A recent study by the Korean Chamber of Commerce and Industry on nearly 1,000 foreign-invested companies showed that 70 percent of foreign investors are reluctant to continue investing in Korea.

Beyond the obvious reasons cited, there is much more to this phenomenon and that in-depth research could reveal systemic problems the government could address, thereby avoiding the outflow of much needed capital for the ailing economy.

With the economy slowing for several years in a row and a new President promising to remedy it but hampered by global economic constraints and internal woes on U.S. beef imports, it is imperative that the government implements a new set of rules for this game before investment is redirected to competitive neighbors.


1. Use PR Money Wisely

Every month I am invited to an event, a fancy dinner at a five-star hotel organized by a foreign investment promotion office, be it central government, province or city. There is no better place to network with the same people, over and over again. The problem with these is that hardly 10 percent of the participants are potential investors. The room is usually filled with whomever the organizers could invite, which includes many Korean companies, many investors who have been in Korea for a long time and cannot wait to get out, and diplomats and other dignitaries who are not investors.

The millions of dollars collectively washed down the drain each year do absolutely nothing to promote investment to a targeted audience, and this does not bring us anywhere closer to reinvestment decisions, which are based on facts and projections rather than the taste of steaks.

2. Frankness vs. Deceit

Foreign investors making overseas expansion decisions usually delegate such to very well-seasoned managers and company achievers.

Korea, being a ``secondary'' place for FDI (not usually a top target for companies but a complementary one to an expansion strategy), is the type of country big corporations will assign directors who have experience in opening and running difficult overseas offices. Having a government officer do a presentation in front of hundreds of these managers on misleadingly optimistic plans is something that only feeds lines for jokes about Korea and the presenting organization, not something that impresses these global characters. More realistic and constructive speeches on Korea and its business environment would be welcomed and appreciated and leave positive impressions about a reliable and hard-working government. FDI promotion stunt shows are nothing short of circus worthy.

3. Labor Union Management

Korea is engulfed in labor disputes, many of which are downright irrational and have no basis, while others carry more essence and need to be dealt with.

These disputes, often aggravated by street protests where union leaders make a lot of noise rather than follow the regular channels, often end in concessions to the union that the company cannot support for long, with unions responding by demanding more.

Many expatriate managers said union demands are not only irrational and delusional, but that union leaders couldn't be more unconcerned with the company's financial situation, low prospects and any other difficulties. Such an attitude and the government's lack of impartiality to deal with it result in the closing down of many operations, both domestic and foreign-invested.

Companies abroad pay very close attention to labor activism in Korea, but it seems the Korean government is just as unattached to this as labor leaders are to their companies' financial reality. Often the victim of the outcome is the company's balance sheet, which can't stay healthy forever under such a labor structure.

What's left? Move the operation to more labor-sound economies. This is one of the areas that will bring the whole house down if not dealt with efficiently and swiftly.

4. Rework FDI Incentives

What's the point of coming up with and refining a series of investment incentives that in the end only a handful of investors qualify for?

The set of tax incentives, cash grants and other favors the government is willing to provide investors usually apply to investments sizing up to many millions of dollars, targeting investors whose line of business matches what Korea labels ``areas of interest'' or ``growth engines.'' This format and structure is one that favors Korea and not the investor, a win-lose situation and not the win-win scenario that FDI follows in most other nation-investor relations.

The process the investor needs to follow and be awarded such advantages only adds to the hurdle. Such an approach at promoting investment is counterproductive, rightfully angers many investors, and makes Korea look deceiving. FDI incentives come in the forms mentioned above, but could be made more diverse and hence cater to a wider range of investors, industries and particular investment situations ― yet another area that Korea's government agencies dealing with FDI must approach in a more systematic way. They should put themselves in the shiny shoes of their investors-to-be to see what really attracts an investor to Korea, besides the universal principle of profitability.

5. Universal FDI Principle

Companies seeking overseas expansion into Korea do not invest for Korea's great IT network, hard-working human resources or location. The more Korea promotes secondary privileges for FDI, the more it remains a secondary destination for FDI, losing potential investors, not to mention existing ones. The one reason why all companies expand overseas and invest is to seek higher profit margins, sometimes as part of a global strategy of market dominance or to make up for low profitability in their home economies.

Sitting between Japan and China, having a great IT platform and a human force that works twice the average of advanced countries does not explain why investors want out of here to go to Singapore or Hong Kong. To turn around and start promoting Korea for what it can offer investors, it is important first to look at what drives them away such as the ailing economy, stagnation, inflation, economic growth outlook for the years to come, and soaring prices of real estate both for purchase and renting of office space. How many of my partners have not told me they set up their operations far away from Seoul just to avoid office space speculation? The government and FDI promotion agencies must reconsider their promotional strategies and include more of what matters to the investor.

