(by guest blogger, Andy Jackson (OK, really by conscripted blogger Brendon Carr))
I found I couple of the comments in my last post by Brendon Carr so interesting and informative that I decided that they deserved their own post. They are certainly sage advice for anyone wanting to do business in Korea.
One thing I want to point out is that Carr’s comments are not just simple exercises in Korea-bashing. His chief point is that the Korean legal system allows for con artists to operate almost with impunity. It also implies that the human temptation to lie, cheat and steal is made more appealing in the Korean business environment, so foreigners have to be very careful before they make a major investment here.
Everything below is from Mr Carr with a few noted edits. Enjoy:
I am constantly consulted by foreign businesses who got suckered by the Koreans. By that time it’s usually too late for these poor bastards.
My advice for the next deal: CASH ON THE BARRELHEAD. NO CREDIT, NO WAY, NO HOW. Not because Koreans can’t be trusted (if 99.9% of 50,000,000 Korean people are completely honest, that leaves 50,000 bastards you can’t trust — lots of ways to get cheated) but because the legal system leaves no remedies in the case you are cheated.
The story always goes thus:
Mr. Kim: "Here is Kim, CEO of Kimsco World Incorporation, CO., LTD. We big company in Korea, know many people in government. Now we have big project bid going and Kimsco will order 10,000 of your esteemed company’s prestigious widgets. Please must to give good price and quick delivery. Project gonna very urgent now."
Suckercorp: "Thanks for your inquiry Mr. Kim. 10,000 units at unit cost $100 each will come to $1,000,000. Please make payment by telegraphic transfer or irrevocable letter of credit, or bank guarantee."
Mr. Kim: "Your price very high. We are contacting your competitor now. Please to cut price unit cost until $70 each. We have big order later on; many more projects here in Korea. Kimsco World Incorporation CO., LTD. now business very good. Don’t worry — my friend Mr. Han will sign contract. I am using his name for company due to unfair government harassment. But don’t to worry about that."
Suckercorp: "That will be a stretch, Mr. Kim, but we can do it. Please transfer US$700,000 to us." (Geez, this sale is kind of a loss leader, but this will be my first inroad into Korea, and soon I’ll be selling to all the Korean companies! What a goldmine! I’m going to be a hero here at Suckercorp and the richest salesman in Springfield!)
Mr. Kim: "Bid very urgent now. Government says we must have product before bid can be approved. But my friend (very powerful in government) says we will win if we have your widgets. Now very urgent. Don’t worry about payment. All under control."
Suckercorp: "Okay, Mr. Kim. Because this is so urgent and we value your goodwill, we have shipped 10,000 units to you. I’ve upgrade shipping to FedEx air freight; don’t worry — we’ll be responsible for that extra cost. We’re looking forward to working with you. Please advise on payment." (The air freight touch is genius! I’m going to be rich off all those future commissions!)
Mr. Kim: "Thank you for quick shipment well received. Bank L/C or guarantee too expensive. We will pay by T/T much cheaper. But now economy not so good, all SMEs are difficult now. Please to must understand our situation. Can we reschedule first payment $100,000? But still need 10,000 more units of widgets for big contract. Once bid approved Kimsco will need second supply top urgent."
Suckercorp: "Umm. Well, I guess so, but what’s the date of this first payment again?" (Should I do some due diligence on this guy?)
Mr. Kim: "Cannot schedule first payment now. Economy still bad. Please you must understand our Korean special situation."
Suckercorp: "Hey, Mr. Kim, we are willing to work with you on payment. Can you make a first goodwill payment of US$50,000?" (Getting worried now. Maybe I should check this out and get legal advice. What, that greedy lawyer wants $300 an hour? Screw that.)
Mr. Kim: [no response]
Suckercorp: "Mr. Kim, we’re becoming concerned. You’ve not kept any of your promises to us, and we are considering legal actions against you." (Hmm, but $300 an hour is too damn much to spend.)
Mr. Kim: [no response]
Suckercorp: "Mr. Kim, respond immediately or we will commence legal actions against you." (Why isn’t this guy answering e-mails or the phone anymore?)
Mr. Kim: "So sorry, Mr. Kim is on important overseas business trip and cannot respond. He will be back in six months. What hotel he in? We don’t know. Please don’t to bother us anymore."
