Eldon-Online

Korea - Hopes, Dreams ... and Reality

I like Korea. If I didn't, there is no way I would get involved as I have; what would be the point? Certainly Korea has its critics, both from inside and outside the country, but then what country doesn't. And just like every other country, emirate, state or region in which I have lived and worked in the last 40 years or so, Korea has its hopes and its dreams. The skill required towards achieving those dreams, though, is to indulge in an ongoing reality check to see whether and by how you much closer you are getting.

In September last year, South Korea was upgraded to "Developed Market" status by the FTSE Group - one year later than had been anticipated, but it happened. It is a status that many widely believe to have a significant impact on asset allocations by Fund Managers and a move that was, naturally, welcomed in Korea. Dream achieved.

During the last eighteen months it has been my privilege to sit as a Special Adviser on the Presidential Council for National Competitiveness. A Council that meets monthly and has undertaken to review many of the country's rules, regulations and laws with the aim of creating, inter alia, a more friendly business environment both for domestic and foreign participants. The meetings are chaired by a senior member of the Blue House, but are always attended by the President who remains throughout the length of every meeting. Much progress has been made over the period so far, but it takes time for this information to reach the world outside and in some cases legislation has been difficult to push through when dealing with a traditional culture where change is often viewed with some suspicion.

One of the more prominent dreams, for Seoul in particular a number of other cities and regions in general and the country as a whole, is the creation of a financial hub in Korea. After all, look around the region - Tokyo, Shanghai, Hong Kong, Singapore and a number of other aspiring centres and you can see the attraction of wanting to join in. Developed markets are generally service centres, rather than centres of heavy engineering and manufacture. But if you ask around the region and then further afield for their diagnosis of Korea's ability to become a financial hub, the view is that it is a long way down the list. That is a reality.

And while we are at it, let's just think of another financial hub reality - the reality of the huge Japanese economy on the one side (slow moving though it may be), and the ever growing and powerful economy of China on the other - and guess who is in the middle?

Korea certainly needs to do something, but why does it give negative perceptions to the global financial community? Because the financial scene in Korea remains less inviting to the very people who should be encouraged to enter the market. Existing rules and regulations remain ambiguous and complex despite ongoing attempts to make them clearer. But more needs to be done to unravel these regulations and to open up the financial services market wider to more participants.

Such concerns raise the noise levels around "obstructive ambiguity" and lead to charges of protectionism - of course not just in the case of Korea but around the world. And let's be clear, there are plenty of Governments whose actions suggest they say one thing and do another; think "Buy (Country)", think of the European Government that provided money for auto makers on condition they stayed in that country, and some months later very publicly spoke out on the subject of never returning to protectionism.

I can say this; I have heard President Lee say himself publicly, and maybe more importantly privately, that he has no time for protectionism. I certainly hope that his administration pays close heed to his words - especially as Korea is about to lead the G20 in 2010. The last thing Korea will need is to be confronted with any examples of protectionism as they move into this leadership role. That could put a halt to the hopes of a greater involvement from the outside world.

I was invited to advise, and I do so freely. Happily I am in a position where I can suggest certain courses of action - even if they may not be universally popular, but I do so with the best of intentions because I would like to see Korea succeed. Better that we have a collection of strong players in Asia than just one or two.

But never underestimate the Korean single-mindedness of purpose. They have proved time and again in their young democracy (which many forget is only 22 years old), that they can get things done once they put their minds to it. The world is a big place, and they need to be a two-way part of it if the dreams and hopes they nurture are to become reality.

Korea - What Next?

It was never going to be easy!

President Lee fought his election campaign in 2007 on the basis of change. Against a backdrop of falling investment in the country. With a history of being tough minded but successful, he won the election by the widest majority achieved in a democratic South Korean election. A win which sparked a glimmer of hope amongst people in Korea and in businesses outside Korea. It brought a full email box to me from Koreans working outside Korea who were writing "At last, positive change and we would like to come back".

Fast forward to today and we have a President whose ratings in Korea have dropped to a low level. A major project, The Grand Canal, was abandoned. A waterway project that was not only going to be for practical business  use, but was potentially environmentally friendly for the most part, and would have created leisure opportunities and wet lands, although admittedly financing was an issue. And then to the import of beef, about which significant protests still abound - but is this really about beef-related health issues - or does it go wider than that?

It seems to me that this is more to do with internal issues, seeking an outlet for domestic woes like unemployment, especially amongst the young. A view clearly shared by others that I have spoken to within Korea, but who have not spoken about it publicly for fear, I guess, of being criticised. But if anything was set to derail the ambitions of President Lee in his quest to make Korea a more open and welcoming economy, then the usual media feeding frenzy on the "standard" pictures of Korean demonstrators does nothing to help.

So, what next?

