Korean companies in dilemma over doing business in Sri Lanka
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| Demonstrators hold placards and shout slogans during a protest against a surge in prices and shortage of fuel and other essential commodities near parliament in Colombo, Tuesday. AFP-Yonhap |
By Park Jae-hyuk
Samsung Electronics, Hyundai E&C and other companies doing business in Sri Lanka are increasingly concerned about the potential negative impact of the island country's political turmoil and economic crisis, according to industry officials, Wednesday.
Fears have escalated since anti-government protests broke out last month against the Sri Lankan government for its failure to solve the deepening economic crisis which global investment banks and credit rating agencies expect will lead to a sovereign debt default.
Although Sri Lankan President Gotabaya Rajapaksa revoked a five-day emergency order late on Tuesday (local time) and the International Monetary Fund promised to discuss a loan program with the government, the country is still suffering from a shortage of food products, medical supplies, electricity and even paper and ink.
However, Korean companies in Sri Lanka have remained cautious about taking countermeasures against the worsening situation, amid the Korean government's continuous efforts to enhance economic cooperation with the local government.
"Even if Sri Lanka goes bankrupt, there will be less likelihood of our business there facing financial problems," said a spokesman from one Korean conglomerate doing business in Sri Lanka. "But we will keep a close eye on the situation to protect the safety of our employees there."
Last Wednesday, the Minister of the Office for Government Policy Coordination Koo Yun-cheol visited Sri Lanka to discuss official development assistance (ODA) with the country's top government officials, including Rajapaksa. National Assembly Speaker Park Byeong-seug also flew to the country earlier this year to boost economic ties.
During their visits, the Sri Lankan government reportedly expressed its gratitude for Korea's increased ODA, support for COVID-19 quarantine measures and the increased hiring of Sri Lankan workers by Korean companies.
According to the Korea Trade-Investment Promotion Agency, 16 Korean companies and institutions, most of which engage in the construction and manufacturing industries, were doing business in Sri Lanka as of 2020.
The volume of trade between the two countries recovered last year to pre-pandemic levels as Korea's exports to Sri Lanka rose 67.3 percent year-on-year to $288 million, while Korea's imports from Sri Lanka reached $142 million, up 27.8 percent over the same period.
Over the past few years, Korean builders have won sizable infrastructure construction projects in Sri Lanka.
In 2020, KT announced it would help Sri Lanka build smart networks in the country's largest city of Colombo and neighboring regions by using artificial intelligence, the internet of things and big data technologies. The Ministry of Land, Infrastructure and Transport has also taught Sri Lanka its know-how of building smart cities.
The Korea International Trade Association expected the latest crisis to affect Sri Lanka's cooperation with Korean companies for the construction of infrastructure and new towns.
Kim Min-hee, a researcher at the state-run Korea Institute for International Economic Policy's India and South Asia team, said that Sri Lanka will face difficulties in solving its chronic financial problem soon, citing a slowdown in the country's tourism industry, which resulted from the Easter bombings in 2019 and the ongoing COVID-19 pandemic.
"In order to minimize damage from Sri Lanka's economic crisis and support Korean firms doing business there, the government should preemptively come up with countermeasures," the researcher said.
