[VIEWPOINT]Rally ’round the jaebeol, boysThe Bank of Korea recently forecast that the potential growth rate for the coming decade is likely to drop to 4 percent, and pointed out that slow investment was the biggest factor behind the decrease in the expected growth rate.
The Korea Chamber of Commerce and Industry also warned that because low economic growth rates are coming, it was urgent for Korea to find a new growth engine. Even private economic research institutes say that the window of opportunity for Korea to become an advanced economy will close in 10 years. The chamber warned that if Korea loses this opportunity, its economy, now the world’s 11th largest, would not only fail to join the ranks of advanced economies but could drop to the 60th-largest economy or below sometime in the future.
So how are Koreans reacting to the alarms? As can be seen in the recent illegal wiretapping scandal, the Korean people seem to prefer to concentrate on the unhappy past, when politics and business colluded, rather than cool-headedly recognizing the seriousness of the situation and setting a proper course for future economic development. Anti-business sentiment among the public also seems to have become stronger these days.
Moreover, we are spending time on rather leisurely and meaningless controversies over whether we should stress economic growth or the equitable distribution of wealth. Some of us refuse to see that the pie has to be made bigger through growth in order to distribute more to poor people. More than anything else, they seem to ignore the fact that job creation is the best means to improve the distribution of wealth.
For the Korean economy to become an advanced one in 10 years, or even to avoid a collapse, a new growth engine is needed. The answer is obvious: if the problem is lower growth potential because investment is slow and there is no powerful economic engine for the economy, then the best engine would be restored willingness on the part of Korean and foreign companies to invest in manufacturing and service businesses in Korea. We need to encourage the spirit of entrepreneurship that can meet the challenge of developing growth engines.
The reality is that in Korea, large companies dominate the economy. Given that dominance, although it is important to foster start-ups and small and medium businesses, the government also needs to encourage large companies to invest at home, not abroad, and make every effort to use their vast amounts of capital and good human resources to develop new national growth engines.
Recently, Samsung Electronics has rapidly risen to be the world’s 20th most recognized brand by becoming globally competitive. Hyundai Motor company, LG Electronics and POSCO have also become world-class businesses. We should not forget that these businesses are the biggest hope for the Korean economy, even if there appears to be little hope now. Those large companies will take the lead in developing a substantial part of a new growth engine that will brighten the Korean economy in the future.
Rather than digging up the unhappy past and tightening restrictions on our conglomerates because we are suspicious of them, it is crucial that we think of the future and encourage them to lead the way to develop the Korean economy. These large businesses, of course, must keep that unhappy past in mind as a reminder that if they fall back into their old bad habits, anti-corporate sentiment here will again surge. Furthermore, they should make even stronger efforts to improve their corporate governance, business ethics and relations with small and medium businesses. They should also invest more in research and development, increase the value of their brands and develop new growth engines.
There is no time to lose. We should think of the future rather than the past. In a spirit of self-reflection and forgiveness, all economic players, including politicians, should unite to increase the global competitiveness of Korea’s existing products and put all our energy into developing new ones.
Whatever the merits or faults, or likes or dislikes, we should recognize that the future of the Korean economy depends on how wisely we can use large companies as the main actors for the recovery of our growth potential, because they hold important positions in the Korean economy.
* The writer is a professor of business administration at Seoul National University. Translation by the JoongAng Daily staff.
by Song Jae-yong