Lee Hyo-sik is Finance Desk editor at The Korea Times. He manages finance-related stories on macroeconomics, banks, stocks, bonds, crypto etc. He is passionate about covering what's happening in Korea's financial industry and explaining it to both Korean and non-Korean readers. You can reach him at leehs@koreatimes.co.kr. Your insights and feedbacks are always appreciated.
Curb enthusiasm for jobs
Big firms refrain from increasing employment
By Lee Hyo-sik
Jobseekers line up at an employment fair organized by the Ministry of Knowledge Economy at COEX, southern Seoul, earlier in October. / Korea Times photo by Kim Dong-ho
By Lee Hyo-sik
Given the continued uncertain global economic outlook, Korea’s large business groups are unlikely to invest and hire more in 2013 than this year.
Since the collapse of Lehman Brothers in late 2008, Samsung, Hyundai and other corporate powerhouses here have increased research and development (R&D) spending and acquired foreign rivals to strengthen their global competitiveness, despite unfavorable business conditions at home and abroad.
As a result, they have emerged as winners from the worldwide financial crisis and captured large international market shares over the past four years.
However, it seems the prolonged business slump has finally begun weighing down on conglomerates here, making them hold onto larger amounts of cash and refrain from expanding aggressively.
According to industry sources Sunday, the majority of the country’s 10 largest business groups have not yet finalized their investment plans for 2013. But they are widely expected to spend only what they did this year to build plants, finance R&D activities and employ new workers in 2013.
If so, it would be the first time Korea Inc. fails to increase corporate spending from the previous year since 2009.
Samsung Group, Korea’s largest family-controlled conglomerate, has reportedly decided to freeze its 2013 investment and hiring at this year’s level. It invested a record high of 47.8 trillion won ($44.7 billion) and hired 26,100 more people in 2012.
Samsung plans not to cut spending in order to maintain its leadership in the global smartphone market, nurture healthcare among other industries as its new growth engines.
Hyundai Motor Group has not finalized its 2013 business plan but is expected to spend as much as it did this year in order to continue developing new-generation vehicles. In 2012, the world’s fifth largest automaker invested 14.1 trillion won and hired 75,000 new employees.
SK Group, which has been expanding into semiconductors and other new business sectors over the past few years, has decided to put its expansionary strategy on hold next year.
``Each affiliate is currently drawing up its own 2013 business plan at the moment. We think the scale of investment and employment will be similar to this year’s,’’ an SK Group official said. The conglomerate invested a record-high 19.1 trillion won and hired 75,000 new employees in 2012.
LG Group has decided to increase investment by a small margin. In 2012, the nation’s fourth largest business group invested a total of 16.4 trillion won and added 15,000 workers to its payroll.
Lotte Group, specializing in retail and leisure industries, is largely expected to slash investment next year, due to the prolonged sluggish consumer demand at home. It acquired Hi-Mart as well as other firms this year, spending hundreds of billions of won.
POSCO, the world’s fourth largest steelmaker, will likely reduce investment and employ fewer new workers in 2013 to cope with global supply gluts and other negative business conditions.
It is unlikely for Hyundai Heavy Industries, which has been struggling with plunging ship orders over the past few years, to boost investment and employment from this year. Instead, the shipbuilder plans to restructure its business portfolio as well as cut labor and other operating costs to prop up its bottom line.
GS Group, specializing in construction, retail and refinery, will also refrain from making huge investment in 2013. ``We are currently working on our 2013 plan. Given the slow world economic rebound, we will not spend more than in 2012,’’ a group official said.
Hanjin Group, which manages the country’s largest flagship carrier Korean Air, has said it will boost its risk management capability against changes in oil prices and foreign exchange rates rather than expand aggressively.
Hanwha Group is facing difficulty in drawing up a 2013 business plan as its Chairman Kim Seung-youn is currently behind bars on charges of breach of trust and embezzlement. A group official said Hanwha will maintain its current business stance next year and hire about 6,000 new workers.