Updated April. 09, 2014 01:40
Employment and consumption are showing signs of recovery, but corporate investment remains in the doldrums. Deregulation should be pushed through to reinvigorate investor sentiment.
According to Strategy and Finance Ministry on Tuesday, the facilities investment index in February dropped by 0.3 percent from the previous month, following a 4.7 percent decline in January. Among major economic indicators, facilities investment alone showed contraction for the second consecutive month.
Facilities investment index measures corporate investment into buildings, machinery and facilities. Its decline shows that companies are closing their wallets and piling up cash. Korea`s facilities investment index dropped 1.3 percent last year after shrinking 2.8 percent in 2012.
In its latest report, Hyundai Research Institute said domestic facilities investments were short of appropriate levels by 2.92 trillion won (2.8 billion U.S. dollars) between October 2012 and September 2013.
Prospects also remain bleak spurring worries that sluggish corporate investment could hamper the economic recovery that is finally showing some signs of recovery. A source from the Strategy and Finance Ministry said, "It is unprecedented that facilities investments dropped for two consecutive months even amid economic recovery," adding, "We will examine the quarterly performance and devise countermeasures."
Experts advise the government to continuously promote measures such as deregulation to boost corporate investment. Kim Jong-seok, professor of business administration at Hongik University, said, "With companies` investment sentiment having shrunk in the past several years, telling them to invest simply won`t work," adding, "The government should do its part to improve their confidence through easing regulations, etc."