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Gyeonggi service helps foreign capital find its niche
Head of association of foreign-invested firms expects more investment from abroadBy Korea Herald
Published : Dec. 24, 2012 - 20:10
When Gyeonggi Province opened up its first industrial complexes in the early 1990s for production centers owned by foreign companies, it looked forward to a boom in employment opportunities for local residents, an inflow of foreign investment and a boost to the provincial economy’s growth.
What it didn’t anticipate, however, was the myriad of unique logistical, labor, legal and tax complications faced by the multinational corporations that came along with doing business in the region.
After realizing that these complications just kept growing over the years among the now eight foreign MNC industrial complexes, the provincial government created the Gyeonggi Association of Foreign-invested Companies in 2006 as a service to help those companies find the right help.
“Gyeonggi was the very first province to create an industrial complex for MNCs, and when it was made, we realized the need for more systematic support for the foreign companies with their perspectives in mind,” said Im Byung-hoon, chairman of GAFIC, in an interview with The Korea Herald on Friday.
“It works as an after-service for those companies that have already entered into business. Also, to facilitate MNCs’ operations, the central and local governments need to communicate with the foreign investors, and we work as a bridge between the two.”
As the importance of such a channel between the companies and the government became clearer over time, the organization’s role has put its focus less on member services and more on being a government interface. It now functions more as a government arm and consolidated, streamlined service for foreign-invested companies.
“GAFIC originally started out in Gyeonggi Province as a member-based organization, but it now works as a separate entity to serve and deal with the problems we as a group are facing,” Im said. “It gives foreign-invested companies one place to go rather than having to search around for the right person to talk to.”
The services differ from those for Seoul-based support systems, due to the regions’ inherently different business environments. As Gyeonggi is the largest province and situated around the capital Seoul, it emerged as the ideal location for branches of multinational corporations, many with headquarters in Seoul, to set up an industrial complex for production centers, especially for the IT-related sectors.
The organization communicates with the government on behalf of the MNCs to relay what policies the companies are having problems with. It also puts forth ways to make life easier for foreigners working at those companies, such as putting factories’ names in English on road signs, translating notices at foreign-resident apartments, and helping to install ATMs at production complexes.
The most unique service GAFIC prides itself in offering is resolving individual complaints filed by companies, having handled 140 such cases in 2012, Im said.
“Most complaints from companies are related to government policy and law, so I think solving government-related problems is among the biggest obstacles,” he said. “GAFIC has to consider both the companies’ and government’s standpoint.”
Today, about 70 percent of the 3,800 foreign-invested companies in Gyeonggi Province use GAFIC’s services, Im said, with 260 companies registered as members in 2011. The annual membership fee is 300,000 won ($280), though companies can keep their memberships and continue receiving help even if they don’t pay their dues.
In reality, because of the business environment in the province, GAFIC hardly deals directly with foreigners at all. Since a foreign-invested company in Korea simply means 30 percent or more of it is owned by a foreigner or foreign entity, most employees and executives are Korean. Foreign investors, generally MNCs from China, Japan, the U.S. and Europe, tend to entrust local businesspeople to run their projects and check in periodically.
This is evidenced by the GAFIC website itself, which has a Korean-only interface. However, Im said it plans to add English, Chinese and Japanese language options to the site.
“Even though local managers in Asia gather information through homepages, they are almost always Korean rather than foreign local managers. This is why our homepage is only in Korean, but I think GAFIC should now meet other countries’ investment needs.”
For whatever content it cannot translate for one reason or another, GAFIC provides links to the relevant multilingual support information on the websites of the Korea Trade-Investment Promotion Agency, Investment Korea and the Gyeonggi provincial government. Additionally, GAFIC makes live translations available during major events for non-Korean-speaking audience members.
While there are hardly any non-MNC businesses in Gyeonggi owned by foreigners, if any foreigner wanted to set up a business in the province, Im assured that GAFIC would have ample resources to help them get set up and manage legal and logistical hoops.
