On October 21, 2009, three organizations brought some of the best minds in the business together at the President Hotel for a meeting called G20 and Overcoming the Global Financial Crisis in Asia: Strategies for Growth, Development and Prosperity. The Asia-Europe Perspective Forum, the Institute of Economic Liberty, and the Indo-Korean Business and Policy Forum organized the event to create some constructive dialogue about the globalization of Korea. Noted professionals and long-time professional expatriate residents of Korea such as Tom Coyner, president of Soft Landing Korea; Sean Hayes of Joowon Attorneys at Law; Donald Kirk, journalist and writer; Desmond Scully, of the Asian-Irish Chamber of Commerce; and many other notable figures examined Korea's current position on the global stage, and what its path could be to the next level.
It is one of the favorite pastimes of a gathering of expatriates living in Korea to complain about the difference between Korea's globalization goals and the reality on the ground. But trying to shape that dissatisfaction into something constructive is a difficult and rarely-attempted feat. During this event the heads in the room tried to do just that, however - to create some meaningful, constructive dialogue on the path that Korea should take to achieve its own goals. The format was rather informal - a presentation was given by one speaker, with official panelists sitting in attendance. The panelists would respond to the presentation, and the floor would be open for question and debate. Many excellent points were brought up, many perspectives analyzed. Adding additional analysis and commentary is beyond the abilities of this journalist, so instead there will be a simple recounting of arguments in the first panel session, called Economic Reform Policy and Deregulation.
His Excellency Ambassador Eamonn McKee of Ireland spoke for the keynote address, and hit on an interesting point. He compared Korea's diaspora with Ireland's own diaspora, since both countries have considerable populations living permanently abroad. He recounted Ireland's successful appeal to diaspora-related foreign direct investment (FDI) in its own economic growth, and suggested a similar plan for Korea. If a favorable environment is set up for Koreans abroad to invest in their own country, then they will most definitely do so. But it takes the right environment, according to the Ambassador. He also stressed that educating the local population and offering tax incentives are key factors in creating an environment favorable to FDI.
New Levels of Competition
After that, Tom Coyner took the podium to give the first paper presentation. He spoke about the competition that Korea should be taking on, rather than what it is taking on. The thrust of his paper was that Korea is not a developing nation any longer, and it should begin trying to compete with other developed countries rather than taking the position of developing nation. He then went on to compare Korea with other developed nations to see how it measures up. Unfortunately he was not satisfied with what he found.
He hit on three major criticisms that are familiar to anyone who has worked in Korea for any length of time - autocratic leadership, the collective mindset of Korea, and a lack of critical thinking skills in the workforce. He said that the autocratic leadership style of Korean executives was not useful or necessary anymore. He admitted that perhaps in the past, when the number of educated people in the country's workforce was lower, the autocratic style was appropriate. But now, there are good ideas coming from all levels of a Korean company's organization. These ideas are often stifled by an authoritarian culture, especially if they come from younger Korean workers. He did admit that Samsung ranked second in the world in the number of patents filed, and that this was an indication that creativity was not lacking in the country. However, he countered this by saying that individual products and marketing campaigns do not live up to that of other countries' companies.
On the subject of the collective mindset of Korea, he said that the shared lack of respect for salesmen is a problem. He pointed out that in Korean companies, junior members are relegated to sales positions, giving them the appearance of a distasteful position. However, in other countries sales is considered to be one of the most important aspects of a company. In Mr. Coyner's case, he was only able to get into sales after he got an MBA.
Thirdly, he criticized the lack of critical thinking skills in the country's workforce. He pointed out that the Korean educational system's emphasis on rote memorization was a disservice to the students, most of who have learned that the best way to get good grades is to uncritically accept whatever is told to them by professors. He said that the educational system should begin to encourage critical thinking at the earliest stage possible, and that academic dishonesty such as plagiarism should be dealt with more harshly.
He finished by saying that these disadvantages of the Korean work environment does not show up when Korean companies are competing against each other, because they all have the same disadvantages. And when Korean companies are competing against developing nations, their educational advantages and strong work ethic push them to the forefront. However, when Korean companies compete globally, they need to get rid of these disadvantages in the name of efficiency. He referenced the 1980s in the US, when sloppy American management was challenged by Japanese efficiency. He said that the time had come for Korean companies to be challenged by global competitive efficiency, and to do what it takes to compete on the international stage.
The second paper presented was by Sean Hayes, Attorney at Law for Joowon Law. He spoke about the cause of the financial crisis and related it to Korea's prosperity. He said that the financial crisis in the US was caused by government interference. According to him, the US government tried to implement a policy of universal home ownership too quickly by manipulating the market. This government interference caused the global financial crisis.
