Foreign companies are cautiously watching the economic climate in Korea as the impeachment of President Park Geun-hye by the National Assembly brings uncertainty over policy direction in the future.

With no way to ascertain how the change in leadership will affect economic policies, foreign companies operating in Korea remained wary about making definite plans or decisions affecting their operations here.

The ongoing scandal involving President Park‘s confidante Choi Soon-sil and the impeachment leaves an effective leadership vacuum as Prime Minister Hwang Kyo-ahn takes over President Park's duties, opening up questions about policy that cannot be answered until the Constitutional Court gives a final ruling on the impeachment and new leadership is put into place.

“We cannot evaluate how the political situation will impact our business until after some big decisions are made,” said a spokeswoman at a British company operating in Korea.

“The current political situation is holding up discussions on issues affecting foreign companies, like changes to regulations,” said an employee of a foreign chamber of commerce in Korea who asked to remain anonymous. 

“The general feeling is that the Park Geun-hye administration must be replaced quickly in order for companies to operate with stability here.”

The volatile climate affects not only companies operating here, but also foreign investors, who are a major force in moving the Korean financial market.

“Uncertainty in the political leadership means that there’s no way to know if an investment in the Korean market will be safe. Investors are going to want to see a stable government put in place with a clear policy direction to guide their investments,” said Chung-Ang University economics professor Lee Jung-hee. 

“The faster political leaders listen to the public and follow the public‘s demands, the faster the situation will settle down.”

Writing for Hana Financial Investment, analyst Kim Yong-gu and economist Kim Doo-un said that the current political turmoil is different from past events such as the attempted impeachment of former President Roh Moo-hyun and large-scale protests against former President Lee Myung-bak because of the scandal’s involvement of major conglomerates. 

The involvement of large companies that “have great impact on the market” and the possibility of “large fluctuations in stock prices due to prosecutors‘ investigations and media reports” could turn off foreign investors as wariness against particular companies impacts the whole market, the analysts said.

By Won Ho-jung (hjwon@heraldcorp.com)