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[June 14. 2016 Korea times] Corporate credit cards induce FDI
- Date : 2016.07.12
- Views : 408
Corporate credit cards induce FDI
By Jeffrey I. Kim
Foreign investors must be heroes. To start a business in a new country, they have to go through so many hurdles and hazards and confront challenging tasks and numerous inconveniences. One can easily make an adventurous and bizarre story out of their experiences in the early settlement period. It could be like a story from the "Indiana Jones" movie series. In addition to struggling with seemingly endless paper work to get approval from the central and local governments, finding locations for the head office, factories, residence, and schools for their children is a daunting task.
One of the most intolerable inconveniences that foreign investors experience during their settlement period is that their credit card issued in their own country is seldom accepted in the host country. In order to receive a credit card for either personal or corporate purposes, they have to wait at least a couple of years because they are required to present their annual business report, the names of references, etc. The bank officers conduct a thorough examination of the credit status of the card applicants.
Foreign investors bring a huge amount of money to Korea for investment. The one-time transfer of their money into a Korean bank for investment is easy, but getting a credit card to settle business transactions and to make payments for living expenses is difficult. There must be something to this. For years they have been complaining about this, but the monetary authorities and the banks have not taken their complaints seriously.
In fact, the Korean people have bitter memories of the credit card crisis and the horrible leakage of card holders' information. The credit card crisis occurred in 2003 when many credit card issuers went bankrupt. To quickly escape from the economic disaster after the 1998 Asian financial crisis, the Korean government encouraged people to use their credit cards to borrow and spend. During 1999-2002 the number of credit cards tripled from 39 million to 105 million while the volume of total credit card transactions expanded more than six times. This policy could not last long unless there was increased expansion and productivity, thus the massive credit card lending boom was followed by a miserable bust.
The scary theft of card information became known to the public in early 2014. Consumer data such as card numbers, expiration dates, email addresses and salaries of the card holders were stolen. Fortunately, however, the PIN numbers and card-verification codes were not included in the stolen data. The managers of two marketing companies were charged with buying the stolen records. The heads of three big Korean credit card firms apologized and resigned. The government set up a taskforce to overhaul the data protection rules and to toughen penalties.
Having gone through these experiences, the financial authorities and credit card firms have become cautious in issuing new credit cards. They have been overly reluctant to issue credit cards to foreign investors.
Now, things are beginning to change. The monetary authorities and banks have become compassionate to foreign investors and more accommodating to the requests and complaints of foreign-invested companies. Only recently have they allowed foreign investors to open bank accounts in Korean currency and use debit cards. This is progress but only a little.
Recently, however, commercial banks have started issuing corporate credit cards to foreign-invested companies by easing up some procedural requirements. If the certificate of registration of a foreign-invested enterprise is presented, the bank issues a corporate credit card to the corporate representative and executive members although the maximum credit line is to be expanded according to their business performance.
Once they open the gate to the use of corporate credit cards by foreign investors, extensive use of the individual credit card will also be allowed very soon.
A credit card is like an automobile. It makes people's lives much easier and more convenient, but it can turn into a deadly weapon killing or seriously hurting people. Sound use of credit cards by the card holders and thorough management of card information by the banks cannot be emphasized too much.
Jeffrey I. Kim is a foreign investment ombudsman, a presidentially appointed troubleshooter for investors and entrepreneurs from overseas. He earned a Ph.D. in economics from the University of Chicago and taught at the University of Colorado, Boulder and Sungkyunkwan University.