[Initial Insight] Economic Diplomacy Synergy with Companies

The Poland economic delegation organized by the Federation of Korean Industries to support President Yoon Suk-yeol, who is on an official visit to Poland, consists of 89 domestic companies and institutions. Among the large corporations, 24 company representatives are accompanying the president, including Koo Kwang-mo, Chairman of LG Group; Kim Dong-kwan, Vice Chairman of Hanwha Group; and Koo Ja-eun, Chairman of LS Group. Unlike previous presidential trips, where the heads of the four major domestic conglomerates all attended, this time only LG Chairman Koo is accompanying, with Samsung Electronics Chairman Lee Jae-yong, SK Group Chairman Chey Tae-won, and Hyundai Motor Group Chairman Chung Eui-sun absent, leading to remarks about the delegation being smaller in scale. This happened because the economic delegation was formed focusing on industries that Poland is prioritizing for investment, such as batteries, defense, infrastructure, and energy.

[Image source=Yonhap News]

In fact, it is not necessary for the heads of the four major conglomerates to all appear at every overseas trip of President Yoon. While it might create a good impression on camera, there is no need for group heads to voluntarily play a background role just because a VIP is traveling. In the past, it was the fate of Korean businesspeople to be present whenever the government set the stage. To maintain appearances, they also had to bring substantial gifts such as additional investment promises. Through these activities, companies gained opportunities to expand their business, and the government could neatly package these as successes in sales diplomacy.

However, times have changed. It is no longer an era where companies are applauded for struggling and squeezing out resources just to create diplomatic achievements for the government. The presence of VIPs only has meaning when companies can generate profits and conduct business that contributes to national interests through economic revitalization.

This year, major domestic company heads have accompanied President Yoon around the world. Starting with the United Arab Emirates (UAE) in January, they visited Switzerland, Japan, and the United States consecutively, and this month they went to Paris, France, to support the bid for the 2030 Busan World Expo (Busan Expo). They also supported President Yoon during his visit to Vietnam, which has been elevated to a 'Comprehensive Strategic Partnership' with Korea, as part of the largest economic delegation of this administration, consisting of 205 members.

This time, it is Poland. Last year, trade between Korea and Poland reached a record high of approximately $9 billion, and Korea has emerged as one of the key investors in Poland. About 350 Korean companies have entered the Polish market, and Korean companies’ expansion in Poland is growing in sectors such as electric vehicle batteries, defense, nuclear power, and infrastructure. This is a market where economic diplomacy synergy can be expected.

In the uncertain economic environment following the end of COVID-19, with domestic demand stagnation and the three highs?high interest rates, high inflation, and high exchange rates?companies are struggling with shrinking profitability. Last month, the Manufacturing Business Survey Index (BSI) remained at 73, well below the baseline of 100, and many large conglomerate affiliates have either launched large-scale capital increases due to increased financial burdens or experienced credit rating downgrades. Eight out of ten major domestic companies do not plan to increase their investment scale in the second half of the year compared to the first half. In fact, 25% of companies said they would reduce their investment scale compared to the first half. With emergency management even being discussed in executive meetings, company heads have many matters to attend to.

In this tight period, when it is difficult even to tour business sites and formulate strategies, it is hoped that companies will seek genuine profit-making opportunities rather than being pushed into government sales diplomacy. The fact that the focus of President Yoon’s visit to Poland is on 'economy' is something to reflect on. The business community is expecting economic diplomacy synergy from President Yoon’s vigorous 'sales diplomacy' campaign.

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