Dr. Thorsten Hutter is the First Secretary for Economic Affairs
at the German Embassy in Seoul. In August he will return to Germany with his wife
and three children after completing two-and-a-half year's service in Korea.
What are your impressions of Korea as a place both to live and to do business?
I often find living conditions for foreigners are very underrated. This is a place, especially in Seoul, where because of the opening up of markets to foreign products and the affluence of consumers, the variety of products and services is growing every day. In jams, beers, vegetables, cheeses, ham, and in particular, clothing, the variety is enormous. The same is true of investment conditions. You have to look at the issue through two perspectives: the cup is half full; and the cup is half empty. In the last few years, the government has strived to make the climate much more attractive to foreigners. The Korean government understands foreign investors have a choice, and they are not just here to impart knowledge and leave, but that they also make very good business partners. So, for the sake of the economy and employment, the government has started a one-stop information service and constructed industrial parks, understanding that land prices are cheaper in Vietnam and Malaysia. They have also come to the conclusion that labor costs are a problem. Twenty years ago, Korea offered cheap labor. Today, a lot of countries are cheaper than Korea. High land prices, in some cases are a problem, as are dealing with local authorities, particularly tax authorities.

What is the nature of these tax problems?
German companies in Korea often find themselves between a rock and a hard place in dealing with competing local authorities on what constitutes the transfer price of products shipped from the mother company in Germany to the branch operation in Korea. While Korean Customs feel the prices of certain products should be high in order to charge a higher duty, the tax authorities feel the price on the same product should be low, so the profit margin on the product is higher, against which a higher rate of tax can be charged. Also, German companies sometimes feel they are being asked information which really revolves around the activities of their headquarters in Germany, information which they are often cannot provide.

How can problems such as these be overcome?
Firstly, there are international standards on how to tax multi-nationals, and Korea is a party to these protocols. Also, Korea is now an OECD member which has a committee on finance and tax questions. The general rule is, you tax someone who is in your country on the profits made.

Do you think these difficulties will be further resolved by the signing of the Framework Agreement for Trade and Cooperation between Korea and the European Union, in addition to Korea joining the OECD?
To reiterate, I think the investment climate has improved dramatically. Korea's A membership of the OECD plus the signing of the Framework Agreement with the European Union will serve to level the playing field to foreign and domestic players. The OECD-sponsored Multilateral Agreement on Investment, to which Korea will be a signatory, is also designed to place domestic and foreign companies on the same level. At one time, there was not much thought given to regulating interntional investment; all the focus was on trade. There is now recognition of investment as a strategic tool to allow companies to compete globally. Companies have to urge governments around the world to get their investment situations in line with each other. Also, the fact Korea is now an OECD member will help other members understand Korea, and help Korea understand what foreigners want. The OECD is a deliberating body of which Korea is now a part.

What cultural support exists for German families and how has this benefitted your time here?
Meeting people here has been most rewarding. I was again and again surprised by the number of Koreans who speak German, know Germany, love Germany, and have a love for things German For example, the Wagner Society here in Seoul was founded by people who admire German culture. For company personnel coming over from Germany, what would improve things for them would be to get some sort of training before they go abroad. It's always helpful if they know they can have access to the German Embassy, the German Club or the Korean-German Chamber of Commerce and Industry. German business people often come to us asking: "How do I rent office space? Where should I rent office space?" What we as a family have found out is there is a distinct difference between Korean and German, or Korean and European, culture. It's in the way people treat each other and it will probably never go away. For us, it's been a good experience. In Europe, people expect people to behave like Europeans, and in the U.S., people expect everybody to be like Americans. There is a certain leeway, but there is a distinct difference in the way business is done here compared to Germany. When Germans go to Korea, they can't succeed unless they do business in the Korean way. It's not a bad thing or a clash of civilizations; it's just the way things are.

What are your most memorable experiences of Korea which you will take back to Germany?
The first is our trip to the Sorak Mountains which we enjoyed tremendously. They are very clean and quiet, and Germans are great nature lovers. The other is Panmunjom. I've been there three or four times. It's a very strange experience. As a German, you have more of a historical background on which to draw, because we also were a divided nation. If you live in South Korea, you think this is a country like any other; it's on the go, it's civilized. You forget that 40km away there's another Korea, very antagonistic to the South, and Panmunjom shows that Korea still is a divided country.

by Charles Duerden