Suckercorp: What the hell? Maybe we should talk to that lawyer and do some due diligence. What’s the headquarters address of Kimsco World Incorporation CO., LTD.? Oh here it is: Doosan Bears Craptown Officetel, Guro-gongdan, Guro-gu, Seoul.
Brendon: Dude, you’re (made sweet love to). [Sorry, I could help but make the Yangban edit. -Andy]
I want to make sure that this information gets recorded so others might find it later and avoid the disaster foretold by the typical pattern I describe.
That story I made up last night based on my experiences here, has about a million screaming red flags in it:
HURRY, HURRY – Speed kills. Slow it down.
"FAKE NAME" PROBLEM – Mr. Kim says in passing that Mr. Han, his friend, has "lent his name" as Representative Director of the company but that Kim is the real principal. This is common, but anyone sensible would ask why Mr. Kim needs to obscure the ownership/management of his company. What is he hiding from? This is one of the first red flags one could catch if legal counsel is consulted early.
BUSINESS ADDRESS – Although this was discovered at the end of my fictional tale, if Kimsco were indeed a major business its address would probably not be over there in Guro. A quick call to a knowledgeable and frank foreign or Korean lawyer (call the foreign lawyer!) could give one this judgment.
IS IT A REAL COMPANY? – And of course, we would pull the commercial register of the supposed "Kimsco World Incorporation CO., LTD." to check if it exists at all. It’s available on line and costs us $1.00 to pull (and then my usual hourly rate to analyze and counsel). It’s surprising how often we find the company doesn’t actually exist.
NO CREDIT – If local banks and guarantee insurance institutions won’t extend credit to Mr. Kim, there’s probably a good reason. They know the limits of the local legal system better than you do — follow them. Any Korean counterparty who cannot pay in advance by T/T and cannot arrange intermediation by a trusted financial institution is not worth the risk. The banks are here in Korea and have much more staying power than a foreign company selling from offshore; if they won’t extend credit why should you?
BIG TALK – People who try to get over on you now with promises to make it up in the future are exploiters and cannot be trusted. It applies equally to sales of goods and services. Customers who ask for a concessionary rate now so that the vendor can get future work at full price are liars: Giving in to that game establishes one as an easy mark for exploitation.
MISSED FIRST PAYMENT – This is the big one. If there is no first payment, there will be no later payments either. You wouldn’t believe how many foreigners get burned by this one and reschedule again and again, all the while continuing to supply more goods or services to the Korean customer. (There’s another version of this one where the canny foreigner insists on partial advance payment: That first payment is made, because otherwise goods won’t be delivered. After that, no more money is released.)
ECONOMY NOT GOOD – We have been hearing versions of "economy not good" as an excuse for for eight years. You should translate it into English as "I’ve mismanaged my company into bankruptcy."
PLEASE UNDERSTAND OUR SPECIAL SITUATION – Everyone is special. This means "I’m not taking responsibility."
UNAVAILABILITY DUE TO BUSINESS TRIP – This one always cracks me up. We see it every time. In English, "extended business trip" means "he’s a fugitive from justice".
So, what to do about it? Number one, although legal services may be expensive, getting ripped off is far more expensive. (Of course, it really burns when you choose the wrong law firm and your lawyers rip you off too. If there are six lawyers waiting for you in the conference room, run away — there are 10 more billing on the case in the back room.) Consult a lawyer at the beginning of your commercial transactions and 99% of disasters can be spotted in advance and avoided.
Credit reporting is becoming available. Use it. Get a credit report from the National Institute of Credit Evaluation, [hot link added -Andy] a joint venture with Dun & Bradstreet. Get reports on both the company itself and its Representative Director individually.
Never be an unsecured creditor. Unsecured creditors here have no recourse other than the criminal system. And the returns on that are not great: The police here put just about zero effort into looking for swindlers.
If assets are offered as security, have the security evaluated by a lawyer so you can be sure you’re getting what you think you’re getting. Last night we counselled someone on the advisability of accepting a fourth-priority keun mortgage on 500 sq. m. land and two-story commercial building in Mapo already encumbered to the tune of W730,000,000. Upon default and liquidation at auction, the other creditors would be paid out W730,000,000 before our client would see a dime of proceeds; they’re selling W1,100,000,000 worth of equipment — does that sound like a good idea?
