"9 out of 10 Outsourcing Companies Have No Investment Plans This Year"

6 out of 10 Places Still Undecided on Hiring Plans

[Asia Economy Reporter Kim Jin-ho] Nine out of ten foreign-invested companies (FICs) operating in Korea have no investment plans for this year, according to a recent survey. Additionally, six out of ten companies have either no hiring plans or have yet to decide.

The Federation of Korean Industries (FKI) announced on the 23rd that these response rates were obtained from their survey on "Hiring and Investment Trends of Foreign Companies in Korea." The survey targeted 1,104 foreign-invested companies with 100 or more employees.

The results showed that 91.1% of FICs responded that they either "have no investment plans this year (26.7%)" or "have not yet made plans (64.4%)." Only 8.9% had set investment plans for this year. Among them, 77.8% intended to maintain investment at last year's level, while only 22.2% planned to increase investment.

The main reason for sluggish investment was the economic downturn caused by COVID-19, cited by 44.1%. Other reasons included completion of investment projects (26.5%) and deterioration of the business environment (5.9%).

Furthermore, 61.4% of foreign-invested companies have not yet prepared hiring plans. The proportion of companies that set hiring plans this year was 38.6%, with more than half of them planning to maintain hiring at last year's level. Regarding new hires this year, FICs are expected to recruit 31.7% in science and engineering fields and 27.6% female employees.

The main reason for sluggish hiring was also the economic downturn caused by COVID-19, accounting for 25%. Other reasons included "difficulty in expanding investment by foreign headquarters due to high corporate tax rates and lack of investment incentives" at 8.3%, labor cost burdens such as minimum wage increases and reduced working hours at 2.8%, and difficulties in restructuring existing workforce due to high employment rigidity at 2.8%.

Regarding the newly launched government, 34% of respondents indicated that expanding incentives such as tax benefits and subsidies for companies increasing employment is necessary to create jobs. Other responses included restraint on minimum wage increases and expanded use of flexible working hours (27.1%), and easing labor rigidity (21.8%).

Notably, responses related to improving the labor environment (restraint on minimum wage increases, expanded use of flexible working hours, easing labor rigidity, etc.) accounted for 48.9%, indicating that foreign-invested companies strongly feel the need for improvements in Korea's labor environment.

Kim Bong-man, head of the FKI International Headquarters, said, "Due to the prolonged COVID-19 pandemic, foreign-invested companies operating in Korea are facing difficulties in establishing hiring and investment plans amid the recession. To expand employment and investment, the new government should focus its policies on creating a business-friendly labor environment, especially by restraining minimum wage increases, expanding flexible working hours, and easing labor rigidity."

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