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Let the corporate sector gladly invest

Published: 20 Jun. 2023, 19:45

Korea retreated in the International Institute for Management Development (IMD) World Competitiveness Ranking for two consecutive years. The ranks of the developed countries like Germany, Britain and France also fell due to the soaring international energy prices. However, oil producers such as Qatar, Saudi Arabia and Bahrain ascended in the ranking by several notches.

We don’t have to be overly sensitive to the ranking, as it is vulnerable to external variables such as oil and gas prices. There is also controversy over the appropriateness of the evaluation based on 163 indices and 94 questions to business leaders. But the IMD basically measures the ability for each government to create a friendly environment for private companies.

The latest assessment showed that Korea’ rank fell two notches from 36th to 38th in government efficiency. In detail, the rank fell from 32nd to 40th in public finance, from 3rd rank to 45th in foreign exchange stability and from 45th to 52nd in political instability. In the category of bureaucracy, Korea plunged to 60th from its position at 57th a year ago.

Foreign exchange instability can be attributed to widened fluctuations of the exchange rate from the second half of last year. But poor performance in other categories clearly shows the heavy price the country had to pay for worsening fiscal condition, consolidated red tape and political instability. The government must prove its ability to maintain fiscal health. It must make Korea an attractive country for foreign capital to come to after fleeing from China for its anti-market regulations.

It is easy to revive the economy with fiscal input. But that approach has massive side effects. Top economic officials know it well. Deputy Prime Minister for Economic Affairs Choo Kyung-ho is infamous for his reluctance to draw up a supplementary budget. Bank of Korea Gov. Rhee Chang-yong had stressed that an attempt to address low growth through short-term fiscal and currency policies is a short cut to the fall of a state.

The only way to revitalize the economy without fiscal stimuli is to create an amicable environment for investors. In a visit to the Federation of Korean Industries on Tuesday, the deputy prime minister for economic affairs urged the private sector to invest aggressively for a better future of the country. Many companies pay close attention to what President Yoon Suk Yeol says. If there remain improper practices in the corporate sector, they must be corrected by transparent systems, not by presidential rebukes. If companies must continue to watch the mouth of the president, the economy cannot rebound.