English translators with a specialty in finance are in for a treat: South Korea’s Financial Services Commission (FSC) revealed a plan to improve foreign investor access for companies listed on the Korean Exchange (KRX).
This plan centers on a comprehensive expansion of English documentation disclosures for South Korea’s capital market. Hatched in January 2023, the process will be completed in phases, aiming to increase the quantity and quality of English documentation that KOSPI companies (the US S&P 500 counterpart) submit.
The reason for this change is twofold, according to the FSC. One, the English documentation in the system mostly depends on automatic machine translation. Two, companies are not required to make the filing in the language. Although the quantity of English information submitted by KOSPI companies has increased from 9% in 2019 to 14% in 2022, company disclosures written in English remain largely voluntary. As a result, foreign investors have limited access to domestic corporate information, reducing potential investment opportunities.
H2: Financial Services Commission’s General Strategy for Foreign Investors
To succeed in their endeavor, the FSC has outlined multiple stages with the ultimate goal of making English disclosures mandatory for filing.
The first phase necessitates KOSPI companies to provide key market information in English. Businesses with more than KRW 2 trillion (USD 1.5bn) with 30% or more of their shares owned by foreign investors and organizations with KRW 10 trillion (USD 7.7bn) or more in assets will start to follow this requirement. Exemptions include companies whose foreign investments are less than 5%. Companies will be given three business days once the Korean disclosures are filed to submit their English versions.
By 2026, the second stage is expected to begin. The requirement will be extended to all KOSPI companies with KRW 2 trillion or more in assets, not just those with significant foreign investors. The required documentation will also be expanded. In the future, the FSC also considering the possibility of requiring the English versions to be filed at the same time as the Korean disclosures.
For the plan to be successful, the FSC plans on improving the quality of English translations and assisting companies with managing the transition. In this vein, the FSC offers a number of measures, which includes “special benefits” for those who file “outstanding” English disclosures.
Other measures include:
- Increasing available translation support from language service providers
- Improving English disclosures training courses
- Expanding automated MT services
- Providing English search functions for Korean statutory disclosures
- Improving translation quality using AI-based MT
These measures attempt to improve the systems the Korea Exchange (KRX) already has in place. The FSC seeks to do the following:
- Abolish the foreign investor registration requirement. Instead, foreign corporate entities and individual investors will be allowed to invest in Korean capital markets using their legal entity identifiers (LEIs) or passport numbers, respectively.
- Remove the investment reporting requirement where the end-investor of a foreigners’ consolidated account needs to instantly report completed investment transactions at the moment of settlement (T+2). Instead, the FSC will increase the convenience of making transactions using the foreigners’ consolidated account, and establish an ex-post oversight system.
- Broaden the scope of OTC (over-the-counter) transactions eligible for ex-post reporting to reduce the burden of preliminary examination and increase the convenience in transaction execution.
H2. The Pros and Cons of South Korea’s Foreign Investment Initiative
For companies wondering about the risks and logistics of conducting operations during a recession, South Korea can be an inviting investment location for both businesses and organizations. One of its major selling points is its highly skilled workforce, ranked among the top in the world, thanks to its expansive education system. Also, the country boasts a dominant position in high-end electronics due to its advanced R&D capabilities.
Furthermore, South Korea offers its highly developed transportation networks and cutting-edge telecommunications systems. The country’s strategic location in Northeast Asia, with its proximity to major markets such as China and Japan, enhances it as a possible hub for shipping and air cargo operations. It’s also home to a solid banking sector, with its currency reserves and low external debt showing a solid international financial position and growth of investment within Asia.
The citizens have a high level of disposable household income, and consumers tend to be brand savvy, and willing to spend on quality products. For businesses looking to establish a foothold in Asia and expand their global reach, South Korea can be a compelling choice.
However, South Korea has its drawbacks as a location for potential foreign investment. One of the primary challenges is the high cost of doing business in the country, which can be attributed to factors such as high labor costs, expensive properties, and regulatory barriers.
