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European Business in Korea: Business Confidence Survey 2019
Research & insights
The purpose of the European Business in Korea: Business Confidence Survey is to take an annual snapshot of European companies' perceptions, successes and challenges in Korea, the first survey of which was conducted in 2014. Led by the ECCK, a total of 13 European national chambers and business councils in Korea collectively organized the survey, in partnership with Roland Berger Seoul.

With consistency was one of the key factors that guided the questionnaire’s design and data analysis, an online survey platform akin to that of the previous years was set up for participating companies. The gathering of such replicable data was done in order to trace and understand the development of company strategies and perceptions year-on-year.
The business environment in 2019 definitely was a challenging one which led to a decent growth of the Korean economy by 2.0% versus 2.6% in 2018. Global trade and investment faced certain headwinds leading to – in general – lower exports but also less foreign direct investments. The reasons were many, but Korean economy certainly was heavily affected by the trade friction between the US and the PR China but also the conflict about export controls initiated by the Japanese government. Korea with its population of 50 million people but also with its globally leading companies, is and remains an important market for European companies conducing B2B and B2C business. 34% of European business leaders state that Korea has an increasing importance and 49% are of the opinion that the level of importance is as high it was in the preceding year(s). Despite more than half of European companies being content with its business performance, it also has to be noted that Korea is and remains a difficult market to operate in. 62% of business leaders state that conducting business has become more difficult. As a result, only 41% of European businesses have plans for further expanding their business; this is in line with that only 35% have hired additional head count in 2019 but 22% of companies actually have decreased their workforce. 65% stated that reforms implemented by the Korean government have not helped their business and also the outlook for the next two years is not much better as 57% of business leaders do not think that the administration will come up with meaningful reforms related to business. A key area of high concern is the rising labour costs as pointed out by 69% of company representatives. 122 European company executives, representing companies with a combined workforce exceeding 53,000 employees and a total turnover of more than EUR 40 billion, answered the survey. The European business community believes in the Korean market and its current and future potential. It seems nevertheless, that a review in some areas is needed to ensure further economic growth. The challenges ahead for Korea, and all industry players both domestic and foreign, are considerable. The European business community hopes that the Business Confidence Survey will be a useful tool for businesspeople and policy makers to make future-forward decisions for the mutual benefit of the Korean society, the Korean economy, and European and Korean businesses.
The companies were asked to share their views on the business outlook for the next two years with specific reference to five key areas: Growth, Competition, Profitability, Productivity, and Labour costs.

The majority, namely 48% (10% highly optimistic and 38% optimistic), of company representatives is optimistic about Growth, 25% have a neutral view and 27% are either partially or highly pessimistic. Overall, this is an improvement in optimism versus 2018 but still below the evaluation in 2017.

Competition remains an area where only 17% (2% highly optimistic, 15% optimistic) are optimistic about the trend for the next two years as 37% rather evaluate this in a neutral way but 46% (38% pessimistic, 8% highly pessimistic) are rather pessimistic. The results in 2019 are more less in line with those in previous years.

Representatives of European legal entities are less optimistic about Profitability; the share of optimistic replies decreased from 34% in 2017, 33% in 2018 to 26% in 2019. The majority of companies feel neutral about the development of their Profitability (38% in 2019, 33% in 2018, 30% in 2017) but a considerable group of 36% is rather pessimistic (35% in 2018, 36% in 2017).

25% of firms are optimistic about their Productivity (4% highly optimistic, 21% optimistic), 48% rather neutral and 28% pessimistic (25% pessimistic, 3% highly pessimistic). In comparison to previous years, there are less company representatives optimistic (25% in 2019, 29% in 2018, 36% in 2017) but more pessimistic (28% in 2019, 26% in 2018, 21% in 2017).

Labour costs remains an area of concern: In respect to the development of labour costs within the next two years, only 7% (3% in 2018, 15% in 2017) of business leaders express their optimism, 30% (29% in 2018, 35% in 2017) are neutral but 62% (68% in 2018, 50% in 2017) of them are either partially or highly pessimistic.
Korea is and remains an attractive market for European businesses. Every year, new European companies are entering the Korean market and 41% of participating companies already being here intend expanding their business operation even further.

