South Korea to Unveil Policies to Boost Corporate Investments

South Korea’s government will unveil policies within days to remove “unreasonable” regulations that deter companies from making investments, Finance Minister Hyun Oh Seok said.

The government is also preparing measures, including loan and marketing support, to help smaller exporters grappling with the sliding yen, the Finance Ministry said in a separate statement yesterday.

South Korea’s President Park Geun Hye announced a $15 billion extra budget and property stimulus package this month and the central bank pared its growth forecast for this year as a decline in the yen hurt exporters and record household debt restrains consumption. Hyun said last week the government is planning policy support for services industries to boost job creation.

“Weak private consumption and inventory drawdown suggest a still slower recovery in private demand, which makes the coordination of policy stimulus all the more important,” Kwon Goohoon, a Seoul-based economist with Goldman Sachs Group Inc., wrote in an April 25 report after first-quarter economic growth rose the most in two years, driven by front-loading of fiscal spending by the government and higher exports.

“We’re trying to do a major easing of rules to revitalize investment,” Hyun said yesterday during a weekend meeting with heads of small and medium-sized manufacturers in Siheung, southwest of Seoul. The measures will target increasing “facility investments” by smaller firms through financial incentives, he said.

Undermine Competitiveness

Bank of Korea Governor Kim Choong Soo said last week that weakness in the Japanese currency has only just begun and will hit South Korea’s electronics, automobile and steel makers who compete against companies from Asia’s second-largest economy.

The yen has dropped about 20 percent against the U.S. dollar in the past six months and about 18 percent against the won. Lee Won Hee, chief financial officer of Hyundai Motor Co., said last week the strong won and weak yen are a concern.

The Finance Ministry warned in its statement yesterday that April exports of vehicles and other goods may rise 1 percent to 2 percent from a year earlier as the yen’s weakness undermines the competitiveness of South Korean exporters.

In an interview with Bloomberg News in Washington on April 18, Hyun said the weakening yen is hurting the Korean economy more than threats from North Korea.

“Compared to the North Korea risk, a sliding yen is having a considerable impact on the real economy of South Korea,” Hyun said.

To contact the reporter on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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