By Jane Han
Staff Reporter
Foreign companies continue to view South Korea as less appealing compared to neighboring rivals Hong Kong and Singapore due to chronic setbacks including higher tax rates and fewer incentives, a poll showed Monday.
The Korea Chamber of Commerce and Industry (KCCI), a business lobby group, asked 500 foreign firms how they scored South Korea's investment environment, and the total number of points put the country behind Singapore, Hong Kong and Taiwan.
Each country was graded in categories including incentive programs, deregulation efforts and legal consistency.
South Korea received a total of 2.84 points, while Singapore, Hong Kong and Taiwan respectively racked up 3.79, 3.62 and 3.19 points.
"Foreign investors' overall perception of local investment conditions is simply not up to par with our geographically close competitors," said Yoon Cheol-min, a KCCI official.
The Lee Myung-bak administration pushed deregulation to make investing easier for incoming businesses, but these efforts alone have proven to be not enough, he said.
The survey showed that a majority of respondents said slashing corporate tax rates and providing tax breaks would help ramp up the competitiveness of Asia's fourth-largest economy.
Currently, companies are subject to up to 25 percent of corporate income tax. President Lee proposed to lower the rate, in phases, to 20 percent, but the related bill has been deadlocked in the National Assembly over details of the changes.
Hong Kong and Singapore's corporate tax rates stand at 16.5 percent and 18 percent, respectively, with their governments seeking to roll back rates even further.
While tax issues and inconsistent and heavy-handed rules have been long-running bottlenecks, a large number of foreign companies doing business here (32.5 percent) are optimistic about domestic investment conditions, according to the survey.
"We've been seeing consistent improvements so hopefully foreign firms are noticing the positive changes," said Todd Sample, executive consultant at Invest Korea, the investment promotion arm of KOTRA. He said 17,000 foreign-invested companies are operating in Korea.
Nearly one out of four respondents said the country's green industries are the most promising destination for investments. The semiconductor industry came next with 18.1 percent, followed by information technology with 12.2 percent, pharmaceutical and biotechnologies with 12.1 percent, and displays and autos with 10.9 percent, the poll said.
"A growing number of foreign firms are finding interest in the green industries as they're noticing the government's drive to pursue eco-friendly growth," said Yoon.