He went on to say that freedom in the market gives prosperity, and that market freedom can be evaluated using a grading system over ten different criteria, called the Index of Economic Freedom made by the Wall Street Journal and the Heritage Foundation. These criteria are business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, and labor freedom. The highest scoring countries with a score of 80 points or more, out of a maximum of 100, were also the most financially successful countries. These are Hong Kong, Singapore, Australia, Ireland, New Zealand, Canada, and the US. The lowest-scoring countries represented some of the least prosperous countries in the world - Liberia, Bangladesh, Iran, Venezuela, Cuba, and North Korea. South Korea's score in this ranking turned out to be 68.1, which makes 40th in the world. It is also lagging behind most of its neighbors in the immediate Southeast Asian region, while being the equal of Malaysia and Thailand.
The two factors that bring Korea down, pointed out Sean Hayes, are Freedom from Corruption and Labor Freedom. Korea has an unsavory reputation as a corrupt system. While this is not as true as it once was, Mr. Hayes says that the reputation for corruption is just as harmful as actual corruption, an important point. If foreign businessmen hear of the possibility of being hassled by a system which seeks to exploit them, they will simply go elsewhere. However, real corruption is also still a problem. Mr. Hayes pointed out that in most other countries, if a company is being audited, they hire an accountant to make sure their numbers are correct. However, in Korea, when a company is audited, they hire a lawyer who has the connections to make sure everything goes smoothly. Only in Korea is an accountant inadequate defense against an audit.
Also Mr. Hayes spoke about labor unions. If a company anticipates trouble with labor unions formed by its workers, the company will simply seek to locate itself elsewhere in Asia. In Korea, joining a labor union is not optional, and is often completely superfluous to employment issues. While in other countries labor unions are used to protect the rights of blue-collar workers, in Korea even white-collar jobs such as bank tellers have non-optional labor unions associated with them. Additionally, labor union leaders are not employees of the company, but professionals brought in from outside. Many of them use their professional labor union leader job history to launch a political career. The system is set up to create political power for professional labor union leaders, without as much regard for the rights of the workers. Mr. Hayes felt very strongly about these two points, and said to the assembly, "I work with foreigners daily. I see why they don't choose Korea. I see why they go to Hong Kong. I see their problems with tax audits, with labor unions. They have problems and they did nothing wrong." He went on to explain that his job is to basically sell Korea to businesspeople that come in, but the facts as they are do not help. "I don't like to explain the problems, and the benefits. And I have a difficult time with companies, if they want to establish a regional headquarters. I have a difficult time beating Hong Kong, Singapore, or Malaysia."
After the presentation of the two papers, the panelists were given time to give their responses. Donald Kirk brought forward a good point right away by saying, "We've been hearing about Korea's authoritative culture, so it seems like nothing ever changes. I heard about that in the 90s. I wonder how Korea manages to do so well with all the criticism it endures." He went on to point out that Korea has become a global economy using its own methods, so he hesitated to criticize them too much. He also commented that comparisons to American can be misplaced, because many expatriate Americans idealize their own system more than they should. He said there is corruption in America too, there is plagiarism in schools, there are all these things. He closed by saying, "Corruption is still a problem everywhere. They don't go to jail in the Philippines for it, but they do here. So that's an improvement."
Next to give his response to the problems presented was Desmond Scully. He said that the perception of corruption in Korea is worse than the actual corruption. It has actually gotten a lot better. He said the same thing for labor union problems. He emphasized this point by saying, "It used to be very, very, very hard to do business in Korea. Now, it is just hard." That is a marked improvement of three orders of magnitude at least. He spoke also on the causes of the financial crisis, pointing out that the banking sector were not innocent lambs led to the slaughter by the US government, but were well aware of what they were doing. They were not pushed into the mortgage industry, but chose it. The financial sector created very complex financial products that the government regulatory bodies did not understand, he said, and therefore circumvented regulations for their own gain. Then he brought it back to Korea and said that the Korean financial system was not involved in such schemes, probably because they learned a lot from the Asian financial crisis of 1997. He then said that Korea does not have to follow the same path of development that other countries did. It does not have to be bureaucratic or autocratic entirely, it does not need to give total financial freedom. It can do something along the middle of the two extremes, and it is his opinion that it will go that route.
The session then devolved into heated discussions about the viability of corporate greed, plagiarism, and the relevance of the discussion to the Korean business sector. The event was a fertile ground for ideas and discussion; the kind of ideas that take a long time to grow. Korea has come a long way, stepping out of the ranks of developing countries into something different. However, despite its criticisms, it has done this in its own way. Will it change to accommodate business as usual in the international arena, or will it change the international arena to accommodate it The answer can only be seen in the future.