Park’s chaebol policy seems to boost businessWith the LG Group on Sunday announcing its record high investment plan of 20 trillion won ($18 billion) for this year, expectations are high that President-elect Park Geun-hye’s so-called “carrot and stick” policy approach on large companies is taking effect.
Park’s policy focuses on conglomerates holding social responsibility while at the same time receiving government support to enhance their global competitiveness.
When Park met with heads of Korean conglomerates on Dec. 26, a week after she was elected as the country’s first female President, she emphasized in her opening speech that “the management target of large companies should be focused on pursuing mutual prosperity with the community.”
Park also asked conglomerates to refrain from massive layoffs and excessive real estate purchases.
Park, however, did not only whip the conglomerates with a stick but also offered carrots as a follow up to her support measures.
In a closed-door meeting on the same day, she told large business owners that “it is the obligation of the government to support companies should they have problems while promoting business activities.”
“The government should support even those large companies that are having temporary difficulties and help them regain their competitiveness,” Park told the conglomerates.
Her comments were made in response to what STX Group Chairman Kang Duk-soo had asked the incoming president at their first meeting.
Amid concerns that the upcoming administration will impose strong regulations on large companies while being lenient on small companies, Kang asked Park to “establish a financial support system that provides help [to large companies that are globally competitive in certain sectors] that are suffering temporarily from business difficulties due to capital stringency.”
Park accepted the request by promising her support for large companies in hardship.
“The government will actively support large companies trying to find new growth engines or entering overseas markets,” Park said, while urging them to invest aggressively.
“I will make sure that investment and management [of large companies] are not stagnated due to instability in government policies,” Park said.
Ahead of Park’s visit to the Federation of Korean Industries (FKI), her advisors are known to have dissuaded her from meeting the conglomerate heads, telling her that “if Park visits the FKI immediately after she’s been elected, her image of looking after the livelihoods of ordinary people could be tainted.”
Chung Mong-joon, a senior member of the Saenuri Party and also the owner of Hyundai Heavy Industries, has also reportedly expressed concern over her move.
Park, however, said that “looking after large companies is also part of looking after the economy for ordinary people.”
“Reviving the livelihoods of ordinary households cannot be done with only a government budget,” an advisor to Park told the JoongAng Ilbo.
“It depends also on how much money companies are willing to spend.”
So far, her advisors say things are moving in the right direction.
On Sunday, LG Group announced its record-high investment plan of 20 trillion won, including 14 trillion won in facility investment and 6 trillion won in research and development.
The amount is a 19.1 percent increase from last year’s 16.8 trillion won. The conglomerate also plans to hire more than last year’s recruitment of 15,000 employees.
Following LG, other conglomerates including Samsung, Hyundai and SK have expressed they will come out with aggressive investment plans.
According to the JoongAng Ilbo’s report, the country’s four largest conglomerates are expected to invest more than 100 trillion won this year.
Samsung’s investment is expected to exceed 50 trillion won for the first time while Hyundai Motor is expected to reach 14 trillion won and SK between 17 and 18 trillion won.
By Kim Jung-ha, Lee Eun-joo [firstname.lastname@example.org]