[Editorial] Time for Businesses to Increase Investment

The Lee Myung-bak administration promised to make a business-friendly environment through dramatic deregulation. Its promise is increasingly becoming reality and taking shape as seen in the reports that each ministry has recently presented. Once the ceiling on total equity investment is removed, 25 conglomerates will be able to increase shareholding and, once regulations on cross-shareholding are eased, 21 companies will be able to benefit from the measure. The process to build a new plant or to launch a new company will be streamlined and corporate taxes will be lowered in several phases. Regulations since the 1980s that banned industrial firms from securing a controlling stake in banks will also be eased, allowing industrial capital to invest in financial firms.

Deregulatory measures that have been announced to date should alone make a big difference. A financial official said that the government has clearly sent a signal that it seeks business-friendly policies. A recent survey by the Federation of Korean Industries (FKI) shows that some 80 percent of companies surveyed have high expectations from the deregulations. Some 40 percent said they gave up or postponed investment in the past five years due to regulations. If those companies decide to make greater investment due to deregulation, it should have a significant impact on the economy.

POSCO’s Honorary Chairman Park Tae-joon pointed out that the Korean economy lost its growth drivers because domestic companies were reluctant to make investments under the past two administrations, because of their excessive emphasis on wealth distribution. However, the political and social atmosphere has dramatically changed since the new administration took office. A case in point: President Lee said that he is willing to personally answer phone calls at anytime from businessmen if they want to ask for more measures to encourage investment expansion. Incheon International Airport recently opened a VIP room exclusively for businessmen. Government ministries advertise themselves as corporate support teams. And an increasing number of workplaces have declared stable labor and management relationships.

Businesses now have fewer excuses or justifiable reasons to shun investment. Businesses insisted that they would increase employment and investment if the government eases regulations that have been a drag on their management. Now is time to put plans into action. According to a recent survey by the FKI, the top 30 conglomerates plan to increase investment by 23 percent this year, compared to last year. The survey shows promising results in renewed investment. Foreign investment in Korea soared 69 percent year-on-year to 2.7 billion dollars in the first quarter of the year, indicating a possible recovery from sluggish investment over the past two years.

In order to ignite efforts to expand capital investment, the government must keep its promise to liberalize the market. It is also urgent that the government create many jobs and new industries in the underdeveloped service sector to match the size of Korea’s economy.