When EU companies are looking for partnership, they look to the long term, not to a short-term profit, and you can see from the volume of investment taking place, Europeans view Korea as an interesting place. At times of crisis we also see more opportunity. There are problems, though. A lot of companies are sitting on the sidelines. They want to invest, but there is a perception gap as to the value of companies being offered for sale. It's a real obstacle. The seller's price expectations and the investor's price expectations are often apart by a factor of five since the Korean side wants the price to cover all the company's debt. I think mergers between Korean companies are not a solution since the debt problem doesn't get solved. In the meantime, FDI is very important because Korea really can't export its way out of the crisis. The EU is confident Korea will overcome its difficulties because the necessary infrastructure is in place. Furthermore, the EU wants to see Korea strong again, because it's in our interest to have Korea as a strong partner. We should not forget the Korean public is undergoing a learning experience in this time of crisis. This is the first time a democratic government has come to power in Korea and it has come at the right time. How far do Korea's economic reforms and investment liberalization program meet the needs of EU investors? I think the newly-passed Foreign Investment Promotion Act is a very positive move since it takes the focus of legislation on the subject away from regulation and puts it on promotion and support. There were 53 procedures related to the process of foreign investment which have been reduced to 36. That's a major step, I'd say. I think credit has to be given where it's due, and the government from President Kim Dae-Jung down is giving all the right signs, making all efforts to transform Korea into a global economy. Everything that should be done has been done, although the chaebol must undergo more restructuring. With regard to the labor unions, there's a process of reeducation underway. The old attitudes of life-long employment are no longer possible in a market economy. Unemployment is here to stay, so a welfare system has to be put in place because the old family system won't suffice anymore. The World Bank has the difficult problem of giving loans in line with reforms in such a way as not to upset the social structure. In general, what other reforms are needed in the Korean FDI regime to attract further EU investment? As I mentioned, all the right signs are coming from the top, but that doesn't mean they're being implemented at ground level. There are several people at ground level who haven't changed their attitudes. The overall climate for foreign investment has changed, but it should be without strings. That is, benefits should not be limited to certain zones or the purpose of investment. There is certainly need for a more simplified application process and less administrative hurdles at the local level. What advantages and opportunities do you see for your members in the current economic downturn? You've heard that crisis begets opportunity? It really does. It means it's time to realign businesses, to concentrate on essentials and core businesses. In the meantime, there are some EU companies which have been here 30 years and intend to be here for a long time to come. I think in this time of crisis, Korea can see who its friends are, who's staying. The EU is also discussing further financial assistance for Korea. It should be pointed out not all of Korea's problems are of its own making. Its currency is strongly linked to that of Japan and what's happening in China. Of all the Asian countries now in crisis, two have the best chance of quick recovery; one is Korea and the other is Thailand. Korea has a strong workforce, a sound infrastructure. It's a nation of people willing to work very hard and tighten their belts in their determination to overcome the present obstacles. I think it's very encouraging. What particular obstacles are faced by the EU investment community? As I've mentioned, the disparity in company valuations during takeovers is a factor. It's a global economy and Korea needs to apply global criteria to get these discussions flowing faster. I think the restructuring of large companies is absolutely essential. On the other hand, in a free market economy, the government shouldn't interfere. However, I think this restructuring will happen automatically. The government has set guidelines for financial restructuring, and if kept to, the chaebol will have to restructure to survive. Has our Korea Investment Service Center (KISC) been a factor in helping EU investors? Our members report KISC has been very useful because of its ability in organizing meetings between interested parties. KISC made contacts on behalf of a Belgian company which was interested in investing here. The feedback we've had on KISC has been very positive. What is your outlook for EU investment in Korea? Because of the impact of the IMF program, people are trying to save. It hasn't helped the economy; it's made things more sluggish because of the preference to save rather than consume. So, domestic consumption has gone down further than expected. I think, as a result, quite a few EU companies are taking a wait and see attitude. I say the time to invest is now. I sincerely believe that one year from today we will be well out of the situation we have at present, provided nothing major happens outside of Korea, in China and Japan. A devaluation in China would have serious consequences for Korea and its currency. by Charles Duerden
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