"Yoon Seok-yeol's New Government Must Actively Pursue Deregulation and Tax Support for Businesses"

FKCCI Announces '2022 Domestic Investment Plans'
Half of Large Corporations Have No or Undecided Investment Plans This Year

[Asia Economy Reporter Jin-ho Kim] An analysis has been raised that the new government led by President-elect Yoon Seok-yeol should actively pursue deregulation and expanded tax support for companies. There was also a suggestion that active support should be provided for the return of overseas-expanding companies to the domestic market. This is because domestic major conglomerates have no or undecided investment plans for this year, accounting for even half of them, amid a significant increase in domestic and international economic uncertainties.

According to the '2022 Domestic Investment Plan' announced by the Federation of Korean Industries (FKI) on the 13th, more than half of the respondent companies (105 companies) have no investment plans or are still undecided for this year. The survey was conducted by the polling agency Monoresearch and targeted the top 500 companies by sales.

The proportion of companies that set investment plans for this year was 49.5%, of which half said they would maintain the investment scale at last year's level. The proportion expecting an increase in investment was 38.5%, while 11.5% of companies expected a decrease.

The FKI analyzed that most of the reasons (74.4%) for not expanding investment scale this year stemmed from a vulnerable external environment rather than internal corporate circumstances. Specifically, companies cited ▲macroeconomic instability ▲difficulties in financing as reasons making it difficult to increase investment scale. They first answered that the situation was unstable due to the spread of COVID-19 and rising raw material prices. They also said that the financing environment worsened due to increased loan interest rates and strengthened financial sector screening. Deterioration of the business environment such as poor sales and concerns about the spread of regulatory systems were also pointed out as causes.

Companies identified the three major risk factors that could affect investment activities this year as ▲raw material-driven inflationary pressure ▲monetary tightening by major countries and the resulting economic contraction ▲emergence of highly fatal variant viruses.

When asked about satisfaction with the domestic investment environment, only one out of ten companies answered 'satisfied' or 'very satisfied.' The remaining nine responded that the domestic investment environment was 'average or below.'

The three major policy tasks for revitalizing domestic investment identified by companies were ▲deregulation ▲expansion of tax support ▲activation of domestic demand such as consumption stimulation.

Choo Kwang-ho, head of the economic division at FKI, emphasized, "Companies are hesitating to invest this year due to domestic and international uncertainties such as soaring raw material prices. The new government needs to focus on deregulation and expanding tax support to attract domestic investment and promote reshoring."

Meanwhile, the willingness of overseas-expanding companies to return to Korea has noticeably increased over the two years of COVID-19. The proportion of companies currently considering reshoring rose sharply from 3.0% in May 2020 to 27.8% in February this year, increasing more than ninefold.

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