Korea Ranks 7th in Global Leading Companies Competitiveness... "Need to Foster Leading Companies to Solve Youth Employment"

6 Korean Global Leading Companies Including Samsung Electronics and SK Hynix
Creating 124,000 Direct and Indirect Jobs if Expanded to UK Level

[Asia Economy Reporter Suyeon Woo] There is a call to strengthen the competitiveness of South Korea's global leading companies, which currently rank 7th in the world, in order to resolve the youth employment crisis. An analysis suggests that expanding South Korea's global leading company competitiveness to the level of the United Kingdom alone would create more than 120,000 direct and indirect jobs.

On the 16th, the Korea Economic Research Institute (KERI) analyzed the number of leading companies among the world's top 500 global companies and found that South Korea ranked 7th with a total of 6 companies. China ranked first with 89 companies, followed by the United States with 79. Japan (17) and France (17) tied for third place, while Germany (15) and the United Kingdom (10) ranked fifth and sixth, respectively.

The criteria for selecting global leading companies are those registered with S&P Capital IQ that rank among the top 500 global companies in both sales and operating profit. As of last year, this means companies with sales exceeding 25.3 trillion KRW and operating profits exceeding 2.3 trillion KRW. South Korean companies included Samsung Electronics, SK Hynix, Hyundai Motor, LG Electronics, POSCO, and Korea Electric Power Corporation (KEPCO), totaling six companies.

KERI analyzed that if the number of South Korea's global leading companies expands to the level of the United Kingdom (10 companies), the number of newly created direct and indirect jobs would reach 124,000. This economic effect was calculated based on the Bank of Korea's input-output tables, assuming the inclusion of four domestic companies not yet classified as global leading companies (Samsung Display, Kia, LG Chem, Hyundai Mobis).

Industry Share of Leading Global Companies by Major Countries / Data Provided by Korea Economic Research Institute

Meanwhile, the concentration of South Korea's global leading companies in manufacturing was also pointed out as an obstacle to strengthening competitiveness. Among the six South Korean global leading companies, five are in manufacturing, and the remaining one is the public enterprise Korea Electric Power Corporation. In contrast, when analyzing leading companies worldwide, mining and manufacturing account for 55.9%, and services account for 34.2%, showing a relatively balanced proportion between manufacturing and services.

The growth potential of South Korea's global leading companies was also found to be insufficient compared to major countries. Over the recent three years (2018?2020), South Korea's average annual sales growth rate was -0.4%, the only decline among the Group of Seven (G7) countries. In contrast, the United States and China both recorded 8.5%, Japan 4.7%, and the United Kingdom 2.2%, with steady annual sales growth over the same period. Overall, global leading companies showed an average annual sales increase of 5.8%.

During the same period, the operating profit margins of global leading companies in major countries were as follows: United Kingdom 16.8%, China 12.9%, France 11.6%, South Korea 11.1%, Germany 9.1%, with the global average at 11.6%.

KERI argued that to enhance the competitiveness of South Korea's global leading companies, it is necessary to ▲ eliminate discriminatory regulations against large corporations ▲ improve tax competitiveness ▲ and enhance the competitiveness of the service sector. First, South Korea's regulatory environment ranked 52nd out of 131 countries last year, which is very poor, and discriminatory regulations against large corporations are particularly strong. Therefore, improving the regulatory environment is urgent to foster global leading companies.

Differential government support based on company size was also identified as an area for improvement. As of last year, South Korea's government support rate for large corporations' research and development (R&D) was 2%, significantly lower than major countries such as France (41%), China (23%), Germany (19%), and Japan (17%). Additionally, tax incentives such as R&D tax credits and facility investment tax credits are applied differently depending on company size.

Finally, KERI emphasized the urgent need to ease excessive entry regulations in the service sector and to prepare support measures comparable to those in manufacturing. South Korea's service sector faces unreasonable regulations that block market entry, such as restrictions on large supermarket openings and designation of small business and livelihood-suitable industries. Compared to manufacturing, support systems are weak, making it difficult to expect the emergence of global leading companies in the service sector.

Choo Kwang-ho, Director of Economic Policy at KERI, said, "To solve the youth unemployment problem, it is necessary to improve discriminatory regulations based on company size and related systems such as taxation, creating an environment where more large corporations leading the global market can emerge."

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