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U.S.
firms now favor Hong Kong over Korea for APAC headquarters: survey
Strict labor regulations make Asia's
4th-largest economy less attractive
By Park Jae-hyuk, The Korea Times - Korea
is becoming less attractive as a base for Asia-Pacific headquarters for U.S.
companies, with Hong Kong overtaking it, the American Chamber of Commerce
(AMCHAM) in Korea said Wednesday.
AMCHAM attributed the result partly to
Korea's inflexible labor market and regulations that are not aligned with
global standards.
According to a survey of AMCHAM members,
only 11.8 percent of respondents said Korea is the preferred destination for
their Asia-Pacific headquarters, while 58.8 percent chose Singapore and 17.6
percent picked Hong Kong.
This marks the first time since 2022
that Korea has fallen to third place.
After strict lockdown measures in Hong
Kong and mainland China during the COVID-19 pandemic, Korea had maintained its
ranking in the second spot, surpassing Japan, Hong Kong and China.
Until last year, Korea had also hosted
the second-largest number of Asia-Pacific headquarters of AMCHAM members,
following Singapore.
However, Korea has lost that status to
Hong Kong this year as well.
AMCHAM said it continues to analyze
exactly which factors led to the shift, though it views Korea's regulatory
conditions as a key aspect behind the country's declining attractiveness as a
regional headquarters location.
When multiple answers were allowed, 68.8
percent of respondents described Korea’s regulatory environment as
“restrictive” or “very restrictive,” while 61 percent cited Korea-specific or
globally misaligned regulations.
Additionally, 71 percent of respondents
identified Korea’s labor policy and labor market flexibility as the most
significant barriers to becoming an attractive regional headquarters pick for
U.S. firms.
Legal risks for management and
regulatory uncertainty were also cited as obstacles.
Since the Serious Accidents Punishment
Act took effect in 2022, foreign business officials in Korea have expressed
concerns about the law, which they fear can lead to the imprisonment of CEOs
over fatal worksite accidents when the companies are found to have insufficient
safety precautions.
The implementation this year of the
revised Trade Union and Labor Relations Adjustment Act, also known as the
"yellow envelope law," has also raised concerns because it compels
companies to negotiate directly with subcontracted workers.
“Korea’s drop to third place as a
regional headquarters destination is a disappointing outcome, but it is also a
clear signal that more needs to be done to strengthen its competitiveness,”
AMCHAM Chairman James Kim said.
“Korea remains a stable and resilient
market with strong growth potential, and with improvements in regulatory
predictability and labor market flexibility, it is well-positioned to regain
its standing.”
The chamber plans to share its analysis
and present policy recommendations during its upcoming “Doing Business in
Korea” policy seminar on April 21.
