ed Chaebol on wrong course

A Korea Employers’ Federation survey revealed Sunday that more than half of the top 10 conglomerates will be tightening their belts next year.

More specifically, 51.4 percent of the 70 largest companies will be engaging in “contractionary management” in 2015, up a whopping 11.8 percent this year.

Only 14.3 percent said they were looking to expand while 34.3 percent responded that they would maintain their current course.

This basically means that major conglomerates are not willing to take risks or rock the boat because domestic and global economic conditions are uncertain.

It remains to be seen what happens in terms of management plans for next year because factors like falling oil prices and volatility in foreign exchange rates are causing all kinds of headaches for conglomerate CEOs.

This is not surprising, and mirrors the government trying to cut its budget to reduce the ballooning national debt, as well as households struggling with loans of their own.

What normally are the results of contractionary management? Surveys in recent years have shown that such business practices slow the economy.

Economists like Nobel laureate Paul Krugman insist that spending and investment have to be increased to boost a slackening economy.

The theory is textbook: with more investment and budgetary spending, more jobs will be created, which leads to greater consumer spending.

Such increased consumer spending will bring in larger revenue for companies, while governments can address the national debt problem more easily when the economy is growing.

This sounds reasonable, because large conglomerates are sitting on huge piles of cash and Korea’s national debt is manageable, according to most economists.

According to chaebol.com, the top 10 conglomerates such as Samsung, SK and LG held cash deposits of at least 125 trillion won ― about a third of the national budget for 2015 ― as of the end of September.

With the stock market the way it is ― at last count, the Korean stock market posted the sixth-worst performance among major global stock markets ― while interest rates are at their lowest in recent memory, it appears that investing could be a wise option.

As the market fluctuates and evolves each day, companies certainly have a lot to consider, but this also means there are many opportunities.

Most reliable financial organizations, like the Bank of Korea and the Organization for Economic Cooperation and Development, are projecting Korea’s GDP growth for 2015 to be in the high 3-percent range.

The ground may not be rock solid, but it is still firm enough. It is time for conglomerates to utilize the tools they have to help boost the economy.