Instable Labor-Management Relations Hinder Korea`s Emergence as a Regional Hub

It was pointed out that the biggest hurdle to South Korea`s emergence as the economic hub in Northeast Asia is unstable labor-management relations.

The Korea Trade-Investment Promotion Agency released on Thursday its survey of 15 CEOs of foreign financial institutions operating here on requirements for developing South Korea into a Northeast Asian center for trade and culture. According to the survey results, Korea got 2.23 out of 5 points in terms of labor flexibility. Meanwhile, its rivals, Hong Kong (4.69), Singapore (4.54), and Shanghai, China (2.58), got better marks. This means that they have more stable labor-management relations.

The head of a Singaporean bank branch pointed out that huge compensation as high as two years of salary is needed in Korea to lay off an employee as part of restructuring and that the current government’s pro-union attitudes are also a stumbling block. A senior official of a British bank said, "When we need to recruit a worker without experience, we first recruit him as a contract worker for two years and then employ him as a regular worker after assessing his performance because employment flexibility in Korea is very low."

In the seven question items of the survey, Korea only got more than 3 points in foreign exchange regulations with 3.07 points. The nation got less than 3 in all the other items, including regulations on credit (2.15), labor flexibility (2.23), communication in English (2.23), tax system (2.61), policy transparency (2.61) and government regulations (2.76).

In terms of average points, Korea (2.5) ranked slightly higher than Shanghai (2.3) but lagged far behind Hong Kong (4.7) and Singapore (4.7).

And the chairman of an American insurance company said that without the U.S. troops stationed in Korea, it is difficult to expect large-scale foreign investment. There was the indication that the current government’s poor economic policy makes it harder to do business in Korea. On the whole, complaints on the instability in Korea’s politics and economy were reported.

Mi-Kyung Jung mickey@donga.com