Revive the venturesome spiritPresident Park Geun-hye met with chairmen of the country’s 10 largest conglomerates Wednesday and asked for their cooperation in increasing “aggressive and proactive investment” in the economy. She said that corporate will is very important in boosting hiring and jobs. She promised that the campaign to fight inequality and democratize the economy won’t discriminate against or choke large companies. She also eased growing concerns about a bill aimed at revising the commerce law, which some fear could undermine the liberty and sovereignty of corporate governance in large companies.
Foreign experts on the Korean economy point to the over-reliance on and concentration of large companies as the key limiting factor in our economy. Revenues of firms affiliated with the 10 largest conglomerates make up 54.2 percent of all the listed companies in Korea. Their contributions to the country’s net profits reach almost 80 percent. On the plus side, they are the primary strength of the Korean economy. Large companies are also the biggest resource for funding social benefits. The largest 1 percent of companies paid 35 trillion won ($31.6 billion) in taxes last year, accounting for 86 percent of all corporate tax revenues. It is an undeniable fact that the Korean economy cannot do without large companies.
The country has been stuck in the middle-income trap of $20,000 GDP per capita for years. The economy is in dire need of traction so it can grow again. For now, large companies are the best candidates to lead the way. The top 10 business groups have piled up cash reserves of 183 trillion won. But in the first half of the year, they executed just 41.5 percent of their pledged capital investments for the year. They have put off investing because of an excess of corporate regulations, external uncertainties stemming from the tapering off of quantitative easing by the U.S. Fed, the prolonged fiscal crisis in Europe, the slowdown in China and aggressive fiscal and monetary policy in Japan.
The country’s top 10 business groups were once known to be fearless in investment, particularly during hard times. Ambitious entrepreneurship helped to make them world-class companies. But their past indomitable spirit is waning. Only large companies can afford to invest and hire on a large scale. They must revive their venturesome spirit, otherwise, they risk provoking an assault on their pile of cash reserves.
If large companies do not invest, the economy suffers and so do their profits. There was a saying after the global crisis that there are no frontiers in business, but a company needs its home country. Korean society and chaebol groups are destined to work in partnership. We encourage large companies to make us proud again.