[1 Year of Yoon Administration]⑨ Emphasizing 'Private Sector-Led Growth'... What Is the Current Status of Corporate Investment?

Yoon Seok-yeol Government's Top Economic Policy Priority
'Public-Private Teamplay' Atmosphere Formation
Companies Align Steps with Tens to Hundreds Trillions Won Investment
External Factors Increase Corporate Burden

"A dynamic economy led by the private sector and supported by the government."

The top priority of the Yoon Suk-yeol administration's economic policy is the so-called 'private-led growth' strategy, which aims to promote investment-driven growth through stimulating corporate investment. The core focus is on creating a foundation to invigorate private companies by expanding engagement with businesses and establishing various policies to improve the investment environment.

President Yoon Suk-yeol, who is on a state visit to the United States, is speaking at the Korea-US Cluster Roundtable held at a hotel in Boston on the 28th of last month (local time).
[Photo by Yonhap News]

Now, marking one year since President Yoon Suk-yeol took office, it is clear that opportunities to share the direction of economic policy and discuss the role of companies have significantly increased. Declaring "the center of diplomacy is the economy" and positioning himself as South Korea's number one salesperson, President Yoon was accompanied by business leaders who traveled to the United Arab Emirates (UAE) and Switzerland (Davos Forum) in January, and to Japan in March to conduct private diplomacy. Most recently, Samsung Electronics Chairman Lee Jae-yong, SK Group Chairman Chey Tae-won, Hyundai Motor Group Chairman Chung Eui-sun, and LG Group Chairman Koo Kwang-mo gathered in the United States as part of President Yoon’s economic delegation. They were noted for achieving 'sales diplomacy' results by expanding economic and industrial cooperation between the two countries in areas such as semiconductors, batteries, and nuclear power, alongside security cooperation between South Korea and the U.S. The business leaders leveraged their global networking capabilities to strengthen partnerships and voiced the difficulties faced by Korean companies under the 'Made in America' policy to local political and business figures, striving to resolve these issues.

As the government outlined plans to build a future industrial ecosystem and expressed a strong commitment to support, a 'public-private team play' atmosphere naturally formed, encouraging companies to increase investments. In March, Samsung Electronics announced a massive investment plan of 300 trillion KRW over 20 years to build a 'semiconductor mega cluster.' This was in response to the government’s plan to develop a 7.1 million square meter (2.15 million pyeong) industrial complex in Yongin, Gyeonggi Province, to create the world's largest 'advanced system semiconductor cluster.' Given the high risks involved in semiconductor industry investments, decisive leadership from top executives is essential. In this regard, the reinstatement and return to management of Samsung Electronics Chairman Lee Jae-yong after the launch of the Yoon administration is seen as having laid the groundwork for investment implementation. Samsung’s 300 trillion KRW investment is expected to generate 700 trillion KRW in direct and indirect production inducement and create 1.6 million jobs. The scale of this investment alone will significantly contribute to South Korea’s economic growth. Hyundai Motor Group also held a groundbreaking ceremony last month at Kia Autoland Hwaseong in Hwaseong, Gyeonggi Province, for an electric vehicle-only factory and announced a mid-to-long-term investment strategy to invest 24 trillion KRW in the domestic electric vehicle sector by 2030. This was a difficult decision for Hyundai, which must compete in the global market amid the U.S. government's strong preference for domestic assembly incentives and protectionist policies.

Choi Tae-won, Chairman of the Korea Chamber of Commerce and Industry (third from the left), Chung Eui-sun, Chairman of Hyundai Motor Group (fifth from the left), and Cho Hyun-joon, Chairman of Hyosung Group (second from the right), attended the official welcoming ceremony for President Yoon Suk-yeol held on the 26th of last month (local time) at the South Lawn of the White House in Washington, DC, USA.
[Photo by Yonhap News]

Companies are announcing investment plans ranging from tens to hundreds of trillions of won, aligning their pace with the government. Samsung plans 360 trillion KRW (450 trillion KRW including overseas), SK Group 179 trillion KRW (247 trillion KRW including overseas), LG Group 106 trillion KRW, Hyundai Motor Group 63 trillion KRW, Lotte Group 37 trillion KRW, Hanwha Group 20 trillion KRW (37.7 trillion KRW including overseas), and Doosan Group 5 trillion KRW, all to be completed during the Yoon administration. These future industry investments by companies are expected to contribute to strengthening the industrial ecosystem and serve as a catalyst to attract investments from global corporations.

However, concerns remain that the burden on companies has increased amid growing external uncertainties. The prolonged Ukraine crisis has severely disrupted supply chains and caused raw material prices to soar. Inflation has risen and demand has weakened, leading to an economic downturn. With the global economy slowing and an ongoing ultra-high interest rate environment, expanding investments in strategic industries inevitably increases financial burdens on companies. A business insider said, "Many investment plans were already announced last year, and large-scale projects are underway. The business environment is too unfavorable to propose new projects or investment plans."

Although there is consensus on the need for regulatory reform, questions remain about whether it has been properly implemented. For example, the Yoon administration announced a dramatic increase in tax credit rates for large corporations’ semiconductor investments up to 25%, urging active corporate investment, but this policy was considered far from sufficient to satisfy companies. Economic experts agree that the government should enhance technological competitiveness through bold subsidy policies. Kim Yang-peng, a senior researcher at the Korea Institute for Industrial Economics and Trade, said, "The semiconductor special laws in the U.S., European Union (EU), and Taiwan offer much richer benefits such as tax incentives and subsidies compared to the policies we are pursuing. We need to consider whether our government’s support is sufficiently attractive to strengthen the domestic semiconductor ecosystem."