Additionally, the country’s complex bureaucracy, current market dominance by several large conglomerates, and sometimes opaque decision-making processes can make it difficult for foreign businesses to enter and navigate the local market.
Another potential weakness is the country’s aging population. There is household indebtedness and a high unemployment rate among young people, resulting in a comparatively high cost of manpower for companies seeking to recruit and retain talent, which could limit long-term growth prospects. The country’s industry standards are also unique, and frequent contract negotiations throughout a business relationship are common.
Finally, as South Korea is heavily dependent on raw material imports, geopolitical risks stemming from tensions and competition with neighboring North Korea and China could create uncertainty for foreign investors. However, South Korea’s strong economic fundamentals and ongoing efforts to improve its business environment make it a viable option for many foreign investors seeking to expand their operations in Asia.
By the numbers, this is the U.S.’s statement when it comes to South Korea’s Investment Climate:
South Korea ranks 32 out of 180 in the TI Corruption Perceptions Index in 2021. Its Global Innovation Index in 2021 is placed fifth from 132. The US Foreign Direct Investment (FDI) in 2020 is $33.8 billion USD. And the country’s World Bank GNI per capita in 2020 is $32,960.
H2. Expert Insights from the Translation Industry
This is not South Korea’s first push to increase the amount of English information available for its listed companies. The county launched a scheme in 2020 that had KRX beginning to offer English translation services when it comes to the regulatory filings of 54 eligible companies listed on the KOSPI. In February 2022, the translation initiative increased foreign investors in the KOPSI to 37%.
But what does this mean for translators who are approached or otherwise interested in participating in South Korea’s plans for foreign investment expansion? Experts from Tomedes, a professional translation services provider, have a few insights to share on the matter.
“The level of English proficiency in South Korea has increased over the years. However, many South Koreans don’t often speak or use this language, so it was a step in the right direction that South Korea’s government has taken the initiative to invest more in translation services to attract foreign investors will increase efficiency in the translation process and make it less bureaucratic.”
– Ofer Tirosh, the CEO of Tomedes
“It’s always useful to have a translation center. As it is mentioned in the article, they are going to create a kind of crowdsourcing service for translations. In my opinion, it can work if a proper translation quality check system will be implemented (such [a] system wasn’t mentioned in the article). All in all, it’s early to judge at this stage and we have to see how the system will actually work.”
– Valery Cherkashin (Korean-English-Russian translator)
“The proposed measures mentioned in the article would surely act as some motivation/incentive for translators and localization companies to provide more quality/outstanding English disclosures. Any benefit or incentive proposed for translators would help, I think. I particularly like providing/improving training courses relating to English disclosures.”
– JiHyun (Jeanne) Kim (Korean-English translator)
H2. Conclusion
Currently, South Korea has many notable partnerships with other countries and regions, such as the U.S., the ASEAN region, and the European Union. Recently, the Middle East is also starting to establish trade and market relations with South Korea, with the UAE planning to invest US $30bn in South Korea in the next few years.
With South Korean Financial Services Commission’s (FSC) initiative to provide English disclosures for foreign investments, incentivizing translation services could have several potential economic impacts on the economic market.
First, it could ease doing business for foreign investors in South Korea. By providing translation services for important documents such as contracts, regulations, and laws, foreign investors would have larger access to critical information. It also reduces the risk of misunderstandings or miscommunications that can lead to costly mistakes.
Second, it could improve South Korea’s market image. Actively promoting the availability of translation services displays the country as a business-friendly country and is a sign to overseas funders and capitalists that South Korea is committed to supporting and facilitating foreign investment.
And finally, it encourages demand for translation and localization services in South Korea. The industry itself is already expanding within the country for both technical texts and audiovisual materials. Moreover, the incentives offered by the FSC could attract more translation companies from abroad to set up operations in South Korea, opening new and different employment opportunities for citizens. It could inspire homegrown Korean translators to start their own businesses to cater to the growing need as well.
However, these impacts will only come to fruition if several conditions are met: first, the translation services provided should be reliable and of high quality. Second, the Korean companies’ ease of access to these services, and, finally, an overall positive investment climate in South Korea.
