[Interview] Jeong Cheol, Head of Hankyung Yeon, "Value-up Regulation May Delay Investment... Growth Rate Could Decline This Year"

"Minority Shareholders and Activist Funds Legal Issues May Cause Directors to Hesitate on Long-Term Investment Decisions"
Semiconductor Subsidy Policy Must Be "Strictly Implemented"

"Introducing a corporate value-up (corporate value enhancement) regulatory bill that includes expanding directors' fiduciary duties to shareholders will inevitably dampen investment momentum in advanced industry companies such as semiconductors. If small shareholders and activist funds raise issues claiming that directors have not fulfilled their responsibilities, directors will hesitate to make large-scale, long-term investment decisions for the company's future due to fear of legal penalties."

Jung Cheol, Chief Research Officer of the Korea Economic Association and President of Hankyung Research Institute, is being interviewed by Asia Economy in his office at the Korea Economic Association building in Yeouido, Seoul. Photo by Heo Younghan younghan@

Jung Cheol, Chief Research Officer of the Korea Economic Association and President of the Korea Economic Research Institute, recently stated in an interview with Asia Economy, "Since the Korean economy is at a turning point with digital transformation and green transition, bold investment is most important, so regulations that discourage corporate investment decisions must be improved."

President Jung expressed concern that semiconductor companies might miss investment timing due to value-up related regulations. He opposed the introduction of the Commercial Act amendment that expands directors' fiduciary duties to shareholders. He predicted that if the law is enacted, more board members will abstain from decisions such as long-term investments that are difficult to produce immediate results. Furthermore, he worried that the number of people willing to serve as outside directors might decrease.

He pointed out, "If legal liability is imposed for not properly considering the interests of all shareholders, including small shareholders and activist funds, cases where directors accept such risks and perform their duties will be rare. As more directors abstain or delay important decisions, companies risk missing optimal investment timing."

He emphasized that semiconductor subsidy support policies must be implemented. He also said that a comprehensive overhaul of National Assembly laws, government enforcement decrees, and enforcement rules is necessary. While fiscal soundness is important, the reality of the ongoing 'semiconductor war,' where falling behind once makes it difficult to catch up, must be taken into account.

President Jung said, "Semiconductor companies have never asked the government for subsidies even during downturns, including the chicken game period in the late 2000s, but now they are appealing for support. Since Korea has fewer resources and higher overseas dependence than the U.S., China, and Japan, subsidy and tax reduction (tax rate cuts) policies need to be implemented more strategically."

Jung Cheol, Chief Research Officer of the Korea Economic Research Institute and President of Hankyung Research Institute, posed in front of his office at the Hankyung Association building in Yeouido, Seoul. Photo by Heo Younghan younghan@

The Korea Economic Research Institute raised its economic growth forecast for this year from 2.0% to 2.4% in June. This was due to the clear recovery of the U.S. economy in the first half of the year, which improved the global economy and boosted Korean exports.

President Jung also hinted at the possibility of adjusting the growth forecast. The Korea Economic Research Institute will announce growth forecasts for this year and next in December, but it has identified variables due to increased uncertainty in semiconductor companies, such as the recent decline in memory semiconductor product prices. According to market research firm DRAMeXchange, the average fixed transaction price of general-purpose PC DRAM products in September was $1.70, down 17.07% from the previous month.

President Jung said, "Given the many factors increasing uncertainty, such as the U.S. presidential election and Middle East tensions, we will closely consider the possibility of a global economic slowdown and semiconductor market conditions over the next two months. Reflecting this, there is a possibility of lowering the forecast."