7 out of 10 Companies "Unable to Finalize Next Year's Business Plans"

Greatest Uncertainty in Steel and Auto Parts Sectors, Semiconductor and Display Relatively Stable
Top Reason for Difficulty in Business Planning: COVID-19 Resurgence Uncertainty (42.9%)

[Asia Economy Reporter Kim Hyewon] A survey revealed that 7 out of 10 domestic companies have not yet finalized their management plans for next year due to internal and external uncertainties.

According to the '2021 Corporate Management Environment Outlook' emergency survey conducted by the Federation of Korean Industries (FKI) through Mono Research targeting the top 1,000 companies by sales, 71.5% of the total respondent companies (151 companies) stated that they had either 'only drafted a preliminary plan (50.3%)' or 'had not even drafted a preliminary plan (21.2%)' for next year's management plan.

By industry, companies in the automobile parts (25 companies) and steel (9 companies) sectors particularly found it difficult to finalize their management plans. No steel companies had finalized their plans, and 76% of automobile parts companies responded that they had not finalized theirs.

Other industries such as construction (8 companies) and general machinery (8 companies) also showed a high rate of unfinalized management plans at 75%. In contrast, the display (3 companies) and semiconductor (10 companies) sectors showed relatively higher rates of finalized plans at 66.7% and 40%, respectively.

The biggest difficulty companies faced when establishing next year's management plans was uncertainty caused by the resurgence of COVID-19 at 42.9%. This was followed by financial risks such as exchange rate and interest rate fluctuations (19.3%), unfair labor policies including employment and minimum wage issues (14.5%), trade uncertainties due to ongoing US-China conflicts (9.8%), and political conflicts and corporate regulatory burdens (8.1%). Although companies have been responding to the deteriorating business environment caused by COVID-19 since early this year with tight management and self-help measures, the prolonged situation and increasing uncertainty have made it difficult to establish management plans.

The most common recent management difficulty was sluggish domestic demand (29.8%). This was followed by export difficulties (24.2%), cost burdens (22.8%), production disruptions (8.7%), debt burdens (7.3%), and lack of funds (6.6%). Despite the government's active fiscal policies such as various subsidies to overcome the economic downturn, the perceived level of domestic demand recovery among companies remains low.

Regarding the overall economic conditions in Korea next year, 46.4% of respondents believed it would be similar to this year, followed by 'slight deterioration (25.8%)' and 'slight improvement (23.2%)' at similar rates.

The majority of respondent companies (29.8%) expected performance recovery to occur 'after 2022.' Including those expecting improvement in the third quarter (27.8%) and fourth quarter (17.2%) of 2021, a total of 74.8% anticipated performance improvement in the second half of next year or later.

Regarding corporate support policies that the government should prioritize to overcome the recent recession, 'tax reductions and tax incentives for investment activities (30.2%)' ranked highest. This was followed by emergency operating funds and loan support (16.3%), deregulation of corporate regulations (15.6%), management of external volatility such as exchange rates (11.5%), support for diversification of overseas markets and clients (9.5%), responses to logistics and transportation difficulties (8.8%), and support for corporate business restructuring (7.8%).

Yoo Hwan-ik, Director of Corporate Policy at FKI, stated, "Due to internal and external uncertainties such as the resurgence of COVID-19, it is difficult to forecast the management environment, and a slowdown in the global economic recovery is inevitable. We must actively identify the difficulties faced by companies and provide policy support to ensure that their growth engines are not weakened."