Posted November. 22, 2006 06:55,
Companies are hesitating to invest, although they have plenty of money. Listed enterprises have net surplus profits about six times more than their capital saved up. An increasing amount of money is being invested in foreign countries, but little is finding its way to domestic investments. No domestic investment means no enterprise and economy growth, and is a red light for the Korean economy.
Still, we cannot force enterprises to invest. Investing is a critical aspect of business. It is natural for enterprises that have experienced tragic investment results to be sensitive about when to open and close their pockets. However, the government can create an investment-oriented atmosphere by forming an enterprise-friendly environment, including easing regulations. At least they should not interrupt investment.
The Fair Trade Commissions persistent investment regulations rein in enterprise investment desires. The government policy which prevents Seoul metropolitan area investment is much the same. The Korean Confederation of Trade Unions strike arguing against a Korea-America FTA also deters investment. North Korean nuclear activities put Korea at risk as well. These are the forces that interrupt urgently needed domestic investment to liven up the economy and public welfare.
Korea is famous for a great entrepreneur spirit. Interest rates are low as well. However, enterprises cannot find profit producing investments. This indicates that overall, the Korean economy is decreasing and ceasing to be productive. It is more than the question of depression. Our fundamentals are out of order.
Floating funds of more than 500 trillion won is one of the causes for the recent real estate price increase. If routes are not provided for this money to flow into productive causes, real estate prices will soar and result in national disaster. Developing finance products and promoting spending that can absorb floating funds are needed. Still the fundamental solution would be to activate investment.
For enterprise investment activation and productivity increase, improving external conditions is desired. Examples are maximization of market economy efficiency, relieving anti-enterprise sentiment, removal of inverse discrimination of domestic companies and small government. Development of scientific technology is basic infrastructure. Promoting competitiveness through competition should be applied to education as well.
Once investment-deterring forces disappear, investment can be active again.