[Insight & Opinion] Slapping Businesses That Already Want to Cry

Under the Lee Jaemyung administration, laws and policies that were previously stalled or blocked are now being pushed through. The Commercial Act, Yellow Envelope Act, Serious Accidents Punishment Act, Online Platform Fairness Act, and Virtual Asset Regulation Act, as well as issues like corporate tax and inheritance tax, are all moving in directions far from what the business community desires. Ultimately, it remains to be seen who these measures are truly for.

Upon taking office, the president declared that the success of businesses is crucial, met with business leaders, and relied on conglomerates' influence in negotiations with the United States. Yet, when examining the legislative content, it is enough to make companies want to shut down their operations. Recently, there has been pressure to increase youth employment despite a lack of labor flexibility. Although the president's requests were framed as appeals, companies rushed to announce employment plans as soon as his words were spoken. If possible, companies would likely prefer to relocate to countries eager to attract businesses.

Statistics also show an increasing outflow of companies and wealthy individuals. In tariff negotiations with the United States, Hyundai Motor, Samsung Electronics, and Hanwha were mobilized to promise massive investments. In addition to direct investments by each company amounting to tens of trillions of won, a fund-based investment worth 350 billion dollars was pledged as part of the negotiations. Of this, 150 billion dollars will go into a shipbuilding cooperation fund for ship construction, maintenance, and equipment, while the remaining 200 billion dollars will be invested in advanced industries such as semiconductors, nuclear power, secondary batteries, and biotechnology. There is also a promise to purchase 100 billion dollars worth of energy-related products. While these are described as voluntary corporate efforts, it appears that companies have a hidden agenda.

The Trump administration is using tariffs as leverage to demand direct investment in the United States in order to revive the American economy and increase jobs for Americans. Ultimately, our government has succumbed to these demands, leading companies to pledge investments of several hundred billion dollars, almost as if offering tribute.

Due to conflicts with labor unions and an increasingly challenging business environment, more companies are expected to shut down domestic operations and relocate overseas. A prime example is Hyundai Steel. While operating profit has plummeted due to the influx of Chinese steel and a slump in the construction market, the company also faced severe labor-management conflicts, even deciding on a workplace shutdown at one point.

Meanwhile, in line with the expansion of the U.S. market for automobiles and shipbuilding, a plant worth 2 trillion won is being constructed in the United States. Even though efforts and incentives are needed to create an environment where companies that have moved overseas can return (re-shoring), the government is instead leading massive investments in the United States under the pretext of tariff negotiations, which will only accelerate the outflow of capital and the labor market to the U.S. and other countries.

A decline in domestic investment means a slowdown in domestic production activities, fewer jobs, a more difficult life for workers (citizens), and a contraction of the domestic economy. The government is promoting the successful conclusion of tariff negotiations, but it appears that the final agreement has not been signed due to an inability to fully meet the Trump administration's demands. It is impossible to predict how severe the aftereffects of these negotiations will be.

In reality, it is best for companies to operate in environments that offer the most favorable conditions. In the global economic landscape, there is no reason to remain confined to the domestic market. Companies wishing to shut down domestic operations and relocate overseas (to the United States) have essentially been given government cover to shield them from the resistance and criticism that would arise at home. In other words, it is like being given a slap on the cheek when you already wanted to cry.

Kim Hongjin, CEO of Work Innovation Lab