Business leaders note challenges and hopes for 2023

Business associations highlighted a multitude of economic challenges facing Korea, setting deregulation and reforms in the labor market as key agenda items for next year.

Financial authorities outlined their policy directions, with the Finance Ministry scheduled to announce measures for stabilizing incomes of individuals soon.

Leaders of the four largest business lobby groups, many doubling as heads of large companies, delivered New Year's messages.

Korea Chamber of Commerce and Industry (KCCI) chairman and SK Inc. chairman Chey Tae-won noted imminent headwinds such as prolonged U.S.–China tensions in his message Thursday while praising the progress the country made in an economic downturn.

“Korea built a wide range of meaningful achievements last year, including being the world’s sixth-largest exporter, the successful launch of Nuri and the surging popularity of K-content, despite tough economic conditions,” Chey said in a statement.

“This year’s conditions remain troubling, with U.S.-China tensions and Russia-Ukraine war showing no signs of end,” he said.

To reduce the financial distress on corporations, Chey requested that the government and the National Assembly work towards shaping a regulatory framework that supports business operations.

Sohn Kyung-shik, chairman of the Korea Enterprises Federation and CJ Group chairman, asked the government for leniency on policies restricting business activities, including lower taxes and increased incentives for investment and job creation.

“Korea needs to be equipped with competitive taxation system in line with the push in other countries to reduce taxes on corporations,” Sohn said in a release Thursday.

He also called for a reform in the labor market to facilitate flexible employment.

“The outdated labor law and unfair practices have made the labor market rigid and triggered an imbalance in the bargaining power between employers and employees,” he said.

Huh Chang-soo, Federation of Korean Industries chairman and GS Engineering and Construction chairman, noted the rising importance of coordination between the government, corporations and the public.

Christopher Koo, Korea International Trade Association chairman and LS Group chairman, stated that the association’s focus next year will be helping exporting companies with sorting out troubles and uncertainties.

Finance Minister Choo Kyung-ho said that the ministry will prioritize the recovery of the economy and improving people’s livelihoods hit by rising interest rate and inflation.

The ministry will announce a set of measures in the first week of January, Choo said in the address, without providing details.

The Financial Services Commission and Bank of Korea outlined policy directions in their New Year’s messages.

Financial Services Commission (FSC) Chairman Kim Joo-hyun said the FSC will prioritize the stability of the financial market and the support of vulnerable people as the key policies in the new year.

“The most important policy for the FSC in the new year is to help vulnerable people survive the difficult times of high inflation and interest rates, and stabilize the financial market in response to unstable macroeconomic factors,” Kim said in the new year’s address released on Friday.

Kim introduced five economic policies: stabilization of the financial market; aligning the infrastructure of finance; fostering growth; reducing cost of high interest rates, inflation and the weak won; and strengthening market order.

“The FSC will actively execute market stabilization measures, involving corporate bonds and commercial paper and help financial institutions secure liquidity while additionally easing regulations,” Kim said in the written speech.

The FSC eased the loan-deposit ratio to 105 percent for banks from the previous 100 percent in October. For the soft landing of the property market, the FSC plans to ease the loan-to-value ratio on real estate purchases for non-investors.

Kim also vowed to ease regulations to foster growth of fintech firms and raise financial support for venture companies.

Kim added that he expects inflation and interest rate to remain high while growth falls in 2023.

Bank of Korea Gov.Rhee Chang-yong agreed in his new year’s speech that inflation is projected to stay above the target range, and added the bank will focus on price stabilization in the operation of monetary policy this year.

“This year won’t be an easy year as uncertainties surrounding the economy persist,” the central banker said in the address on Monday. “Uncertainty in the global financial market could expand largely depending on the monetary policy direction of the central banks of key countries, including the U.S. Federal Reserve.”

He noted the importance of “delicate combination of policy” as the impacts of the rise in interest rates is projected to affect the economy in full swing in 2023.

Rhee also delivered a message of hope.

He said the current difficulties could be a turning point for Korea to reduce reliance on China by expanding the supply chain networks.

China’s slowing growth was pointed as one of the factors for Korea’s weak trade balance in 2022.

Rhee also said high interest rates will function as a starting point to lower high household debt and improve the debt structure.

“It’s true situations are difficult both inside and outside, but I believe better outcomes can be created depending on how we act,” Rhee added.

BY PARK EUN-JEE, JIN MIN-JI [park.eunjee@joongang.co.kr]