Doing Business in the United States:
A Korean Perspective

A Speech by Hong Taek Chung
Korean Chamber of Commerce and Industry in the USA, Inc. (KOCHAM)

Thank you. It is a great pleasure to address this session of the 15th annual U.S.-Korea Business Council Joint Steering Committee Meeting. My name is Hong-Taek Chung. I am the president of KOCHAM, the Korean Chamber of Commerce & Industry in the USA. This is the first time a KOCHAM representative has had the privilege of addressing this committee and we are very grateful for this opportunity.

Our membership includes over 400 Korean subsidiary companies and financial institutions doing businesses in the United States. We are working as a private organization and dedicate ourselves to improving business relations between Korea and the U.S. Every year our operating members travel to Washington D.C to make an official visit to concerned offices of the U.S. Commerce and Treasury departments, Congress and other institutions to help promote a dialogue and mutual understanding in conjunction with current trading and financial issues. They are eager to hear from us as we can give them a front-line view of the concerns of Korean businesses operating in the United States and carry back their views to our member firms and our colleagues in Korea.

Today I would like to discuss the U.S. business environment and the experience of Korean companies as they seek to expand and operate their businesses in the United States.

Market Survey

In December of last year (2001) the Korea International Trade Association (KITA) conducted a survey among KOCHAM members. As many as 83% of the 225 subsidiaries surveyed expected that Korean exports to the U.S. would increase this year. Most attributed this rise to an expectation of a U.S. economic recovery. While 56% replied that they have no import-regulated items, 30% foresaw the possibility of new regulations. Additionally, 40% of now-regulated companies worried that import regulations and restrictions will be strengthened to their detriment.

When asked to describe the big obstacles they faced in respect to their U.S. operations, interviewed firms identified a range of factors.

Internally, a lack of competitiveness in price and quality, marketing power, market information and tax concerns were identified as major problems. To solve and overcome these difficulties, Korean companies are making substantial efforts to lower costs in every aspect. At the same time they are moving to enhance product development, quality control, participation in local marketing systems, and their ability to provide after-sale services.

Externally, Korean companies are keeping a sharp eye on important bilateral trade issues such as TPA (Trade Promotion Authority), the Byrd amendment, Trade Remedy law and U.S.-Korea Free Trade Agreement (FTA). Among these issues FTA draws special attention as the most reasonable alternative to address trade barriers and to promote long term growth in our trading relationship with the United States.

When asked to name the areas where they have the most concern, Korean executives often cite banking, automobiles and steel. Among these three fields, banking has made special progress -- both in respect to the actual achievements that have been made as well as toward a strengthened relationship between the authorities concerned.

Working Together to Strengthen Korean Banking Operating in the U.S.

Following the Asian financial crises in 1997, U.S. financial and banking regulators imposed stringent supervisory and inspection standards on Korean bank branches. Inspection teams, composed of members of both the Federal Reserve Board (FRB) and Supervisory Banking Department of New York, began to jointly audit Korean banking operations in the U.S. These teams came every year and spent about seven weeks working with each bank.

Korean banks strove to get rid of this bondage. Their efforts included writing off bad assets and strengthening risk-management and compliance with U.S. regulations to prevent money laundering. Many fortified their operational systems by hiring additional U.S. personnel to help them comply with their regulatory obligations.

Annual workshops hosted by both U.S. and Korean Authorities were held on a regular basis. These workshops provided Korean banks with information on restructuring and economic trends, as well as the inspection process. As a result, from this year on, these two agencies will alternate in performing these inspections.

We attribute this change to the fact that many Korean banks have been upgraded to 2nd grade from a punitive 3rd or 4th grade. More specifically, the ratings of thirteen of the eighteen Korean branches operating in the U.S. were elevated back to where they had been before the crisis.

The bottom line is that Korean companies truly appreciate the many benefits we enjoy operating in U.S.A. These include clear regulatory guidelines, a well functioning legal and financial system, superior corporate governance practices and a dynamic competitive operating environment. KOCHAM is here functioning as the lubricant oil to remove any friction within the trade mechanism between Korea and the United States.

I would like to conclude with a recent statement by Mr. Ajai Chopra, Assistant Director, of the Asia and Pacific Dept. at the IMF. He noted "Korea was one of the few countries that showed economic growth in spite of the worldwide recession because of the effective implementation of its restructuring efforts. Further progress is foreseen over the coming year with the potential sale and restructuring of major companies such as Hynix, Daewoo Motor and Hyundai Trust and Investment."

Thank you. I look forward to working with you in the future and to answering any questions you might have.

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