By Yoon Ja-young
The country’s top 30 conglomerates said Wednesday that will invest 122.7 trillion won this year, 5.2 percent more than last year. But their outlook on the economy is pessimistic.
The Federation of Korean Industries (FKI), a chaebol lobby group, announced the 2016 investment plans at a meeting with Minister of Trade, Industry and Energy Joo Hyung-hwan.
Detailing the spending, facility investment takes up 90.9 trillion won, up 7.1 percent on last year, while 31.8 trillion won will go to research and development.
“The government will give full support so that businesses can execute their investment plans without any problem,” the minister said.
Among the top 30 conglomerates, 18 increased investments compared to last year, while nine cut spending and three allocated about the same.
Last year, the top 30 conglomerates ended up investing 116.6 trillion won in total, 92.6 percent of the 125.9 trillion won they had originally planned. The FKI said several problems hampered businesses from investing as much as they had planned. On top of the outbreak of Middle East Respiratory Syndrome, the economic shock from China and the global recession added to uncertainties for businesses.
Major investments scheduled include Samsung Group’s plan to invest 15.6 trillion won by 2018 to set up a semiconductor plant in Pyeongtaek, Gyeonggi Province, and Hyundai Automotive Group’s plan to invest 13.3 trillion won by 2018 to develop eco-friendly cars and smart cars. SK Group, the country’s third-largest conglomerate, will invest 5.4 trillion won in Hynix Semiconductor facilities, 1.3 trillion won to bolster the telecom arm’s networks and 650 billion won for SK Broadband, an Internet protocol television subsidiary, this year.
LG Group will be investing 10 trillion won by 2018 to expand its OLED facility, and 4 trillion won by 2020 in its Magok Science Park.
The outlook, however, is not positive. Eight of 10 conglomerates expect surroundings will worsen this year from last year, and 96.7 percent said the economy will not recover before 2017.
When asked to pick the biggest challenge, 30 percent cited falling exports while 20 percent pointed to worsening profitability. Another 20 percent picked changes in interest rates and foreign exchange rates as burdensome, while others selected sluggish domestic demand, a shortage of funds and an absence of leadership as main hurdles.
Seven out of 10 picked restructuring as the focus of their management strategy this year, followed by the search for new growth engines and risk management.
“Though internal and external conditions are expected to worsen, the conglomerates are likely to lead investment this year,” said Song Won-keun, head of the economic research division at FKI. “For their efforts to pay off, the government should set up corporate-friendly surroundings, which include deregulation and support for new growth engines.”