Recently another foreign client who had gotten swindled out of millions of dollars came to our office with a "guarantee insurance" policy that their trusted agent had supposedly bought for them in Korea for a W6,000,000 premium. It turned out to be a "Silver Insurance" supplemental-health policy with a W1,000,000 benefit level and a W20,000 premium; the trusted agent had embezzled the rest of the money to buy a really swell computer for himself. It took me seconds to recognize the discrepancy but by that point they had been relying on the trusted agent as their only source of information about Korea for years.
Now, if you’re a knee-jerk defensive nationalist like [names deleted - Andy], these war stories might lead you to shriek "Brendon hates Korea, to criticize so much!" Far from it. My own experiences here, especially with the folks in my firm Aurora Law Offices, have been really positive; our guys are 100% decent and 110% (too honest, if you ask me). But like I said earlier, even if 99.9% of Koreans are completely trustworthy that still leaves a lot of potential disasters out there.
Forewarned is forearmed.
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Absolutely first rate post! I hereby respectfully remove my plumed hat and cape and render a deep bow. Almost makes me wish I was still practicing.
Great post! BTW – Loved reading Brendon’s comments on the US soldier in trouble the other day in one of the Korea papers.
Now if I could just get my company to hire legal council in Korea like the guys who post here, I would feel sooooo much more comfortable.
It is indeed shoddy. The most disspointing thing is, I don’t just see this in the private sector… the worst is when even government officials are playing a part in the dog and pony show.
I work in the construction line in Korea as a foreigner. You will not believe some of the wonders of norebangs, couple of bottles of yangju and loose women could do, when seeking stamps of approval from ‘the people who matter’.
I don’t know much about much admittedly but most of the advice given here (while being very good and given my a man far more knowledgeable than myself) seems pretty obvious (again though, maybe I am missing the more subtle points of international business dealings).
Perhaps it’s just the scenario and the way it reads but Suckercorp and anyone like them who enters dealings like the one in the scenario deserve to be ripped off (IMO the dodgyness is clear from the start).
Still if it helps some poor schmuck with no forsight from getting screwed it was all worth it I suppose.
peace.
(for clarity I am not flaming the post or poster – I really like Mr Carr’s work – just saying the mistakes made in the scenario seem fairly obvious)
Hojuin,
perhaps, but i think the post was highlighting both the dodgy business practices as well as the shortcomings od the korean legal system. being ripped offf is one thing, as there are people whow will do this anywhere give the chance, it’s the lack of viable legal recourse that is the major problem as i see it.
i gues its a different business culture. Even if western business practices are often not so ethical, they are with a few exceptions legal. thats the difference.
(Junior assistant blogger power in action! SS, aren’t you persona non grata or something over here? -Andy)
A lot of things appear obvious when viewed in retrospect, Hojuin. Brendon’s fictitious S/M manager for Suckercorp. rings true as a guy who thinks that he can manage any challenging situation to a successful conclusion.
About 15 years ago, way before I wised up and made the (for me) sensible move to academics, I worked for a seafood company in Seattle. At that time, the company was the world’s largest seafood company, and was also the world’s largest producer of whitefish fillets and paste. This is the stuff from which surimi (locally, ??) is made.
As you can guess, Korea is a huge market for this stuff, and since our company had the licenses and the vessels, Korean customers flocked to buy what they needed. And, it would have been great, if only the customers paid as promised. That, in fact, was the key reason that I was hired: tighten up the transactions to smooth out the cash flow.
I worked with local banks (primarily KEB, which had a business branch in the Belltown area), and produced documents which matched L/C description in order to receive funds – optimally, I could turn it around on the same day that we got the L/C (or, that the product shipped).
Yet many customers came up with the same tired lines that Brendon wrote – some are exactly the same. These were guys that we were doing regular business with, either directly or through a broker connected to the industry association here in Korea. Even so, they didn’t seem to have a problem pulling this BS, even with a company that really dominated the global market.
