posted by permission of The Rushford Report, Published May 1997. © The Rushford Report

"This is an important event," declared moderator Julian Weiss to a rapt audience of some 70 Korean and American business executives, journalists, and academics who met on April 17 at New York's Rihga Royal Hotel, near Rockefeller Center, to discuss "issues related to Korea's public image" in the global economy. While normally such a seminar would not be particularly newsworthy, Weiss, a fellow at Washington's Heritage Foundation with an extensive Asian background, knew what he was talking about.

To understand why requires a little knowledge of how Korea works, and why the Korean business community has become quite concerned about something as soft-sounding as "image".

The conference was jointly sponsored by the Federation of Korean Industries, or FKI, whose members include such powers as Hyundai, Samsung, Daewoo, LG and Sunkyong; and by the Korean Chamber of Commerce and Industry in USA, Inc., which is comprised of 700 of Korea's leading firms in the United States and is called by its acronym, KOCHAM. Young Man Kim, KOCHAM's chairman (who is also Sunkyong America, Inc.'s vice chairman) addressed the conference; as did Kook-Hyun Chang, the executive director of FKI's New York office. Working closely with the two influential business leaders was New York-based public-relations executive Keith Rabin, who is president of KWR International, Inc. At the seminar Rabin released a 50-page study analyzing the perceptions of a wide range of opinion leaders regarding Korea.

What was unusual about the public seminar is that Korean business leaders usually don't do this sort of thing. Korea -- a nation of extremely self-reliant people -- didn't get its historic appellation, the "Hermit Kingdom" for nothing. "I have been active in Korea-American business relations for more than twenty years, and have rarely seen such a wide range of Korean and U.S. opinion leaders in one room," KOCHAM's Chairman Kim said as he surveyed the audience. Moreover, in Korea traditionally government leads the way, with business expected to follow. The Rihga Royal seminar is evidence that this tradition might be changing.

Why the concern over "image?"

Viewed one way, Korea's image is terrific. The one impoverished Republic of Korea -- in start contrast to the continuing tragic embarrassment in communist North Korea -- has been an astonishing economic success.

Averaging nine percent growth every year for three decades, Korea is now the world's eleventh largest economy and the United States' fifth largest export market. This is a country that deserves deep respect.

Yet, Korea often presents an awkward, unsophisticated presence on the world stage. And Korean business leaders have already seen evidence that when Korea presents a clumsy face to the world, forces can be unleashed that will hit companies where it hurts -- on their bottom lines.

Last October, Korean President Kim Young Sam narrowly avoided an embarrassing rejection of Seoul's application to join the Paris-based "rich man's club," the Organization for Economic Cooperation and Development (OECD). Kim was outmaneuvered by an intense behind-the-scenes pressure campaign by labor activists in Scandinavia and Germany who used the opportunity to try to link Seoul's labor record to the OECD. The Clinton administration -- always unduly sensitive to its own political backers in organized labor -- dithered until the last minute, when Japan, Canada, and other countries strenuously pointed out that Korea's oft-criticized labor record had nothing to do with the country's obvious qualifications to join the OECD.

Shortly thereafter he was home free in the OECD, however, President Kim made things worse when he pushed controversial labor-reform legislation through the legislature in a secret pre-dawn meeting. This, as might have been anticipated, drew the Korean labor movement into the streets. Much bad press resulted, and Korea looked foolish.

What aggravates Korean business leaders now is that their country has a tendency to take such PR beatings lying down. "Silence is often interpreted by the media and outside audiences as an acceptance of an any allegations in question and therefore, one has to make sure to address, and to respond, to both positive and negative information," FKI's Executive Director Chang told the audience.

Chang was right on target. Despite Korea's vulnerability to criticism on its labor record, for instance, an honest examination of the substance of the government's new labor-reform legislation suggests that much of it is not only reasonable, but is economically compelling as Korea becomes more of a global presence. So why shouldn't business come out and make its case -- particularly as Korea's side of the story is often more reasonable than generally understood?

