“Small & medium sized enterprises should be able to act on eye-level with Chaebols”
An interview with Stefan Halusa (Outgoing Co-Chairman of the Korean-German Chamber of Commerce and Industry) about the Choi Soon-sil scandal, Moon Jae-In’s campaign pledges and the expectations of foreign business to the newly elected Korean government.
TI-Korea: President Moon Jae-In promised to make Korea a fair and transparent country. He said he would make efforts to create jobs, reform chaebol, eradicate corrupt ties between politics and business, and resolve regional and generational disputes. What do foreign companies expect from the new government?
Stefan Halusa: Very simple: Foreign investors expect that the same rules apply for all companies. There shouldn’t be discrimination or special regulations for foreign investors. International business must be treated fairly and in exact the same way as Korean companies.
And of course, Moon’s campaign pledges should be realized. After six months of uncertainty in the political environment, the new administration should stabilize the situation and has to take control: They must deal with North Korea and China. And they should revitalize and support programs for Small & Medium Sized Enterprises (SMEs) in order to reduce the dependence on and the influence of Chaebols.
TI-Korea: In the 2016 Corruption Perceptions Index (CPI), South Korea was ranked 52 out of 176 countries. The score has dropped dramatically, 15 points compared to the 37th rank published in 2015. The CPI shows the increase of corruption in the public sector. In your opinion, what should be the first steps of the new government in order to fight corruption amongst public officials?
Stefan Halusa: The CPI 2016 doesn’t reflect the Choi Soon-sil scandal (the data has been generated in the months before). So I assume that the scandal – on the long run – will have a healing effect on corruption in South Korea. In the past, many people seemed to have difficulties to draw the line between mutual favors and between creating mutual obligations. The scandal around former President Park should help to draw the clear line of what is an acceptable favor and of what is creating a situation of mutual obligations. We are now waiting for a follow up: The legislation and rules are in place, it is all about making sure that they really take effect.
TI-Korea: There are more and more Korean companies dealing with the issues of transparency and corruption. What policies are necessary to support their task?
Stefan Halusa: Compliance and corporate governance are an issue, especially for big conglomerates with their way of cross- and circle-shareholdings and managing the companies. The best the government could do is to further develop rules and regulations for corporate governance procedures, so that there will be more transparency in decision making. The public and business partners have to know how decisions are being made. And if they are not being made according to the government’s regulations, there should be a government institution which the SMEs could turn to for support. Moon Jae-In suggested to establish a “Ministry of Small Business and Venture” which could also take over this ombudsman-like role. If this institution existed for SMEs, it might support them in dealing with Chaebols.
TI-Korea: The Choi Soon-sil scandal revealed that the “cozy relationship” between politics and business has not been eradicated yet (so-called “Grand Corruption”). What could be successful countermeasures?
Stefan Halusa: The scandal we just went through made it so obvious to which extend the cozy relationships are still in place. I hope that the public will focus on fighting grand corruption. If a president is being impeached and indicted, and if the heir and vice chairman of the biggest conglomerate (Samsung) is indicted as well – what more can happen to really make it clear and obvious that something needs to be done by the new administration?
TI-Korea: Moon is quoted saying: “In the Moon government, people will have equal opportunities, fair due process and righteous results.” In terms of labor policies, job security and workers’ protection, is the German model a helpful example for the Korean government?
Stefan Halusa: Yes and no. The increasing number of irregular workers is a social and economic problem in South Korea. This month it was published that almost 1/3 of the workforce of public companies are temporary workers. Also in the industry, a lot of work is being sub-contracted in order to address cost pressure, and the salary gap between the regular sector and temporary workers is immense. It’s the same issue between Chaebols and SMEs.
To be honest, in Germany there is also a tendency towards irregular employment. It is difficult to say whether the German model could serve as a good example. We have to find a compromise: On one hand, companies need the possibility to act flexibly on the utilization of their capacities – and to react on demand changes – but at the same time we have to eliminate the abuse of the system by reducing the number of employees beyond a reasonable point. What is different in Germany is the gap between large companies and SMEs. In the German case, salaries are comparable, and this enables the SMEs to build up their own technology and Intellectual Property (IP). They act on “eye level” with large companies. This should be the focus of the new Korean administration, too, as it will reduce inequality and reduce irregular employment.
TI-Korea: Do you have any recommendations to the new government?
Stefan Halusa: It’s difficult to give recommendations to a new government. The Korean investors, business and economy are in a transition phase. Korean products and brands have been well known for being very reasonably priced and they have a very solid quality performance. But in many areas, for example in electronics and automotive, in order for these leading companies to be successful, they need to be reasonably priced. Therefore, they need foreign technology, foreign services, foreign products. I really recommend being open and to invite foreign companies, technologies and products to come to Korea and to support the Korean companies. Basically, this is a request for an open market and for fair terms and conditions for everyone regardless where the headquarters of a company are located.
Mr. Halusa, thank you very much for the interview.
Interviewer: Karoline Richter, Communications Director, TI-Korea Chapter
For more than six years, Stefan Halusa has been President and Representative Director of German automotive supplier Brose Korea Ltd. He joined the Board of Directors of the Korean-German Chamber of Commerce and Industry (KGCCI) in 2013 and was elected as President in 2015. Mr. Halusa served as KGCCI President for two years. His successor is Ms. Ingrid Drechsel, CEO of Bayer Korea.