Korea - The Other Side of Success

The Korean economy has made a spectacular return to the "real" world - quickly out of recession (if it was ever in), and through a combination of good measures, the usual Korean impressive single-mindedness, and a little bit of luck, it has been arguably the best performing Asian economy in the last twelve months. It has been a performance worthy of applause.

Much of the direction for that success has come from the top. From a President for whom I have the greatest respect. He is progressive, and I believe fully understands what needs to be done for the future benefit of his country. I have sat in meetings where the future structure of a new Korean society - both business and social - has been debated and measures put forward that would, if and when approved, start to change some of the old "rules". Measures designed to open up the economy, which it is acknowledged will take time, but matters that deal with some of the more negative aspects of Korean business practice - and punishment.

But the sands of time are running out.

So, what is bothering me? It is simply this.

A successful economy needs to be built for the long term. So although like the picture of the man with his head in the sand you might get some short term success or relief by being single minded, there is a danger you do so to the exclusion of other things that are going on around you. By not recognising there is another, dynamic, world out there. A world that would like to invest - as long as it is comfortable that their investments will be welcomed. A world keen to participate in a developed OECD economy, for example. But a world that also has alternatives. A world that, by and large, is interested in the long term.

The other side of success, therefore, is less encouraging. It is littered with examples of difficulties faced by truly international foreign companies operating in Korea. Companies used to dealing in a universal world. Regular contributors to the fabric of global society, and businesses that are happy to see Korean companies operate freely in their world, and only seek in return some reciprocity in the Korean economy. An opening up that would, in many cases create an environment of improved skills for many, (as long as we don't teach them "Wall Street Finance"), more opportunities in the work place, and greater revenues to the economy.

And on the subject of Korean companies operating freely in the global world, just look at what they have achieved, according to a recent article in the Financial Times:

- Samsung Electronics is the world's largest technology company.

- Seoul has recently won a contract to supply nuclear reactors to Abu Dhabi.

- A Korean company has recently secured a USD6bn renewable energy project in Canada.

This is excellent for Korea, and a great tribute to the companies involved, but what would the reaction be in Seoul if some of those countries turned round and demanded reciprocity, or a level playing field in matters of arbitration, anti-protectionism or legal judgements.

So, again, what is bothering me? The inability to deliver the message that the longer term effects of the short term successes are not yet understood. Japan is more open today than it used to be, and it is a much larger economy than that of Korea. China marches inexorably onwards, opening up as it goes, albeit little by little in some cases, but tangibly. Korea sits in the middle of these two economic superpowers. Imagine the picture above showing a stationary army tank behind the rear (Japan) and a fast moving tank coming in from the front (China). No prizes for guessing what happens to the man in the sand, and he won't even see it happening.

In my Advisory role, I continue to provide feedback about those actions taken in Korea that continue to reinforce the view internationally that Korea has a strong belief that it can do all its growing without any outside "interference". Major companies from Europe, the Middle East and the USA have, to my certain knowledge, invested much time and effort in the market only to eventually fall into a cycle of protectionism, ambiguous legislation and incomprehensible judgements, making their experiences an altogether unpleasant one. And one where their stories eventually find their way in to the international market place, thereby putting off more potential investors.

I have never set out to be anything other than honest in my assessments and my feedback to the President and the Government. I was asked to advise on the basis that I would do so even if it was not pleasant. I am neutral, but perhaps too frank, some might say. But I see no benefit in merely saying there is a strong wind ahead when it's actually a typhoon.

This year, Korea holds the mantle of the G20 Chairmanship. As the Financial Times article also pointed out, it is a matter of intense national pride for Korea, but it will be a year when Korea will come under intense scrutiny from the rest of the world and particularly from potential investors who may be having one last look at the country before they decide whether it is worth trying to invest - or whether they walk away for ever.

My hope is that tangible changes will be made to improve the climate - heaven knows we have enough climate change going on as it is - and that real progress can be made, and demonstrated, during President Lee's third year (out of a maximum of five) in office, to yet make Korea an international success.