Look­ing to­ward in­clu­sive growth

JoongAng Daily - - Front Page -

econ­omy con­tracted by 6.9 per­cent. The Gini in­dex rose to 0.32. Dis­tri­bu­tion slightly im­proved, but the gap deep­ened after the Wall Street-trig­gered fi­nan­cial melt­down in 2008. The mid­dle class shriv­eled, while lower in­comes widened along with the wealth gap.

The two crises taught us that low growth can lead to rises in un­em­ploy­ment and worsen in­come dis­crep­an­cies. The econ­omy can only main­tain sus­tain­able growth if it runs on both en­gines of do­mes­tic and ex­ter­nal de­mand. Do­mes­tic de­mand must tick in dur­ing volatil­i­ties on the ex­ter­nal front. De­mand at home was killed by the sink­ing of Se­wol ferry, which re­sulted in more than 300 deaths. The econ­omy fell into a silent de­pres­sion in up to larger en­ter­prises. Mom-and-pop stores and self-em­ployed busi­nesses should build up their com­pet­i­tive­ness to sur­vive on their own. Large com­pa­nies now mostly pay pri­mary sub­con­trac­tors on time.

But pay­ment to sec­ond and third sup­pli­ers still ar­rives late. Im­prove­ment in pay­ment de­liv­ery and pric­ing could help boost do­mes­tic de­mand. If pay­ment ar­rives at the pri­mary sub­con­trac­tors, it should be shared on time with the sec­ond and third sup­pli­ers. Such sym­bi­otic cap­i­tal flow will strengthen man­u­fac­tur­ing com­pet­i­tive­ness.

South Korea and China are close to strik­ing a free trade agree­ment. Large and smaller in­dus­tries must join forces to in­crease ex­ports to meet the tastes of a gi­gan­tic mar­ket with 1.3 bil­lion peo­ple. On the food sci­ence front, small and mid­size com­pa­nies can de­velop lo­cal or­ganic farm pro­duce, and large com­pa­nies can help ex­ports to China through their sales net­work.

The lo­cal in­no­va­tion cen­ters the gov­ern­ment has been sup­port­ing to pro­mote start-ups across the na­tion also de­pend on the ca­pac­ity of in­no­va­tion by small com­pa­nies in re­gional ar­eas. Large com­pa­nies are re­ported to have a 757 tril­lion won sur­plus. There are many ca­pa­ble ven­ture cap­i­tal com­pa­nies in the coun­try. Com­pa­nies should be en­cour­aged to invest in ven­ture cap­i­tal en­ter­prises with their cash re­serves to help foster start-ups and in­no­va­tive tech­nolo­gies. Eco­nomic ac­tiv­i­ties hinge on that sen­ti­ment. Con­sumer spend­ing also sways on ex­pec­ta­tions for in­come growth. Large-scale cor­po­rate in­vest­ment that ac­com­pa­nies risk-tak­ing also moves on in­stinc­tual sen­ti­ment.

We need to breed a pre­dictable in­vest­ment en­vi­ron­ment. The be­nign cy­cle of growth and dis­tri­bu­tion can only run when en­trepreneur­ship, in­vest­ment will, timely le­gal ac­tions and ad­min­is­tra­tive com­pe­tence all func­tion well.

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