A corporate roleThe Korean business community faces problems from all sides. Big employers from next year will have to pay more corporate taxes and small ones will be burdened with higher labor costs. There has been trouble in China due to retaliatory action against Seoul’s deployment of a U.S. antimissile system and labor costs are on the rise again after Kia Motors was ordered to pay its employees overdue wages by recognizing regular bonuses as base compensation. Moreover, the corporate sector is under pressure from the new liberal government to convert its irregular workforce into permanent employees and share profits with partner subcontractors in sync with the government’s economic policy on boosting jobs and income.
Can Korea Inc. withstand this onslaught? On paper it has been faring well. Exports have grown for ten months in a row. Industrial activity and private consumption has turned positive. The gross domestic product grew 0.6 percent on quarter and 2.7 percent on year. Consumer prices have jumped due to lengthy drought and floods, but could stabilize once food prices normalize.
But data can be misleading. Korea Chamber of Commerce and Industry Chairman Park Yong-mann in a meeting with the trade, industry, and energy ministry questioned the data. According to a KCCI study on 494 companies listed on the main Kospi, their combined operating profit gained 17 percent in the second quarter against a year ago. But operating profits of companies unrelated to the top 10 conglomerates plunged 24 percent on year. Performance by top 10 group companies also was mixed. The only strong players were Samsung, SK, and LG riding on the global boom in semiconductors, displays, and petrochemicals. The others have all been struggling. Hyundai and Lotte were hit hard by business setbacks in China.
The semiconductor boon also cannot go on forever. Chinese latecomers are advancing fast, backed by rich capital and strong government aid.
North Korea’s nuclear and missile threat has become imminent. Bank of Korea Governor Lee Ju-yeol warned that economic uncertainties have escalated due to geopolitical risks from North Korean nuclear and missile threats.
The government must not neglect the imminent economic dangers. It must moderate its policy on increasing income with consideration of the affordability and impact on employers. It is true that income increases could stimulate consumer and corporate spending to help the economic expansion. But if companies are shaken, they won’t hire or invest. Without a corporate role, there cannot be increases in income and jobs, or a better economy.
JoongAng Ilbo, Sept. 2, Page 26