Updated January. 14, 2014 07:00
Last year, Korea`s two biggest conglomerates of Samsung and Hyundai Motor generated a combined operating profit of 43 trillion won (40.7 billion U.S. dollars), up 18.5 percent from a year ago. The performance deserves credit considering adverse internal and external conditions stemming from fragile global growth and the European debt crisis. This is equivalent to 30.4 percent of combined operating profit of all local firms at 141.7 trillion won (134 billion dollars).
Yet Korea`s economy is not as well off as Samsung or Hyundai Motor. The combined operating profit of the country`s corporate sector except Samsung and Hyundai Motor, stood at 98.7 trillion (93.7 billion dollars) in 2013, down from 111.3 trillion won (107 billion dollars) in 2012. Since the global financial crisis in 2008, only a small number of large companies with global competitiveness have been faring well, whereas others are suffering. Due to the worsening of this dual structure, the gap between perceived economic data and official ones is widening.
The two conglomerates are the key pillars of the Korean economy. They have raised Korea`s brand image abroad and earned money for the country. However, an excess reliance on a small number of companies can put the national economy at risk. In other words, the nation can suffer a blow if one or two companies falter. Samsung Electronics is currently facing challenges from China`s low-cost mobile phone makers, while the yens decline has given Japanese automakers a competitive boost.
However, Korea should not put a drag on the two conglomerates to find excuse of balancing the economy. These conglomerates have to overcome challenges to help the country`s economy fare well. The key is to foster the next Samsung Electronics or Hyundai Motor. So-called hidden champions should also be aggressively nurtured. Such approach will help balance the economy, reduce economic bipolarization and create more jobs.
At New Year`s press conference last week, President Park Geun-hye pledged to boost domestic demand and make further efforts to promote creative economy by drastic bold deregulation efforts mainly in the property and public service. Korea`s economy needs to seek out new growth engines and create investment-friendly environment to solidify its industrial structure. At their New Year`s address, Samsung Chairman Lee Kun-hee and Hyundai Motor Chairman Chung Mong-koo presented "management innovation" as the keywords of this year. Self-innovations are needed to shift from being a "fast follower" to becoming a "first mover."