[Outlook]Companies must grow in size

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[Outlook]Companies must grow in size

Ethiopia has a population of 70 million and its economy is valued at $7.7 billion, while North Korea has a populace of 23 million and an economy worth $20.8 billion. Meanwhile, Samsung Electronics has 70,000 workers, and its sales amount to $72 billion, with value added assessed at $21.6 billion, according to a 2004 issue of Fortune magazine. Value added produced by Samsung Electronics is larger than that of North Korea’s economy and three times larger than that of Ethiopia.
Ethiopia used to be better off and assisted us during the Korean War. But now it has become the second-poorest nation in the world. Due to socialist policies that impede corporate activities, Ethiopia has no large companies with an international presence and few medium- or small-sized companies. Its per-capita income is only $110.
Let’s take a look at the United States, the world’s richest country. Bill Gates, the founder of Microsoft, has accumulated assets worth $50 billion. The assets of General Electric are larger than those of the 227 affiliates of Korea’s top 10 companies combined. The sales value of the world’s largest company, Exxon Mobile Corporation, is $380 billion and its net profit is $39 billion. Washington prioritizes the protection of national interests when devising its foreign policies. At the core are measures to protect and boost its companies.
Advanced countries have many companies that represent them. Among Fortune’s list of 500 global corporations, there are 170 U.S. companies and 70 Japanese. France and Britain combined have 38 companies on the list. Twelve Korean companies appear, the same number as Switzerland, even though the European country has only one- sixth of our population.
As there are many global companies in the United States, people can choose between many alternatives when they look for a job. As wages are good, Americans have stable finances. As there is a system to make money through stocks, people do not spend excessive energy and time on trying to find ways to make more money, the kind of thing that creates instability in Korea.
According to the World Bank’s annual World Development Report, Korea’s economy is the world’s ninth-largest among advanced countries, but it ranks 11th if China and India are included. The International Monetary Fund also included Korea in its list of the 28 most advanced countries.
However, Korea has too few large-scale companies to compete effectively on the global stage. In order to become a truly competitive country, Korea needs to develop and foster its companies.
There is another reason the country needs to develop big companies: a shortage of jobs. Every year, 630,000 people with degrees come on to the labor market. But the number of available jobs is only half of the number of job-seekers.
The government plans to create jobs to fill this gap, but it is not the right body to create jobs. The number of government civil servants is now 1 million.
Even if the number doubles, that cannot resolve the problem of long-term unemployment. As civil servants are paid with taxpayers’ money, to increase their numbers means an increase in taxes and bureaucracy. That is something that we should avoid.
We need to nurture companies to increase our penetration of global markets and we need to make partnership companies become listed enterprises in order to create more jobs. There are three things to do.
First, we need to grant prizes and honor to world-class companies and entrepreneurs, just as we grant medals and lifetime bonuses to athletes who become world champions.
These days, young people flock to become government officials, members of the judiciary or lawyers. Instead, we should encourage them to become world-class entrepreneurs if we want to win any battles in the economic war.
Second, most of Korea’s global companies have been founded and developed by conglomerates.
Peter Drucker advised that Korea should develop its current conglomerates into global ones, instead of dismantling them.
These days, there is no such thing as one correct way to run a company or an organization. We should help a company that is not part of a large conglomerate to become big enough to represent the country.
Third, in preparation for a free trade agreement with Washington, we should develop a more competitive corporate environment that is like the one in the United States. We must lift regulations on all forms of investment. The government, companies and the people should do their best to develop companies that can represent the country on the international stage.

*The writer is a professor emeritus at Seoul National University. Translation by JoongAng Daily staff.

by Song Byung-nak

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