European companies consider Korea as a key market. The majority of the respondents (83%) replied that Korea holds at least the same or even a higher level of importance in their company’s global strategy. Business in 2019 overall seemed to have developed nicely as 51% of responding companies have experienced a higher turnover compared to 2018; although 24% had to cope with a lower turnover. The majority of European enterprises (71%) have generated a profit in 2019, and only 15% broke even respectively 14% even reported a loss position. 48% of company representatives are still positive about the growth perspectives of their businesses for the next two years in Korea; 25% rather have a neutral view and 27% are instead pessimistic. 

Despite of its attractiveness, Korea is also a challenging market. The ‘Income led growth policy’ – including job creation – has been a key pillar of the Korean economic policy. European companies do support this policy, but only 35% of European companies has hired additional permanent employees while 22% have reduced their workforce. This reflects the concerns of 62% of business leaders in respect to labour cost development since 2017. Naturally, this is linked to a decrease in investment plans as well as certain costs saving initiatives by corporations to safeguard companies’ profitability. The survey shows that companies, in general, do not plan to reduce their operational expenses. In the contrary, 48% of companies plan to increase their operational expenses and only 8% are foreseeing lower operational costs.

Key for economic success is a transparent, fair, trust-based policy making reconciled with all stakeholders followed by a proper implementation execution. This should avoid general uncertainty respectively interpretation needs in all rules and regulations governing business.

In fact, policy making is still an area of concern. 65% of business leaders do not believe that reforms implemented in 2019 supported their businesses; a similar view exists for the years to come as 57% of respondents are not convinced that governmental reforms will positively impact their business. The areas where the highest need for a betterment is seen are labour costs, ambiguous rules & regulations, and discretionary enforcement of regulations / market access barriers. Additionally, it is the perception by 57% of business leaders that unfair or unfavourable policies do exist. This is in line with the response made by 52% of survey participants that they have lost business opportunities due to either market access issues or regulatory obstacles. It is without any doubt that the Korean government has initiated meaningful law amendments, but the feedback collected in this survey indicates that an even better policy reconciliation between business and politics is necessary to further improve the overall economic landscape in Korea.

The survey grasps the opinions, views and perception of business leaders representing European business operating in Korea. A change can only be reached due to a constant and constructive dialogue with stakeholders, which is seen by the European business community as the key to success. Thus, the European business community is committed to further investment in Korea. Korea competes for foreign direct investment with other international markets. Korea can only benefit in this respect, when the overall business situation is also evaluated positively in terms of profitability, growth perspective as well as policy transparency and consistency.  It is of crucial importance that a consistent and transparent economic policy is developed and implemented. An economic policy focusing on products and services, on people being employed, taxes paid and not on companies’ nationality.

To download the report click HERE.
By Christoph Heider, President of ECCK
In 2019, a bit more than 75% of business leaders replied that the most significant economic performance driver is Fair competition; considered equally important are Transparent policy-making and implementation and Productivity growth which were named by a bit less 75% as key economic performance drivers. Capacity for Innovation (67%) and Domestic consumption (65%) make the list complete.
How has doing business in Korea for your company developed over the last couple of years?
How would you describe the business outlook for your industry in Korea within the next 2 years?
A majority of 62% of responding companies feel that conducting business has become more difficult while 30% indicate that is about the same and 8% also stated that it actually has become easier. Replies from companies interpreting that the business environment has become more difficult stood at 61% in 2017, 65% in 2018 and 62% in 2019. The number of replies indicating that the situation is about the same were 29% in 2017, 26% in 2018 and 30% in 2019. 10% in 2017, 9% in 2018 and 8% in 2019 agreed that business has become easier.
Top 5 economic performance drivers by order of significance1) – Item comparison YoY
On government reforms
On European and Korean governments' actions
The majority of business leaders, namely 65% (57% in 2018, 52% in 2017), are of the opinion that the reforms launched and implemented in 2019 have not been supportive for business operation. 25% (40% in 2018, 35% in 2017) of executives are not sure about the impact and 10% (4% in 2018, 13% in 2017) evaluate policies launched in 2019 positively.

Business leaders are also not optimistic about the Korean government launching meaningful reforms in the near future – in fact, only 9% (12% in 2018, 21% in 2017) of respondents are optimistic about that; 34% (40% in 2018, 43% in 2017) are not sure but 57% (47% in 2018, 36% in 2017) are of the opinion that the government will not come up with meaningful initiatives in the coming years.
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