Chaebol Undecided on Upturn

A business environment survey conducted last week among the thirty largest companies shows that the big boys underperformed in the first quarter and forecast a gloomy second quarter. They are also concerned about the fluctuating exchange rate and slow export growth.

About half the companies said their performance was "not good" and 37 percent said "average." Only 17 percent were pleased with their results. Forty percent said conditions would improve in the second half, but those who were dissatisfied with their first quarter results were also pessimistic about next quarter.

The companies say the exchange rate will be the biggest uncertainty in the second quarter. Around 80 percent of the companies said their biggest difficulty in the first quarter was the sharp rise in exchange rate; 53 percent saw steep increases in prices of raw materials, including oil, and 23 percent were concerned about the yen's swoon.

About 73 percent said the biggest difficulty in the second quarter will continue to be instability in the exchange rate and rising raw material prices, and 20 percent expected the yen to continue weakening.

In the previous survey, half the companies anticipated the won rate would be over 1,100 won per dollar this year and only two companies expected more than 1,300. Now, 73 percent of the companies expect the won to weaken below 1,300.

There is no consensus on whether the global economy will continue slow in the second quarter or begin to recover. The firms also seem to have concluded that a lower exchange rate does not necessarily help exports. Rather, they said, the slow economy in the United States and the weakening yen overcame the benefits of a cheap won. Half of the companies said they expect export problems in the second quarter.

Despite the gloomy mutterings, about 77 percent of the surveyed companies do not intend to lower this year's goals for revenues and profit. Most companies plan to overcome the difficulties by reducing their work force, curtailing operations or selling noncore businesses. About 67 percent intend to cut expenses, and 53 percent said they would reduce capital expenditures.

by Lee Jae-kwang