Things needed to do to recover sluggish economy

President Park Geun-hye is to have a meeting with 17 CEOs of major domestic businesses including Samsung, Hyundai Motor, SK, LG and Naver at the presidential office Cheong Wa Dae on Friday. Although the purpose of this meeting is to encourage companies that have supported the establishment of Centers for Creative Economy and Innovation in provinces across the nation, attentions are paid to comments of the president and business leaders on how to revive the sluggish domestic economy.

Korean economy rose 0.3 percent in the second quarter, compared to the previous quarter, hovers around 0 percent range for five consecutive quarters. Excluding the fourth quarter (0.3 percent) of 2014, this is the lowest-ever in the past six years since the 0.2 percent growth in the first quarter of 2009. The second quarter saw a 2.2 percent growth year-on-year, making it unlikely to reach an annual 3 percent growth. While Hyundai Motor Group’s operating profit in the second quarter sank by 16.1 percent year-on-year, other Korean businesses are showing worse business performance.

Considering this grave reality that Korean economy has fallen into a "swamp of low growth," the presidential meeting with business leaders must not end up with a venue to exchange typical words of encouragement and express gratitude to businesses that have supported creation of Centers for Creative Economy and Innovation. President Park should see challenges against the Korean economy and have an honest discussion on how to resolve the economic crisis with major group CEOs who have great influences over job creation and investment. It would be desirable to announce concrete measures that the president and her administration will do for labor market reform and vitalization of investment.

In Japan, structural reform is gathering a momentum following the suit of fiscal stimulus and monetary easing, which are the three arrow agendas of Abenomics pursued by the Shinzo Abe administration. Japanese congress has passed a bill to enhance industrial competitiveness to spur business structure reform and a labor market reform bill to get rid of fixed-term employment. As Abenomics is yielding positive results, Japanese economy expanded 1.0 percent, compared to the previous quarter (3.9 percent when converted into an annual growth rate), overtaking Korea. In Japan, the ruling party can pass a bill that the ruling party pursues without much difficulty despite objection from the opposition party, which is a stark difference from the practice in Korea. Still, it is questionable whether President Park has tenaciously persuaded the opposition party or interest groups.

As a meeting with the president is a rare opportunity, business leaders may talk about their own difficulty in operation of businesses. But it can cause resistance from the public if they blindly blame "external factors" or make excessive requests for their own interest. When business leaders take the lead to innovate business operation and create jobs, and also show practices to fulfill social responsibilities despite economic challenges, they can earn trust from the public.