Foreign invested companies hold back investment plans as pandemic continues

Most companies with foreign investors in South Korea have not yet been able to make investment plans for this year, due to the prolonged COVID-19 pandemic, according to a survey from the Federation of Korean Industries released Wednesday.

Of the foreign-invested companies with more than 100 employees surveyed, 91.1 percent said they are yet to come up with an investment plan (64.4 percent) or do not plan to make an investment this year (26.7 percent).

Only the remaining 8.9 percent of them have this year’s investment plan in hand, among which three-quarters said they would maintain investments at last year’s level, while the remainder said they would invest more.

Even when it comes to employment plans for this year, 6 in 10 foreign-invested companies do not have one ready.

Specifically, 14.9 percent said they will not recruit this year, and 46.5 percent said they still need to work on their hiring plans.

Of the remaining 38.6 percent that said they have already made their employment plans, more than half (51.3 percent) said they would recruit the same number as last year.

Most of the rest — 46.2 percent — said they would employ more this year, and 2.5 percent said they would employ fewer people than last year.

The main reason foreign-invested companies gave for not augmenting investments this year was worldwide economic stagnation due to COVID-19 (44.1 percent), followed by investments in other major projects abroad (26.5 percent).

On why they were not increasing employment this year, 25 percent of foreign-invested companies said it was due to poor economic conditions, followed by 8.3 percent pointing to the high corporate tax rate and a lack of investment incentives.

The largest portion of those surveyed (34 percent) said the government should offer tax benefits for companies that employ more. Others picked refraining from raising the minimum wage (27.1 percent), improving labor rigidity (21.8 percent) and supporting innovative industries (10.2 percent) as key factors to consider.

“The next administration that will be chosen through the presidential election in March will have to acknowledge companies’ difficulties and improve tax benefits to those that have good employment and investment performance,” said an FKI official. “It should focus on creating a good business environment by refraining from raising the minimum wage and expanding the flexible work system.”

By Hong Yoo (yoohong@heraldcorp.com)