Semiconductor, Electric, and Automobile Industries to Further Cut Facility Investments Next Year... "Korea's Regulatory Pandora's Box"

Korea Industrial Alliance Forum (KIAF) Surveys Next Year's Investment Plans in 7 Key Sectors
Investment Decreased by 11.6% This Year and Expected to Drop 3.1% Next Year

[Asia Economy Reporter Kim Hyewon] Major companies supporting our economy, such as semiconductor, electronics, and automobile industries, plan to reduce domestic facility investments next year following this year. Due to the direct hit from the novel coronavirus infection (COVID-19), companies have fundamentally shifted to a tight management system, and corporate investments are shrinking due to domestic labor rigidity and the mass production of regulatory legislation. Whether COVID-19 ends early compared to advanced countries that have started vaccination and the easing of regulations that constrain companies are expected to be important variables determining the future recovery of the Korean economy.

On the 22nd, the Korea Industrial Alliance Forum (KIAF), which has 15 industry groups as member companies, surveyed seven representative industries (semiconductor, electronics, automobile, display, shipbuilding, textile, machinery) and found that the total facility investment amount for next year is estimated at 53.2 trillion won, a 3.1% decrease compared to this year. Facility investment in these seven industries decreased by 11.6%, from 62.1 trillion won in 2019 to 54.9 trillion won this year. Compared to last year, the year before the outbreak of COVID-19, the decrease rate for next year reaches 14.3%. ▶Related article page 3

By industry, semiconductor facility investment has been decreasing by 8.3% and 9.9% respectively, from 36.3 trillion won last year to 33.3 trillion won this year, and 30 trillion won next year. Although Samsung Electronics' Gyeonggi Pyeongtaek (133 trillion won) and SK Hynix's Gyeonggi Yongin (120 trillion won) clusters are scheduled to execute investment costs exceeding 100 trillion won each, some investments are delayed due to permit delays and other issues.

An Gihyun, Executive Director of the Korea Semiconductor Industry Association, pointed out, "It takes more than a year to obtain permits for roads, electricity, and water, and even then, processing is delayed due to local community complaints, so the permit period for constructing manufacturing facilities domestically is too long." He added, "Since the investment recovery period is also long, long-term and low-interest loans for over five years or tax benefits for investment funds are necessary."

At the forum, voices of concern were also raised regarding the mass production of regulatory legislation such as the three corporate regulation laws and the Labor Union Act, as well as the movement to enact the Serious Accident Corporate Punishment Act. The business community requested the suspension of legislation such as the Serious Accident Corporate Punishment Act or the search for reasonable alternatives, the promotion of amendments to minimize side effects when necessary for multiple derivative lawsuits and separate appointment of audit committee members, abolition of indirect emission regulations, improvement of the greenhouse gas paid allocation system, legalization of alternative and dispatched labor and allowance of contract worker expansion, and domestic demand activation measures such as abolition or 70% expansion of reduction of automobile individual consumption tax.

Jung Manki, Chairman of KIAF, said, "On-site, there are complaints about delays in construction permits," and urged the government, "Please organize and operate a task force (TF) centered on relevant ministries to check factors that hinder or delay investment and resolve the 'real difficulties'." Chairman Jung also emphasized, "Along with the early end of COVID-19, measures to exempt vaccinated individuals from self-quarantine should be actively considered domestically and internationally so as not to negatively affect industrial activities."

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