Korea must turn US investment into growth potential, practice business-friendly policies
President Lee Jae Myung on Sunday met with leaders of key conglomerates — Samsung Electronics, SK, Hyundai Motor, LG, HD Hyundai, Celtrion and Hanwha — and asked them to expand their domestic investment and employment.
The meeting was held to discuss follow-up measures after the release of a joint fact sheet on bilateral trade and security agreements with the United States.
Lee asked them to respond actively to the anticipated industrial hollowing out due to their massive investment in the US under the bilateral memorandum of understanding signed after the Korea-US negotiations.
The group leaders pledged about 830 trillion won ($569 billion) in investment in Korea.
The joint fact sheet was announced, but the two countries have a long way to go to finalize details. Cooperation between the government and businesses will be important in further consultations with Washington and the execution of their pledged US investment.
In order to prevent investment from going down the drain, the government should examine the viability of Korea's US projects through close communications with businesses. It should try to ensure that the projects will engage as many Korean companies as possible.
The $350 billion in investment that Seoul pledged is enormous, but it could be a golden opportunity for Korean companies to expand their market shares in the US and beyond. The points of the deal essential for successful investments should not be overlooked.
Investments will be made in projects agreed upon by both sides through a joint investment committee chaired by the US Commerce Secretary. Seoul should direct all its energy to reflecting its position in the investments.
It is important for Korea to draft follow-up steps to ensure that its companies take the initiative in such fields as key equipment and operation systems of their production facilities, even if they are built in the US.
Safeguard clauses in the memorandum should be fully utilized. Under the deal, the investment will be funneled into "commercially reasonable" projects. A consultation committee will be headed by Korea's industry minister. Even though special-purpose vehicles are to be formed by the US side, they will have Korean project managers, if possible. The US should prioritize South Korean firms when selecting vendors or suppliers for the projects that will be overseen by SPVs.
Korea should secure some influence on investment portfolios, technology transfer and Korean companies’ participation.
Above all, it is important to find ways to raise the possibility of recovering a return on its invested capital. The government and business circles must turn investments in the US into Korea's corporate growth potential.
Lee occasionally meets with business leaders and tells them his government will do its best to meet their demands. This time, he asked the conglomerate leaders to let the government know what it could do to relax regulations that constrain their corporate activities.
The problem is that his actions are different from his words. Lee signed into law several bills that worried businesses, such as the excessively labor-friendly "yellow envelope" bill and corporate law overhauls that are tougher against large shareholders and boards of directors. The strict 52-hour workweek brings down the international competitiveness of Korean hi-tech companies, while their foreign rivals spend 24/7 on R&D. The Lee administration sharply increased the carbon reduction burden on businesses.
In the meeting, Lee said he does not like hearing businesses demand tax cuts. Taxes are an important factor in investment decisions. The new government of Japan recently announced plans to cut taxes for large companies in strategic industries such as AI and semiconductors. The Lee administration should consider adjusting tax rates strategically.
If the government wants to prevent the hollowing out of domestic industry in the wake of its trade negotiations with the US, it must, among other things, become more business-friendly.
khnews@heraldcorp.com
