Roh's Role in Foreign Investment

In the government announced Tuesday that in order to reverse the drop in FDI, it would introduce a cash-back system in which the government would help pay for part of any major investment by foreign companies into Korea starting next year.

The government has also decided to give cash awards to Korean government organizations and provincial government officials who contribute to inducing foreign investments.

Statistics indicated that in the period from January to June this year, the total FDI made in Korea reached US$2.66 billion, a sharp 45 percent drop from investment in the same period last year. According to a high-ranking official at the Ministry of Commerce, Industry and Energy (MOCIE), the cash grants would be extended for any case of FDI of over US$10 million in the new construction or the expansion of existing plants, or for US$5 million into R&D facilities.

The official, however, said the principle for the cash grant would be operated flexibly through negotiations with the foreign investors. The government also said that officials at the Ministry of Labor, the National Police Agency and the prosecutors' office would be appointed to take charge of labor disputes for foreign-invested companies in Korea.

Another official at MOCIE said the ministry is also moving to ease the current cap on Korean businesses' equity investment, when such investments are made jointly with foreign firms. He added that the government is considering allowing the establishment of new casinos exclusively for foreigners.

In addition, MOCIE plans to set up schools for foreign students in Seoul, Sacheon in South Gyeongsang Province, and Pangyo in Gyeonggi province.

Foreign CEOs based in Korea said that the government's plan to attract more FDI is unrealistic, as the plans do not consider the effects of militant unions on Korea's image, which has repelled many potential investors.

William Oberlin, the head of Boeing Korea, said the world views Korea as a republic ruled by militant unions. He said the ratio of unionized workers among the total workforce stands at a tiny 12 to 13 percent, leaving foreign investors puzzled by the high rate of labor disputes in the country.

John Taylor, the CEO of British American Tobacco Korea, said that a negative image of Korea has been spreading across the world, as the country is suffering from headaches ranging from labor issues to the North Korean threat. The labor cost in Korea has also been rapidly increasing, he added.

A Korean CEO at Nestle Korea said union executives in Korea have been frequently organizing illegal strikes, but the government does not enforce the breaks in law in order. The CEO said he understands that Nestle's head office does not understand the militancy of the labor market in Korea.

Market observers said that there should be a fundamental restructuring of the labor market in Korea.

Tami Overby, the executive vice president of the American Chamber of Commerce in Korea, said that Korea needs fewer short-term treatments and more fundamental solutions that might deal with the root of the issues, including an improvement in the business environment. (Song Eui-dal, edsong@chosun.com )