Chairman Heo Chang-soo: "We Are Currently Facing a Real and Financial Complex Crisis, All Available Measures Must Be Mobilized"

Currently More Severe Than the 1997 Foreign Exchange Crisis and 2008 Financial Crisis, Response Capability Also Declining
Calls for Temporary Regulatory Relief, Expansion of One-Shot Law Coverage, and Temporary Suspension of Forced Stock Sales

Huh Chang-soo, Chairman of the Federation of Korean Industries (file photo)

[Asia Economy Reporter Changhwan Lee] Huh Chang-soo, Chairman of the Federation of Korean Industries (FKI), held an emergency press conference on the 25th and stated, "Our economy is currently facing a complex crisis in both the real and financial sectors, and we must mobilize all available means to respond."

At the press conference held at the FKI headquarters in Yeouido, Seoul, in the afternoon, Chairman Huh said, "Our economy is in the midst of a perfect storm, a complex crisis of the real and financial sectors caused by fear of the novel coronavirus infection (COVID-19)," adding, "Just as much as quarantine measures, extraordinary measures are needed in the economic sector."

He explained, "Companies will strive to protect jobs and carry out planned investments without disruption," and "The FKI is preparing joint proposals to overcome the crisis together with the Global Business Coalition (GBC), the U.S. Chamber of Commerce, and others."

Chairman Huh introduced urgent matters that need to be addressed for economic recovery.

First, he urged the introduction of a system to temporarily suspend regulations on companies. Korea's corporate regulations ranked 50th out of 63 major countries worldwide (2019 IMD World Competitiveness Ranking), imposing a heavy burden on companies.

He emphasized that in the current situation where consumption, investment, and exports have all contracted due to the COVID-19 crisis, regulations are hindering the survival of companies. Considering this situation, the FKI argued that regulations should be boldly suspended temporarily.

He proposed suspending regulations for at least two years and permanently abolishing them if no side effects occur after the suspension period ends. The temporary regulation suspension system suspends or defers the enforcement of regulations that hinder economic recovery for a certain period and has been implemented for 280 cases in 2009, 26 cases in 2012, and 303 cases in 2016.

He also mentioned the need to expand the application of the Corporate Vitality Act (One-Shot Act), which promotes voluntary business restructuring by companies, to all industries and companies. The One-Shot Act is a system that grants special measures such as simplified procedures and regulatory suspensions when companies proactively and voluntarily restructure their businesses. Currently, its application is limited to oversupplied industries.

Because the application is limited, severely affected industries such as air transportation and refining cannot utilize the One-Shot Act. Since all industries are facing a crisis due to COVID-19, he added that it is necessary to expand the application to all industries to support companies' proactive and voluntary business restructuring.

He also proposed a temporary suspension of forced stock sales. Forced sales allow financial institutions to sell stocks arbitrarily to maintain collateral value when stock prices fall. In such cases, stocks are sold at bargain prices, which worsens the market crash, tightens financial markets, and increases shareholder losses.

Moreover, if major shareholders' collateral stocks are forcibly sold, corporate management rights become unstable, negatively affecting companies' active investment activities. Therefore, the FKI argued that financial institutions' forced sales should be temporarily suspended until the financial market stabilizes. Regarding the potential losses to financial institutions from this, government guarantees are necessary, he added.

In addition, he demanded a significant expansion of currency swaps and allowing COVID-19 testing at corporate clinics. To respond to the surge in dollar demand caused by COVID-19, he proposed signing currency swap agreements with key currency countries and expanding currency swaps to the level of Japan in the long term.

He also explained that corporate clinics with doctors should be actively utilized as screening clinics for COVID-19 testing to help prevent the spread of the virus.

Kwon Tae-shin, Executive Vice Chairman of the FKI, evaluated, "Our economy was already suffering from underlying conditions, but the COVID-19 crisis has struck, putting us in a much more serious crisis than the 1997 foreign exchange crisis or the 2008 financial crisis." He added, "With weakened economic fundamentals such as potential growth rate and blocked overseas export routes, there is no obvious breakthrough."

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