So why keep the business? After all, Japanese companies love that stuff, too, and would have bought it all. Because – and this is the part where it’s easy to look back and see it – the S/M director wanted to expand the market, and was tempted by the purchase orders and pre-sale offers from the Korean firms.
A lot of companies can’t see that, because they’re too focused on success and expanding their operations. If you can, Hojuin, great – there are a lot of companies that would like to hire you.
Plunge, could you provide a link to the story you mentioned?
http://en.wikipedia.org/wiki/Ferengi
This is off-topic, but hey…. Looks like Kim Jongil will be doing some abducting soon–hide your actresses!
http://english.chosun.com/w21d.....50011.html
Good stuff Mr. Carr. Time to write a book and be a real international dial-a-quote for the media while making lots more on the side.
Well I’m not saying I have the necessary forsight to run a multinational company (how easy it is to critique a situation on paper eh?) but honestly, as soon as someone tries to blame ‘poor economy’ as a reason that I should discount my goods offered to them I’m sceptical.
Add to this the fact they have said my preferred means of payment is ‘too expensive’ (as well as the dodgy business name/the mysterious Mr Han) and I would not be taking any further dealings with these people without a man on the ground – hell what’s 5 or 6 (10 or 12 ?) grand to hire a local foreign lawyer for a week to iron out the bugs in the contract you’ve drawn up for Mr Kim’s signature ? (I find it hard to believe a company capable of dealings in the international scene does not have, if not in house legal counsel at the very least readily accessible ‘trusted legal partners’ so to speak who should be able to knock up a contract for the sale of goods in a day or two – it ain’t rocket science)
Again though I will readily admit to not knowing squat about Korean law or International business (I realise the issue in the post is mostly about the lack of legal remedies for any – particularly foreign – parties who are wronged, and the only real solution to that is avoid doing business here IMO).
interesting read indeed.
peace.
To read the comments of the revered Mr. Carr, the article as asked for:
http://www.estripes.com/articl.....icle=33349
It was a stars and stripes, not Korean newspaper as I had thought.
Shit, this stuff would be good advice for working at a hagwon as well…
I probably ought to be more sore with AmCham than I actually am. My feeling about the organization is one of disappointment rather than anger.
Your comments about how AmCham is basically a vehicle for Jeff Jones (excuse me, JEFFREY D. JONES) is well taken. Here’s one telling signal of that: When one of my friends, a current Governor of AmCham, asked me “Did you vote for me?” I realized I hadn’t received a ballot and therefore couldn’t vote. So I called AmCham to try to figure out why. It seems that as an employee of a Korean law firm, I don’t get a vote. Only “American companies” and their employees get a vote — EXCEPT for Jeff Jones (and probably Tom Pinansky). “How’s that make sense?” I asked. “Those guys work for Korean law firms too! Just like me!”
The answer from Tami Overby was that yes, Jeff Jones gets a vote and right to hold office (and hold office forever, apparently — maybe we should call him “El Jeffe”) because the vote was mistakenly granted to him in violation of the AmCham constitution many, many years ago. So in response, an exception has been written into the definition of “Company Member” so that Kim & Chang qualifies: Votes are allowed to (i) American owned or controlled companies; and (ii) other companies whose principal business activity is, in the opinion of the Chamber, representing American firms organized and existing under the laws of the United States or its possessions.
Sure, Kim & Chang takes fees from a lot of American companies, but my firm actually does represent American firms too — and yet no vote for Ol’ Brendon. Those fuckers. So I’ve really lost interest in the organization.
Whoever posted that link to the wikipedia ferengi entry did so falsely under my moniker. Harmless as this posting was, stealing handles is bad blog hygiene. Cease and desist!
In the example that I gave, the company wanted to grow its customer base, in the express attempt to drive up the global market price. That’s it – run up the price of the market generally, and then you don’t have to worry if some customer is slow on payment.
Brendon’s talking about getting screwed straight out of the gate, but the company that I worked for was getting hung out by customers that kept dragging out the wait-time on L/C’s. In a cash-intensive industry like fishing, that can kill a company quickly.
Even though the company I worked for always eventually received its payments – yanking the broker’s chain usually took care of that – the crap is the same as Brendon described. Interesting: it’s like there’s a School of Bad Business which many businesses require their upper-management to attend.
