Hankyung Research Institute: "67.3% of Foreign-invested Companies Expect Sales Impact Due to COVID-19"

[Asia Economy Reporter Ki-min Lee] Seven out of ten foreign-invested companies in Korea with more than 100 employees are expected to suffer a decline in sales due to the spread of the novel coronavirus infection (COVID-19).

The Korea Economic Research Institute (KERI) under the Federation of Korean Industries announced on the 4th that, according to the "Survey on the Business Environment of Foreign-Invested Companies" conducted by the public opinion research agency Mono Research, 67.3% of respondents expected a decrease in corporate sales due to the recent spread of COVID-19. This survey was conducted on 150 foreign-invested companies in Korea with more than 100 employees.

KERI explained that among 26 companies with more than 300 employees, 76.9% responded that they expected a decline in sales, indicating that concerns about sales impact are significant even among large corporations.

The survey results showed that 80.7% of foreign-invested companies forecasted that Korea's economic situation this year would be "more difficult" than last year, while only 1.3% responded that it would "improve." KERI pointed out that many companies expected this year to be more challenging following last year's barely achieved economic growth rate of 2.0%.

According to the survey, 74.0% of foreign-invested companies in Korea identified "labor policies such as reduced working hours and minimum wage increases" as the most burdensome corporate policies. This was followed by "tax policies such as tax increases (10.7%)," "service and new industry regulations (4.7%)," and "strengthened corporate governance regulations (4.7%)." Comparing with the survey two years ago, the response rate for labor policies (65.0%) increased by 9.0 percentage points, indicating that the perceived burden of labor policies among foreign-invested companies has recently grown.

KERI also revealed that among recent changes in foreign investment policies, 56.0% of respondent companies pointed to the "abolition of the corporate tax reduction system for foreign-invested companies implemented in 2019" as the policy with the greatest impact. According to the survey, the proportions selecting the government's measures announced in February this year to promote foreign investment?such as "expansion of cash support incentive eligibility (26.7%)," "increase in cash support ratio (10.7%)," and "recognition of reinvested undistributed retained earnings as foreign investment (4.7%)"?were relatively low. This result appears to reflect foreign-invested companies' regret over the disappearance of significant benefits like corporate tax reductions, despite the government's detailed policy considerations being effective.

When asked to comprehensively evaluate changes in the business environment in Korea over the past five years, 22.6% responded that it had "worsened," which was relatively higher than the 13.4% who said it had "improved." Compared to the survey two years ago, the "improved" response decreased by 9.1 percentage points, while the "worsened" response increased by 0.9 percentage points.

Choo Kwang-ho, Director of the Economic Policy Office, pointed out, "It is urgent to expand foreign direct investment attraction to boost economic vitality, but the amount attracted last year was $12.8 billion, a 26.0% decrease from the previous year." He added, "This year, with adverse factors such as COVID-19 overlapping, foreign-invested companies are greatly concerned about the domestic economic downturn and sales decline," emphasizing, "The government must actively ease labor regulations and expand support for foreign-invested companies to restore their economic sentiment."

This content was produced with the assistance of AI translation services.