The allure of Asia’s fourth-largest economy to foreign investors appears to be fading, as indicated by a recent decline in satisfaction among European companies engaged in business in Korea over the past three years.
Only 58 percent of 172 CEOs of European firms in Korea responded that they were either “very content” or “content” with their business performance in 2023, according to the annual survey conducted in January by the European Chamber of Commerce in Korea, the Korean-German Chamber of Commerce and Industry and 10 other European chambers here.
The findings revealed a significant decrease from 68 percent in 2022 and 71 percent in 2021.
There was a notable uptick in dissatisfaction among European companies last year, with 12 percent expressing either “discontentment” or “extreme discontentment” in their performance, marking a rise from 9 percent in the preceding year.
The proportion of respondents who answered that the importance of Korea increased in their global strategies last year stood at 53 percent, down from 59 percent in 2022 and 62 percent in 2021. Also in 2023, there was a slight uptick in the percentage of companies perceiving the importance of Korea to remain the same, rising to 39 percent. This marked an increase from 34 percent in 2022 and 31 percent in 2021.
The survey also showed that Korea could encounter challenges in attracting larger investments from European countries.
Only 51 percent of the respondents planned to increase investments and operating costs in 2023, marking a decrease from 55 percent in 2022 and 60 percent in 2021. The proportion of companies planning to maintain their spending increased gradually to 41 percent in 2023 from 36 percent in 2022 and 34 percent in 2021.
The European chambers attributed these results primarily to reduced trade volumes between Korea and European countries following external factors, such as Russia’s war against Ukraine, the Israel-Hamas conflict, and other geopolitical tensions. They emphasized that despite challenging global economic circumstances, business relations between Korea and Europe have remained resilient.
However, some answers in the survey showed that European firms may have been disappointed with the Yoon Suk Yeol administration’s policies.
In response to a question on whether they believe that the government will implement meaningful reforms next year, only 9 percent of the respondents said “yes.”
The previous year’s survey, which was conducted less than a year after Yoon’s inauguration, showed that the proportion of respondents expecting meaningful reforms increased to 19 percent from 13 percent, showing their optimism about the new administration.
In addition, the percentage of companies not expecting meaningful reforms in 2023 rose to 44 percent from 28 percent in 2022.
The chambers said it is necessary to address the issues described in the survey to enhance investment and trade.
