the spectrum. According to the chairman, a large number of European companies in Korea do not rely solely on domestic sales; rather many EU companies here export their products, which he said was typically unaffected by political turmoil
“You can really consider EU companies as exporting companies, not importing and selling companies, in Korea,” he said, also adding that he has never “seen a country, for political reasons, destroy an economy.”
In his near two-year tenure as ECCK chairman, Darbes’ says he had three main targets he strived to address: to unify EU businesses, to reinforce the financial soundness of the chamber and to develop small and medium-sized enterprises.
During his chairmanship, ECCK membership has increased by roughly 10 percent and is now approaching 340 members -- a number he stressed should double. He also claims to have positioned ECCK as a key interlocutor to the Korean government.
The chamber has also generated 3 percent income surplus, which he referred to as “very modest” compared to commercial companies, but also emphasized that ECCK is a nonprofit chamber.
After stepping down as chairman, Darbes will move on to serve in the French Navy reserve as a Corvette captain. He says he will still continue to be engaged in supporting Korea-EU business development and hopes the chamber’s new chairman focuses on member expansion to forge stronger reinforcements.
ECCK is expected to elect its new chairperson on Feb. 20.
By Julie Jackson (firstname.lastname@example.org)