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Home  Corporate Affairs
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Corporate Affairs
Our corporate affairs project area provides the international business community with unique access to the issues and individuals that define U.S.-Korea business relations in a rapidly changing global environment. The programs offered in this project area include conferences, seminars and forums that help Americans and Koreans meet the challenges of doing business together. These programs bring together Korean and American leaders from government, business, the media, academia and international organizations for frank and interactive discussions of the current economic, political and security topics that affect U.S.-Korea relations in a global context.
The focus of this project area is to explore and clarify the major issues affecting the economic partnership between the U.S. and Korea by providing opportunities for interaction between major players in both the private and public sectors of both countries. The objective is to promote a better understanding of the potential for mutually beneficial collaboration within a rapidly changing global environment.
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For something that may or may not exist, the Korea Discount-that difficult-to-quantify markdown some economists see weighing down the Korean securities market-gets a lot of attention. Kyeong-Wong Kim, executive director of the Money & Finance and Global Economy departments at the Samsung Economic Research Institute, wants to put it to rest. According to him, the Korea Discount definitely doesn't exist. Addressing a Business Roundtable audience, Kim pointed out that those who argue for the Korea Discount often point to the low price-to-earnings ratios of Korean companies as evidence. However, Kim asserted, valuations of Korean companies only look low when compared to U.S. equity ratios. South Korea is still widely considered an emerging market by global investors, and when compared to other emerging markets like Indonesia and Malaysia, South Korea's ratios are about where they should be. Kim also took issue with commentators who claim the Korea Discount reflects a lack of investor confidence in Korean corporate governance. While recent history has shown that Korean corporations might need to operate by stricter rules, studies have failed to empirically link the governance of a corporation with its stock price. Judging from the many questions about price-to-cash flow ratios and dividend payout rates during the Q&A session, it appeared that not everyone in the audience was convinced by the argument Kim had presented. Apparently the myth of the Korea Discount-or the reality, as some would contend-is too powerful to be easily explained away. |
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A panel comprised of six current and past officers of the American Chamber of Commerce in Korea (AMCHAM-Korea)-Chairman Wayne Chumley (president, Daimer Chrysler Korea); Vice Chairman Il-Young Maing (president, United Technologies Korea); President Tami Overby; Former Chairman William Oberlin (president, Boeing International Korea); Former Chairman Jeffrey Jones (attorney, Kim & Chang); Governor David Ki-Yong Kim (chairman, Cargill Korea); and Governor Chae Wook Lee (president and national executive, General Electric Korea)-led a lively discussion of the direction of the South Korean economy and the business environment in South Korea from the perspective of U.S. business leaders. In their presentations, these senior representatives of the American business community in Korea evenhandedly laid out both the pros and cons of doing business in Korea during a period of historic and unprecedented change. In particular, they assessed the effectiveness of the ongoing reform and deregulation efforts in promoting greater transparency in the industrial, financial and public sectors and the progress of the efforts to bring about greater flexibility in the local labor market. All concurred with the overall assessment that the business climate in Korea is much better than it may seem when viewed from the U.S., a point they also made in Washington during their meetings with members of the U.S. Congress just prior to their stopover in New York for this program. Despite the eagerness on Capitol Hill to talk about the business climate in China, Chumley noted, business in Korea for U.S. firms has never been better. Public perceptions of Korea in the U.S. are tainted by the tense, overly dramatic media coverage of the North Korean nuclear standoff, thus making some U.S. investors jittery. On the contrary, as Maing pointed out, Seoul residents are more concerned about traffic than nuclear war. Smart corporations have taken advantage of South Korea's size and location to make it a test market and logistics hub for all of East Asia. At the same time, however, the panelists stressed that doing business in Korea isn't trouble free. The labor market is chronically overregulated, and progress on a free trade agreement between the U.S. and South Korea will likely be held up until Seoul resolves its ban of American beef and its protectionist movie screen quotas. Still, all of them noted in agreement as Overby repeated the organization's mantra: "Korea is the best place in East Asia to invest and the time to invest is now." The program was cosponsored by the Korea Economic Institute (KEI) and the Korean American Chamber of Commerce (KOCHAM). |
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The Incheon Free Economic Zone: Korea's Second Economic Miracle Optimism filled the last open spaces in the room-crowded as it was with CEOs, consultants and portfolio managers-as Ahn Sang-Soo, the mayor of Incheon, reported on the promise and progress of Incheon's Free Economic Zone. The zone consists of three new cities, in various stages of development, on Incheon's periphery-each specially built to become the center of a target industry. The most ambitious is New Songdo City, a project that is being spearheaded by The Gale Company. Designed complete with highways, canals, malls and a crowning 65-story office tower, when it's complete New Songdo City will have 25,000 residents and be a hub of business services and IT. Ahn's aides predicted it would be a hot spot for the front-office functions of companies with manufacturing facilities in Northeast China. The Gale Company was represented in this program by its chairman, Stanley Gale. In his remarks, Gale reported that the ground has already been broken for some of the city's shopping complexes. "This is really happening," he said, "it's not just something people are talking about." As the program drew to a close, Gale brought New Songdo City even closer to reality by presenting Mayor Ahn with a tee-shirt proclaiming him the city's first citizen. |
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South Korea wears its post-war economic miracle on its sleeve, but often that past success can distract investors from the real economic obstacles in the country’s near future. Jeffrey Shafer, head of economic and political strategies at Citigroup; Hyun Jun Taik, president of the Korea Development Institute (KDI); Michael Petit, managing director of Asia Pacific and corporate ratings at Standard and Poor’s; and Chester C. Dawson III, author and global finance editor, all presented at a panel discussion on what those obstacles would be and how Korea could overcome them. Jeffery Shafer started off the program by noting that South Korea had just come off a less-than-stellar 2005, managing only 4-percent annual GDP growth. High oil prices were a major factor in the lackluster performance. Costly crude slows growth on a global scale, and thus dampens demand for Korea’s exports. The forecast for 2006 is 5.5-percent growth. However, uncertainty of where and how Korea will find its niche in East Asia’s rapidly changing economic order continues to hang over analysts. Hyun Jun Taik examined South Korea’s labor market. He pointed out that the picture was not entirely grim. Though exports slowed in 2005, domestic demand and service industry expansion had picked up. Economists have long argued that Korea needed to do more to stimulate both areas. This growth hasn’t provided an employment boom though. There are more high income and low income jobs available, but few in the middle. The number of workers doing irregular contract work, instead of working in full-time positions, is also on the rise. Michael Petit commented on the Roh administration’s heavily promoted plan to turn South Korea into a financial services hub. Though he didn’t want to be against he aspirations of the Korean people, Petit said the hub plan doesn’t constitute a real vision of how to make the entire Korean economy vibrant again. And financial centers are not easy things to establish. Historically, Petit said, financial centers have offered something unique: Switzerland provides stability, and the Bahamas provide a haven of deregulation. Korea hasn’t yet found what singular advantage it can offer. Chester Dawson closed the discussion by noting that Korea is in a unique position. As it decides how to best liberalize its economy, it has the chance to set an example for China while avoiding the mistakes of Japan . Korea needs to avoid the familiar temptation to protection its flagship industries at the expense of its overall competitiveness, and become genuinely comfortable with foreign investment. Doing so is vital, he added, because as China continues to come into its own, it will be harder and harder to convince investors that Korea is growth opportunity |
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