How to do that effectively, of course, is not all that easy. "You can't just print up 5,000 expensive brochures that nobody will read," notes Sukhan Kim, an international trade lawyer with the D.C. office of Akin, Gump, Strauss, Hauer & Feld who represents such blue-chip Korean "chaebols" as Samsung.

And particularly in the hermit kingdom's case, cultivating a sophisticated look in global markets will mean more than just an image enhancement. As Korean business is coming to realize, understanding and overcoming cultural differences is at the core of what must be done. The real problem, of course, is what to do when Korean positions are vulnerable to responsible criticism, due to a mixture of cultural, political, and bureaucratic factors.

The current strained state of Korea's trade relations with the United States illustrates some of these forces at work. Despite the fact that the United States had a $3.9 billion trade surplus with Korea in 1996 -- and also that U.S. foreign direct investment in Korea shot up 30.4 percent to $5.3 billion in 1995 -- U.S. trade officials' faces darken when asked how things are going with Korea.

The USTR's 1997 "Foreign Trade Barriers" report fills nearly 19 pages of complaints about Korea. The litany of frustrations includes: complaints about high tariffs Seoul sticks on foreign autos; about lengthy delays in clearing good through Korean ports; about government tax audits of persons leasing foreign cars or otherwise engaging in "conspicuous consumption" of luxury goods; and about what a total run-around one gets when dealing with Korea's various health, welfare, agriculture, forestry, food, safety, and other bureaucracies. Five years ago, and in only ten pages, the 1993 "Foreign Trade Barriers" report complained about ...tariffs on foreign autos, lengthy delays in clearing goods through Korean ports, government tax audits of persons leasing foreign cars and other luxury goods, and the frustrations of dealing with Korean ministries of health, welfare, agriculture, and so on.

At last month's seminar in New York, Nancy Linn Patton, who is deputy assistant commerce secretary for Asia, spoke clearly about the continuing Korean "frugality" campaign against "luxury" goods, which usually turn out to be foreign -- only to hear the Korean response that conspicuous consumption is not part of their culture. Listening, I recalled hearing the exact same arguments five years ago from different U.S. officials and their Korean counterparts. What a perfect definition of a perception gap.

At least such trade-related problems have either political or bureaucratic solutions that are easy to see (if not so easy to implement, for both Koreans and Americans). Solving other cultural problems that are more deeply rooted will be far more difficult for Korea.

Bruce Nussbaum, the editorial page editor of "Business Week", told the audience at the Rihga Royal about the experience of a female executive from Silicon Valley who recently flew over to Seoul after completing her business in Tokyo. She wanted to see Korea partly for vacation, and also to check out Korea for business opportunities.

When the woman put on her track suit and went to her hotel's gym to work out, she was told that female paying guests weren't allowed. OK, she shrugged. Then, when she entered a popular Seoul restaurant during lunchtime, she was also turned away. OK again, the executive shrugged. Then, when checking out of her hotel, the woman patiently waited at the front desk for a clerk -- only to be left quietly steaming when all the clerks left her to fawn over a group of Japanese businessmen who just then entered the hotel. This was the last straw. The executive didn't blow up; she just got even.

There is now one Silicon Valley firm under strict orders from a certain woman executive never to have anything to do with Korea, period, Nussbaum related.

Even though the problems are serious, at least they are beginning to be seriously recognized by the Korean establishment. After a candid recitation of Korea's "image" and economic problems, the FKI's Kook-Hyun Chang told the Rihga Royal audience that he was confident that there wasn't any economic problem too big for Korea to handle. "I wouldn't bet against us," Chang said.

As one who first saw Seoul nearly thirty years ago when it was a poor backwater, and has since been thrilled and amazed by Korea's economic miracle, I wouldn't take such a bet either.

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This article was published in the May 1997 issue of "The Rushford Report", a Washington-based publication that covers international trade and finance.