From the perspective of foreign investors, existing or potential, nothing much has changed. Korea remains, to many, as being "anti-foreign" or at the very least "systemically unfriendly" to foreign investors. Views that have been confirmed by various polls of business leaders in such organisations as the UK's Institute of Directors, and by the complete omission of a mention of Korea in the International Herald Tribune in an article about foreign investors in the the region. Not once was Korea mentioned. But I prefer to think of Korea as being less anti-foreign and more pro-Korean. In others words Korean interests tend to be put, or considered above all others. And I see nothing inherently wrong with this attitude, but the reality is that if you want to be a major player on the world economic stage you cannot be perceived, in any way, as being unfriendly towards foreign business.

For Korea, to move slower than the other neighbouring economies or, worse yet, stand still means it is losing ground. Look at the region. A powerhouse economy like Japan, countries which are developing rapidly like China and India. Newly emerging economies like Taiwan, Vietnam and the "next Vietnam" - Cambodia. Established business hubs like Hong Kong and Singapore, which are constantly enhancing their offerings and, in addition to Shanghai the newly emerging Chinese cities like Tianjin, Dalian, Chengdu and Chongqing which all have serious aspirations as business hubs. 

Let's be blunt, I am concerned that Korea runs the very real risk of being marginalised.

When I first became an Adviser to President Lee I made it very clear to all who listened that for Korea to take its place on the world stage, it had to want to be there. I was not there to tell them what to do, but to provide help if I could and if it was what they wanted. The message I am receiving now is one that is divided. For the President, I believe he knows very clearly what needs to be done for his country, and for the future. For the Korean people, they have a choice. They can either see foreign participation in the domestic economy as some sort of threat...and see only the downsides. Or they can realise that such foreign interest is actually a vote of confidence in the future of Korea, and in the many talents of Koreans. It should bring employment, and a wider marketplace for the economy.

I, for one, hope it happens.

Korea - Land of the Morning Calm

The western nickname for Korea has not proven so true in my house for the last couple of days, where my telephone has been ringing off the hook, ever since President-elect Lee Myung-bak announced my appointment as co-chairman of the special committee on National Competitiveness. It seems it is the first time a foreigner has been appointed to such a role, and let's not be coy, I am both flattered and honoured (not to mentioned somewhat amazed).

There will be many who ask why I agreed to take this on, and you may be sure that I asked myself the same question. I did not seek the role, and there is no compulsion for me to do so. I owe nobody anything, and I am beholden to no-one. I was rather amused, in fact, by a suggestion reported in the UK newswire Times Online that I might be able to influence the Korean regulators to approve an application from my former employer who wishes to invest in a Korean bank. It only goes to show that the commentators don't know me at all, and the comment from the regulator who said I would not influence them was absolutely right; I wouldn't dream of even trying. The piece, under the byline of Andrew Salmon suggested that I was "unavailable for comment". I think, on reflection, that about the only journalist from Korea who didn't call me yesterday was Andrew Salmon.

So, for those good people who swamped my blog site yesterday - and look like doing the same today - here are some facts (that might also correct some of those in the Times Online's rather inaccurate "potted" CV).

I am a career banker, who started out in 1964, left Britain in 1968 and who has worked and lived in a variety of Middle East countries as well as Hong Kong and Malaysia. I have been traveling globally on business since the late 1980s, and first started visiting Korea regularly from about 1992. I retired from the HSBC Group over two and a half years ago after an association of 37 years. I believe it was a mutually satisfactory relationship, but since leaving them I have got on with my life and have no association with them other than some shares and some friends. I live in Hong Kong.

I am independent, and always have been, sometimes to the dismay of others who wished I was more "flexible". I believe in fair play and get easily irritated by bullies (and by companies like Amazon.com who still refuse to answer my letters on identity theft (mine) - even though I have sent the recent letters earlier this month by registered mail - see "Up the Amazon (.com) Without a Paddle" posted 17 September 2007).

I first got to know President-elect Lee Myung-bak when I chaired the Seoul International Business Advisory Council (SIBAC). I found him to be a man with drive and vision. His views on creating Cheonggyecheon were being criticised by many people, it seemed, but having lived through some of the disruptions caused in Hong Kong by the creation of the Mass Transit Railway, I could see that there was a long term benefit to be gained by short term inconvenience. I believe that today the benefits of Cheonggyecheon are plain for all to see, and I expect Mr Lee has not finished yet.

I have no illusions (or delusions) of "guruhood". I am conscious that I am a foreigner with a remit to suggest ways in which Korea might become a more "acceptable" destination for foreign direct investment. Korea itself has to determine if this is what it wants. I have no magic, no crystal ball, but I hope I bring a degree of openness and objective thinking with no pre-conceived ideas or bias to a country with potential that in my view should be realised.