Aggressive investment to create jobs

Samsung Group said Wednesday that it will invest this year a record 43.1 trillion won (38.3 U.S. billion dollars). Though the conglomerate had earlier hinted at boosting investment and hiring, its figure exceeds expectations. Samsung invested 36.5 trillion won (32.4 billion dollars) last year, up 38 percent from the initially planned 26.5 trillion won (23.5 billion dollars). LG Group said it will invest 21 trillion won (18.6 billion dollars) this year, and Hyundai-Kia Automotive and SK groups are also expected to jump on the bandwagon.

A survey on 1,200 companies nationwide by the Korea Chamber of Commerce and Industry found that facility investment is expected to grow an average 6.1 percent this year. Though a big improvement from negative growth in 2008 and 2009 in the aftermath of the global financial crisis, the figure is still a far cry from the estimated 28 percent last year. If large companies make massive investments and develop new growth engines, however, smaller venture companies can follow. This will then start a virtuous cycle in which expanded investment improves employment conditions and eventually helps recovery of consumption.

Samsung will also hire 25,000 workers this year, up 2,500 or 11 percent from last year. This plan is encouraging because this year is expected to come up short in matching last year’s job creation performance (310,000). The government says 280,000 jobs will be created this year, but private think tanks have a lower estimate of around 230,000.

The government, management and labor should band together to ensure that massive investments lead to more hiring. The KDB Research Institute said a 1-percentage point increase in facility investment leads to a 0.42-percent rise in job creation. Deregulation of the service industry is crucial to boost investment and employment and compensate for the decline in manufacturing jobs.

Samsung Electronics Chairman Lee Kun-hee said in his New Year’s message, “Most of Samsung’s leading businesses and products will have to be replaced within 10 years,” stressing his commitment to develop new growth engines. Samsung will invest 5.4 trillion won (4.8 billion dollars) in OLED, a promising sector. Over the next 10 years, Korea’s major companies are expected to invest 80 trillion won (71 billion dollars) in new businesses including green industries. American companies that are in the final stages of restructuring and Japanese corporations trying to deal with the strong yen have announced plans to expand investment, so the future of the Korean economy relies on aggressive corporate investment.