BTW, Hojuin, you reached the same conclusion as did my former employer: the only way to truly solve the problem would be to have someone locally present who held sway with the Korean companies yet remained loyal to the interests of the American-based firm. I don’t believe that they ever found that person.
“BTW, Hojuin, you reached the same conclusion as did my former employer: the only way to truly solve the problem would be to have someone locally present who held sway with the Korean companies yet remained loyal to the interests of the American-based firm. I don’t believe that they ever found that person.”
[Cough] Uh… some of us do this for a living.
As much as I hate to admit it that is the main reason why Korean companies overseas are run by Koreans, they need someone on site that is loyal to the company back home. The problem seems to go both ways.
i don’t think its a matter of loyality from the western end. its a matter of ability, and ethics. the difference is koreans prioritise personal, group, or country gain over ethics and good business practice. I guess this is ‘loyalty’ in a twisted way.
and for the record, i don’t think that the western ssytem of business, law, and to a large extent, society is really western as much as just developed. asian countries following the western countries lead isn’t moving to the westen system as much as simply developing.
the comment about even if 99% of koreans are honest, it still leaves 50 thou from 50 mill.
well. what’s 1% of population of wherever your from ?
you people like to think yourselves clean.
oh and that poor english skill of the scamster.. how many words of korean did the sucker use ? hey you know what f.u means? m.f’er..
way to pound on that chest, tarzan…
Sorry, Wedge, if you mistook my comment to mean anything greater than an expression of the problems that my former employer faced.
As I mentioned, Hojuin reached the same conclusion that they did, and that (to my knowledge) they hadn’t been able to find someone to help them out. I wasn’t being facetious – that was truth. I’d suppose that ‘I don’t believe that they ever found that person’ could be confusing, but I was really only contemplating the time during which I worked there, not ‘ever’ as in ‘forever’.
Without responding to “tarzan” in detail, it is the prevalence of his hostile attitude toward attempts to warn foreigners of the most common traps that deters AmCham and others from repeating common-sense advice that costs Korean “face.” When I was an associate at larger law firms here my advice was constantly stepped on and cut down by Korean attorneys who, while admitting the warnings I wanted to give were doubtless based on truth and sure to be useful to the client, said that it would “give the wrong idea” (i.e. the right idea) about doing business here.
Methinks that Mr. Carr’s insights into the Korean psyche are quite sound.
I’d like to hear Mizar5’s druthers.
Brendon:
You’re letting AMCHAM off way to easily. Years ago, it was very frank about the problems of doing business in Korea, Indeed, it was beyond blunt; it was combative. When the Fat Man became Amcham president, the pendulum swung – big time. The justification was that the confrontational attitude that was prevalent among some – but not all – of the previous administrations impeded access to and effectiveness with Korean policymakers and bureaucrats. That was probably true, and it was quite in order for aggression to be dialed back in favor of assertiveness. What we got, however, was a bunch of pod people, or stockholm syndrome sufferers, more intent on obtaining their personal goal of obtaining and wielding influence at the expense of representing the interests of American business in Korea, except when doing so was congruent with the primary directive or the particular American business whosr interest needed representing was so influential itself it could not be ignored. I’ll bet dollars to dimes that if asked most business people couldn’t name a single initiative undertaken by AMCHAM apart from its tireless efforts to get the US to let Korea into the visa waiver program, and possibly the charitable activities of the Partners for the Future Foundation, a vehicle for the Fat Man founded under AMCHAM auspices, using AMCHAM resources and (despite hijacking of AMCHAM administrative services) with a horrible ratio of overhead vis-a-vis actual charitable disbursements), but which essentially resulted in the destruction of AMCHAM’s own direct community fund activities. These are both creditworthy activities – although, as noted, the diversion of the community fund activities from AMCHAM itself to a charitable organization not directly controlled by it and that behaves more like a PR machine for FM and his golf tournament is reprehensible. But the fact remains is that they are at best ancillary to AMCHAM’s principal reason for being, which is to represent and promote American commercial interests, those of big, middling and small businesses alike. This it no longer does.
