"68.5% of Foreign Companies in Korea Say Labor Environment Has 'Worsened' Over 3 Years"

FKCCI 'Survey on the Business Environment in Korea'

[Asia Economy Reporter Dongwoo Lee] More than half of foreign-invested companies in Korea have felt that tax and labor environment regulations for Korean companies have intensified over the past three years.

The Federation of Korean Industries (FKI) announced on the 30th that a survey on the business environment in Korea, conducted among trade and investment officers in Korea and foreign chambers of commerce in Korea, revealed dissatisfaction with the labor environment and the passive administrative attitude of policy authorities.

71.4% of respondents rated Korea's business environment as generally excellent, citing the main reasons their home country companies invest in Korea as "attractiveness and growth potential of the domestic market" (46.0%), "expansion of collaboration with globally recognized Korean conglomerates" (22.2%), and "advanced IT and industrial infrastructure" (15.9%). Additionally, 76.2% of respondents said they would recommend Korea to their home country companies considering overseas expansion.

However, satisfaction was low regarding perceived regulatory changes by sector. When asked about the degree of regulatory change felt over the past three years compared to the past, opinions that the tax environment had "greatly worsened" (5.3%) or "worsened" (47.4%) were higher than those who said there was "no change" (36.8%) or "improvement" (10.5%).

In terms of the labor environment, 68.5% of respondents felt it had "greatly worsened" (21.1%) or "worsened" (47.4%), more than twice the combined responses of "no change" (26.3%) and "improved" (5.3%).

Significant Impact from Abolition of Corporate Tax Reduction Benefits for Foreign-Invested Companies... Passive Problem-Solving Also an Issue

Regarding specific factors affecting business activities over the past three years, respondents pointed to the abolition of corporate tax reduction benefits for foreign-invested companies since 2019, the implementation of the 52-hour workweek system, and the sharp increase in the minimum wage.

Meanwhile, satisfaction with Korean authorities' response to requests for resolving difficulties from companies of their home countries was generally positive, with 50% rating it as "average (40-60 points)" and 45% as "satisfactory (60-80 points)."

However, when asked about areas needing improvement, "passive willingness to resolve difficulties" (42.9%) was the highest response rate, calling for more proactive efforts by authorities to address foreign-invested companies' issues. One respondent commented, "When difficulties are raised, the surface attitude of Korean policy authorities is friendly, but in reality, very little is actually improved."

Other areas identified as needing improvement for resolving foreign-invested companies' difficulties included "lack of policy consistency" (17.9%), "frequent changes of responsible personnel" (17.9%), and "complex resolution procedures due to overlapping regulations" (14.3%).

The most necessary improvement for Korea's business environment was found to be "eliminating complex administrative procedures and bureaucracy" (34.9%), followed by "improving excessive regulations" (19.0%), "reforming laws and systems that hinder innovation" (17.5%), and "efforts to resolve rigid labor-management relations" (9.5%).

This survey was conducted over four weeks from October 12 to November 6 via phone and email targeting the top 50 countries investing in Korea (based on 2019 filings). Among these, 42% responded, and among the top 20 countries investing over $100 million, the response rate was 50%.

Kim Bongman, Director of International Cooperation at FKI, stated, "As shown in this survey, alongside improvements in labor and tax environments, a more proactive attitude from policy authorities is necessary to resolve difficulties faced by foreign-invested companies."

This content was produced with the assistance of AI translation services.