For the foreigners who do work at those foreign-invested companies, GAFIC provides mostly cultural and living support for the workers and their families. It sends brief monthly “GAFIC Family” newsletters in Korean, English and Japanese to foreign-invested companies about member companies’ accomplishments. It also offers free cultural programs twice a year and holds a “Foreign Businessmen’s Day” for networking opportunities and recognition of foreign workers.
To aid in business management, GAFIC helps foreign-invested companies with issues in resources, labor, accounting, patents, finance law, free legal and personnel training, customized consulting, cooperating with large local companies, and even shuttle transportation for workers between housing and the Jangan-Hwaseong industrial complex in the south of the province.
With more than one in five foreign-invested companies in Korea doing business in Gyeonggi Province, the growth of those 3,000 businesses in the nation’s most populous province is giving clear rise to development there. Im pointed to the foreign luxury hotels that are popping up in fast-modernizing cities like Suwon, where GAFIC is headquartered, as evidence of foreign investment’s growing influence in the region.
“The advantage (of operating in Gyeonggi Province) is that companies are not going to build factories in Seoul, because building a plant there is too costly. Gyeonggi Province being the nearest area to Seoul makes it an advantageous place for foreign companies to put a factory,” Im said.
“Previously, the facilities in this area were weak for foreign companies, but they’re improving. … Gradually, these things are increasing.”
Im said that with the growth of foreign investment throughout Korea, the GAFIC model as a go-between for foreign-invested companies and the government is expanding to other provinces.
“When GAFIC first started, we mainly supported foreign-invested companies and networked with them in an industrial complex. But now we support all foreign-invested companies throughout Gyeonggi Province in many different ways,” Im said.
“We recently helped Jeju Province and Changwon, South Gyeongsang Province, to establish organizations similar to GAFIC, so I think GAFIC not only supports foreign-invested companies in Gyeonggi Province but also affects such companies across Korea.”
The local business climate’s attractiveness to investors is cemented, albeit in part, by its free trade agreements with the U.S. and European Union, Im said. When investors choose between Korea, Japan and China to open up production centers in the region, they may settle on Korea as its jump-off point into the high-demand markets of the U.S. and Europe.
“When companies invest, there are many reasons that lead to their decision. An FTA may be one factor, but it is quite difficult to say the investment was made solely because of it,” Im said. “Nevertheless, there were incidents where foreign companies originally intended to build a factory in China or make business partnerships in Japan, but instead went to South Korea possibly because of the FTAs.
“Our business system is much like that of Japan and China, and neither country has opened up FTA with either the EU or the U.S. South Korea is the only country to have an FTA with the EU and U.S., and I believe its impact will be vast.”
While investment hasn’t jumped immediately since the effectuation of the FTAs with the EU and U.S. (in July 2011 and March 2012, respectively) owing in part to the cooling of global economic conditions, Im believes that the pacts will spur investment from emerging economic powers in particular, but that it will take some time to see the effects.
“I think it is difficult to find that investment increased significantly due to the FTAs because of the global economic crisis, but many companies from other countries will invest in Korea because of the FTA. For example, investment from Japan has significantly increased recently,” he said.
“I think that from now on, attracting investment from emerging nations such as Russia, India and those in South America will increase.”
Im also noted that interregional cooperation through free trade pacts with China and Japan, if and when the deals are sealed, will boost investment in Gyeonggi Province and Korea.
“There may be differences in the types of industries (that will expand), but I believe Gyeonggi Province has great potential for success and I strongly hope the FTA with China opens up.”
In the future, GAFIC plans to expand its support by strengthening the foundation for localized communities of foreign workers to network and cooperate, Im said.
“We will build up communities of different countries, not only in Gyeonggi Province but also in other provinces,” Im said. “It must be done actively because GAFIC is closely related with what is being handled in central and local province administrations.
“The companies usually get such benefits via support from both the central and local governments. To resolve any conflict, you have to convince both governments, and GAFIC becomes a significant means of persuasion.”
Visit the Gyeonggi Association of Foreign-invested Companies at www.gafic.or.kr.
By Elaine Ramirez (email@example.com)
Articles by Korea Herald
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