Sunday, January 15, 2006

Those who do not learn from history...

An interesting article on China's service industry on in the Economist. The funny thing, if you would substituted "China" for "Korea" it would be almost as true. I do know know if this says more about China or Korea. However I think it may means that such hurdles my be more difficult to overcome in China given Korea's experience. A sample from the article, "Koreanized":

The reason for this is a...bias towards manufacturing—“[Korea's] ‘real-men-make-stuff' attitude,” as...[a global consulting company's Seoul] office puts it. This has led to a plethora of ill-thought-through regulations for services, made worse by [Korea's] continuing suspicion of [non-chaebol] business, which is mostly concentrated in the services sector...

Worse, though [Korea] took a...decision to invite foreign direct investment into manufacturing, it has been reluctant to open up services. [A major global] consultancy's think-tank, argues that allowing more foreign investment in services could bring “not just capital and technology but a competitive dynamic...The presence of Carrefour and Wal-Mart leads to domestic copycats, creating innovation and productivity growth.”

Yet in many services—from telecoms, to the postal service and the media—[Korea] thwarts foreign firms with onerous regulations and inconsistent policies. In banking and other financial services, foreigners face limits on ownership and the types of business they can conduct. In legal services,...Lawyers' poor quality (the practice of bribing judges and rote learning of law means few can argue a case) could be helped by training from foreign firms. Yet foreign lawyers are barred at every turn. They cannot practice or comment on [Korean] law, cannot appear in a [Korean] court...

A shortage of well trained people—a complaint of almost every foreign multinational—is also holding back services growth. Many [Korean] employees, even qualified graduates, think rigidly rather than creatively and do not challenge authority or ask questions. That may be appropriate in a factory, but not when the client wants to find a clever way to win this contract or that license.

Read the article, the above changes surprisingly small. Good luck China.

Second thought, if this truly represents the service sector in both countries, it seriously begs the question why Korea should be hub of northeast Asia rather that Shanghai.


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