6. Location, Location, Location

Every time I hear an FDI promotion agent out there tell a crowd of foreign business people that Korea is in a great location between economic giants Japan and China, I can't help but think this guy put little reasoning into the phrase and just repeated it from the preceding presentation. Why in the world would an investor want to go to Korea while it is sitting between two more attractive countries? The one with a customer base and purchasing power far superior, the other with a much better production base and output network. Does being in Korea give a particular company more access to the Japanese consumer market than having a physical base in Japan? Or can foreign invested companies in Korea hire their entire workforce out of China under Korea's labor and immigration countermeasures? Korea is sitting between two giants that effectively suck out a lot of what otherwise would be FDI for Korea. FDI promotion must steer clear of Korea's weaknesses. Decorating them does no good and any half-trained manager being delegated an overseas office can figure this out in minutes.

7. Mission Impossible: the Social Mindset

The Korean social mindset, far from a global one, is a major complaint among investors, and certainly a cause for companies to see difficulties in doing business in Korea, prompting relocation decisions. Much of the reason two giant foreign retailers pulled out of Korea in recent years had to do with them being unable to secure high quality products as well as credit arrangements from domestic suppliers, as the cream of the crop went to Korean retail competitor chains at the best conditions. With such a mindset against foreign business and unfavorable situations set on purpose to drive them out of business, isn't it natural they pack up and leave for environments that are fairer? There are pharmaceutical companies that find their patented medicines copied over and over by domestic firms and courts ruling against the foreign producer. I have objected to such an irrational procedure and can see why foreign investors would want to get out as soon as possible. But this is a treatable illness Korea can treat by campaigning to the government and the private sector change into being competent and using foreign talent and companies for the benefit of the nation. Success cases need to arise and be publicized and examples need to come from all areas of FDI and all company sizes and colors.

8. Facilitating vs. Upgrading the Process

So hasn't the government done anything to help expats adapt to the Korean lifestyle? Yes it has, and facilitating the process is great, though for Korea's ambitions and needs, the focus must shift to ``upgrading'' rather than just easing. I applauded enthusiastically the Seoul city government's initiative to create ``Global Centers.'' Learn a lot about how to move around in Korea as a tourist, get help with banking, Korean lessons, you name it. The centers are so helpful that you can even get a driver's license there in minutes with an English-speaking police officer. These places have become symbols of what the government should be doing to integrate similar processes for its own citizens. Investment promotion agencies have ``one-stop'' service for investors as well. This is all great and welcome. From here though requires the upgrading part and my point on resolving the foreigner ID system is urgent. The top priority, however, is to transition Korea from the previous century's mindset into this century's globalized thinking, and whereas the government might see it as very difficult to engage the whole society into a new era of free interaction with non-Koreans, it is time the government ``grows up'' into globalization itself first by not categorizing everyone as either ``Korean'' or ``foreigner'' and wiping out this concept from the face of the country for once and for all.

9. Global Talent Unavailability

A fairly urgent matter is that of not having foreign talent present in Korea. Immigration counteractions toward hiring foreigners at many more levels than currently admissible are among the factors to blame. I have clients that take months finding ways to bring in expat forces from their head offices abroad due to overtly complicated procedures meant to lower the chances of the visa issuance. This immigration policy which could be viewed as designed to protect local labor interest is far from helpful and a complete misfit in a country transitioning into globalization. Larger and more developed economies see themselves flooded with immigration activity despite having tons of foreigners of their own, so their being difficult to accept the masses becomes also a population control issue. Hong Kong for example has plenty of expats in high government ranks. Singapore boasts nearly 20 percent of its population as relocated expats, Dubai in UAE an astounding 80 percent, while Korea makes the bottom of the list with 2 percent, 1/3 of whom are from Chinese or Korean backgrounds, thus adding somewhat but not significantly to the cultural diversity. Korea does not have enough expats let alone qualified high-ranking managers to call itself a global nation ― not by a long shot. With a population of only about 2 percent expats, Korea is by far one of the least segregated (and hence least diverse and global-oriented) country there is.

10. Branding Korea

Korea must, with the assistance of global talent and not just domestic advertising agencies, find a way to brand itself to the world and not just Japanese tourists. But beware, it is important that this brand be discussed publicly with Koreans and expats alike. Expert advice on branding must come from the private sector, so we don't end up with something totally meaningless like ``Hi! Korea.'' Cities and provinces have figured it out, so can Korea as a whole. And it is fairly urgent, unless we want to remain branded to the world as the country of irrational street protests, endless labor disputes and giant companies under tax audits. Every day Korea provides the world a new image. We must replace it with a unified, consistent, meaningful and attractive one that overrides all the ugly stuff aired on domestic and international TV.