[Urgent Survey of Top 1000 Companies] "Regulatory Easing Needed to Enhance Management Flexibility"

Akyung-Korea Chamber of Commerce and Industry, Survey on Business Environment of Top 1,000 Companies by Sales
Companies Call for Improvement in Interest Rates, Prices, and Exchange Rates to Boost Korean Economy
Government Has Limited Solutions... Needs to Support Businesses
"Regulatory Relaxation Needed for Flexible Response to Environmental Changes"

[Asia Economy Reporter Yoo Hyun-seok] The unprecedented 'three highs (interest rates, exchange rates, and inflation)' phenomenon is a factor that worsens corporate investment and employment while shrinking consumption. Companies expect that the easing of the impact of the three highs amid rising uncertainties in the global financial market will improve not only the Korean economy but also the corporate management environment. However, since the three highs phenomenon is caused by global influences rather than domestic economic conditions, experts advise that the government should ease regulations and help companies respond flexibly to environmental changes.

On the 24th, Asia Economy, in collaboration with the Federation of Korean Industries, conducted a survey on the economic and management environment targeting the top 100 domestic companies by sales. The result showed that the most important variable for improving the Korean economy and corporate management environment was 'controlling the pace of interest rate hikes,' at 24.1%. This was followed by price stability (23.5%), exchange rate stability (17.6%), global supply chain stabilization, and the Russia-Ukraine war (each 10%).

By industry, 'general machinery and shipbuilding,' 'automobiles and parts,' and 'others' responded with the highest proportions for 'controlling the pace of interest rate hikes' at 25.0%, 31.6%, and 40.0%, respectively. In the case of general machinery or shipbuilding, it is interpreted that there are concerns about a decrease in orders if interest rates rise. When ordering machinery or ships, higher interest rates can increase the financing burden due to higher procurement costs.

Among the automobile and parts industries, finished car manufacturers are concerned about a decrease in car sales. This is because as interest rates rise, more consumers may give up purchasing vehicles. Additionally, for parts suppliers, as more companies face critical situations, there is a risk of a wave of bankruptcies. According to the Korea Automotive Technology Institute, an analysis of parts suppliers' management performance last year showed that 36.6% of companies had an interest coverage ratio below 1.

For petrochemical products and electrical and electronics (excluding semiconductors), which are closely related to consumers, price stability was identified as the most necessary factor. When prices rise, consumers may reduce consumption of petroleum products such as gasoline, as well as TVs and home appliances. Along with this, the accommodation and food service industries showed price and exchange rate stability at 33.3% each. The food service industry, although a domestic sector, was unexpectedly greatly affected by exchange rates due to its reliance on imported agricultural and marine products.

While the top priority factors for improving the management environment differ by industry, there is concern about the recently emerging high interest rates, high inflation, and high exchange rates. However, regarding exchange rate issues, since the government can intervene to some extent, appropriate adjustments are advised. Professor Shin Se-don of the Department of Economics at Sookmyung Women's University explained, "Interest rates and prices are situations that cannot be controlled. However, it is necessary to raise interest rates at an appropriate pace to stabilize exchange rates and prevent financial instability."

In particular, voices calling for the abolition of government regulations are growing in this situation. Since the ongoing three highs phenomenon is closely related to the global economic situation and cannot be resolved by the government alone, it is argued that the management environment should be improved to enable flexible responses to the global market. Professor Hwang Yong-sik of the Department of Business Administration at Sejong University said, "There is a need to create a foundation or environment where companies can freely conduct business activities," adding, "Since the government's role is currently limited, it should be able to act as a supporter for companies."