I’m sure there’s no conspiracy. To be fair (I try to be fair), I stopped caring about AmCham well before the latest sham election. I don’t know if I’m still a member, and so maybe the reason I didn’t get to vote in this latest election was that I’m no longer a member. But the no-vote-for-you policy had been a burr in my saddle for seven years prior to that.
Re AMCHAM voting: Brendon is correct that there is no conspiracy – at least not one aimed at him. The general rule is that each “voting company” member has a vote, i.e., the company, NOT the individuals associated with that company who derive their associate memberships from it, has a vote that, for administrative purposes, is cast by the so-called company representative member.
Originally, eligibility for classification as a a “voting company” was limited to American companies. Sometime long ago, perhaps in recognition of the desirability of encouraging membership when there was a relative paucity of foreign businessmen in Korea, exceptions were made for a small number of Korean law firms that employed American lawyers who perforce, given that the legal market was (and still is) closed to direct foreign participation were legally unable to function here except as employees of foreign firms.
Periodic efforts to eliminate this exception, in recognition of the less than complete fit between the interests of Korean law firms and the interests of American businesses(including Americna firms interested in opening firms in Korea)all have been beaten back, most recently when AMCHAM’s constitution was amended and restated in its entirety and, despite outspoken opposition by among others the draftsman of the instrument, those Korean law firms that long had enjoyed voting privileges were positively grandfathered into permanent voting eligibility. Either Wedge’s friend is the company representative member for such a Korean law firm; he’s lying; or there’s been a screwup.
It somehow seems sadly appropriate that the Amcham is run by a fellow whose name reminds me of a robocop villian (Dick Jones). OCP is alive and well in Korea then.
Good comments on AMCHAM. The only thing that seems to come from my membership is junk faxes, which are illegal in Korea by the way. That Hampsink guy at EUCCK seems to get in the face of Koreans quite often, which to me is what the head of a CHAM should be doing.
They had an issue of the AMCHAM Journal a few months ago which had a propaganda piece on FDI in Korea vs. China (Korea: good, China: bad). It was obviously written by a Korean and was a complete joke. I pay my dues for MOFE propaganda?
On the voting issue, I know a foreign legal consultant who was given a vote in the latest election. There must be an anti-Brendon conspiracy on the WTC 45th floor.
On the junk faxes that come wih being in he AMCHAM directory, I used to anonymously threaten the senders that if they sent one more I would turn them in to the prosecutors. At first they’d be afraid but then the attitude would be like: “Who are you kidding?” Finally, in defeat I took the paper out of my fax machine.
“As much as I hate to admit it that is the main reason why Korean companies overseas are run by Koreans, they need someone on site that is loyal to the company back home. The problem seems to go both ways.”
Or maybe just prefer to deal with Koreans. Some friends of mine worked for an American subsidiary of a Korean company. They had to buy goods and services from ethnic Korean-owned businesses even if costs were higher.
whatever…
even if, and this is a big if, 99% of all americans are honest, that still leaves three million damned thieving bastards in america. imagine that three million damned bastard m f”en americans that you can’t trust..
even if 99% of all americans are smart, that still leaves 3 million stupid bastards all over america. and that’s a modest figure. imagine that. three million inbred morons just like brendon.
you ever hear of.. ? ” beware the forked tongued whites ”
damn.. those people knew something didn’t they..
He’s the sole company rep.
Brendon,
I love your sense of humor!
You start with what would have been an accurate observation along these lines:
“. . . if 1% of 50,000,000 Korean people are completely honest, that leaves 49,500,000 bastards you can’t trust — lots of ways to get cheated”
and you turn it inside out in a way that gets us all laughing!
Sorry to all and everyone, but I’m currently in the midst of having to figure what to do about a Korean boss who’s screwing me over. He’s so Christian (multiple bibles on display in his office), so seemingly honest and decent and hardworking, so everything. But he’s running the dumb excuses on not paying me in full, not honoring his contract with me . . . and while I truly hate to have to generalize, I’ve got to say that I’ve been in Korea long enough–read, “too long”–not to be surprised.
Honesty may yet be Koreans’ undoing. They think they can cheat the rest of the world and get away with it. Again, I’m generalizing, but can you blame me?
Watch out, Korea. The world’s keeping score.
Anybody know what that overhead ratio is? And what kind of overhead the Partners for the Future Foundation could possibly have?
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