60% of Companies Identify AI and Big Data as Future Growth Engines... Propose 14 Key Policy Tasks

Jeong Manki, Chairman of the Korea Automobile Manufacturers Association, is delivering a keynote speech on "Prospects and Challenges of Our Global Competitive Industries After COVID-19" at the 3rd Industrial Development Forum held on the 29th at the COEX Grand Ballroom in Gangnam-gu, Seoul. Photo by Kim Hyunmin kimhyun81@

[Asia Economy Reporter Kim Hyewon] Among 10 major domestic companies, 6 identified artificial intelligence (AI) and big data utilization as future growth engines, but more than 30% hesitated to invest due to a lack of technological capability or difficulties in securing personnel. Additionally, more than half of the companies considered domestic regions for future investments, but over three-quarters cited easing labor cost burdens, government financial support, and relaxation of unreasonable regulations as prerequisites for reshoring.

On the 29th, a survey titled "Future Growth Challenges and Management Conditions by Industry" was conducted targeting member companies of 26 major industry associations, including the Korea Automobile Manufacturers Association, Korea Federation of Textile Industries, and Korea Machine Industry Association. The results showed that the most cited future growth engine was AI and big data utilization with 147 cases (58.8%). Specifically, AI (34 cases), autonomous driving and future mobility (33 cases), big data (25 cases), and smart factories (23 cases) were ranked in order.

The biggest challenges for future investment were "lack of technological capability and difficulty in securing personnel" at 34.5%, followed by "market uncertainty and immaturity" at 27.5%, and "lack of government financial support and other funding difficulties" at 23.2%.

Regarding future growth engine investment locations, 52.8% answered domestic, 12.7% overseas, and 14.1% both domestic and overseas. Among 45 respondents who specified detailed regions, 28 were domestic, with 17 in the Seoul metropolitan area including Gyeonggi Province, and 11 in non-metropolitan areas, showing concentration in the metropolitan area.

As a prerequisite for converting overseas investments into domestic investments, the highest response rate was for "easing labor cost burdens and government financial support" at 40.5%, followed by "relaxation of unreasonable regulations such as labor legislation" (34.8%) and "expansion of government support for corporate revitalization" (21.6%).

Regarding difficulties and suggestions faced by companies, "legal and institutional improvements" related to labor and environment accounted for 61 cases (54.1%), more than half. Next, "expansion of government support" including personnel and finance was 34 cases (32.1%), and "other matters" such as fostering a working atmosphere was 15 cases (13.8%). Notably, among legal and institutional improvements, 70.5% focused on improvements related to labor systems such as flexible working hours.

These associations proposed 14 major tasks that the government and National Assembly should prioritize policy-wise, including ▲improvement of government research and development (R&D) policies ▲adjustment of corporate tax rates ▲measures to reduce working hours ▲prevention of legislations requested by lawmakers ▲improvements to labor-management relations laws related to strikes and negotiations.

First, although South Korea's R&D investment accounts for 4.6% of GDP, ranking first in the world, there are criticisms regarding outdated and complex management systems such as project selection and management methods and budget systems of government-funded research institutes, resulting in insufficient productivity and efficiency. They urged the establishment of a "national R&D system innovation and productivity enhancement plan."

Also, despite the Moon Jae-in administration raising the top corporate tax rate from 22% to 25%, tax revenue fell short of government expectations and weakened companies' investment capacity. They proposed lowering the corporate tax rate by 2 to 5 percentage points and simplifying the brackets from four to two stages. Regarding working hours reduction, they suggested expanding the flexible working system period from 3 months to 1 year and relaxing the introduction requirements from written consent by employee representatives to individual employee consent. They also recommended adding research and development and construction jobs to the list of special working hours industries.

For labor-management relations laws, they proposed extending the validity period of collective agreements from 2 years to 3-4 years, raising the approval rate for strikes, and allowing replacement labor during disputes as key improvements. These associations also advocated introducing an industrial and job impact assessment system for regulations to prevent excessive legislative petitions by lawmakers and strengthening the regulatory adjustment role and functions of the Office for Government Policy Coordination.

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