Into the abyssOur economy is facing a crisis as companies cut investment and production. The prospects for next year are also gloomy. According to data released by Statistics Korea on Tuesday, Korea’s facilities investment for the month of June dropped by 5.9 percent compared to May. The investment shrank for four consecutive months from March. Industrial output also contracted by 0.7 percent. The Bank of Korea announced that the Business Survey Index (BSI) — a key barometer of economic performance by companies — fell to 75 in July, the lowest in 17 months. If that figure is smaller than 100, it signifies companies’ underperformance compared to the previous month.
That’s not all. Korea’s mainstay industries including carmaking are facing possible disaster with the U.S.-led trade war. Despite semiconductors’ relative competitiveness, the industry must worry about China’s dramatic rise.
But the government shows no signs of urgency. In a report released last month, the Ministry of Strategy and Finance said our economy showed signs of recovery as seen in increased industrial production for two consecutive months. That diagnosis was wrong. Industrial output plunged in June after a short respite in April and May. We are dumbfounded at the ministry’s wishful thinking.
A government-proposed revision of the tax code does not show any sign of being able to rejuvenate the economy by creating jobs. The revision aims to expand the scope of eligibility for the earned income tax credit (EITC) and the child tax credit (CTC), both of which call for a 15 trillion won ($13.4 billion) budget over the next five years. But those remedies are simply a quick fix for the negative side effects of the current administration’s so-called “income-led growth” policy.
The government is begging chaebol to recruit more workers. At the same time, it is putting pressure on them by the adoption of a “stewardship code” by the National Pension Service. The government raised the corporate tax rate from 22 percent to 25 percent starting this year. The U.S. government lowered its corporate tax rate to 20 percent from 35 percent in 2017, which helped achieve employment.
If the government doesn’t change, our economy will collapse. Deregulation and labor flexibility are the answers. Companies, not the government, create jobs.
JoongAng Ilbo, Aug. 1, Page 30