AsiaToday reporter Choi Won-young
South Korea has celebrated the Year of Black Rabbit. As economic experts and observers say that the economy will be normalized in 2024 if the country overcomes the economic downturn and uncertainty which will continue throughout the year, the country’s major conglomerates such as Samsung, SK, Hyundai Motor, LG and Lotte have been put to the test to turn crisis into opportunity.
The Korea International Trade Association (KITA) predicted on Sunday that domestic companies would suffer from the triple difficulty of sluggish demand, rising costs, and financial difficulties in the first quarter of this year, leading to very poor export performance. According to the KITA, the ‘Export Industry Outlook Index’ (EBSI) for the first quarter of 2023 is 81.8. The figure has been below the 100 baseline for four consecutive quarters, indicating that the export environment would deteriorate significantly.
The cleverness and agility are the moves needed for the business world in the Year of Black Rabbit. In a situation where the flow of the world economy is uncertain, the business world feels that they must prepare in advance with wisdom before a crisis occurs. How the pandemic might play out in 2023 and beyond is one of the key variables in the world economy that nobody can predict. China’s lockdown is a factor that greatly reduces global consumption and disrupts the parts supply chain. The war between Russia and Ukraine is expected to gradually ease tensions, but the direction of global energy price fluctuations will be determined depending on whether the warfare will escalate to nuclear warfare and Middle East risks or be ended.
The conflict between the U.S. and China is a concern that Samsung, SK and Hyundai Motor are watching the most. This is because the level of global protectionism and economic sanctions against China is determined accordingly. Samsung and SK, which are reorganizing their large investment strategies due to the U.S.’ Chip 4 alliance and the Inflation Reduction Act (IRA), are leaving all possibilities open and finding ways out. This is why Samsung head Lee Jae-yong is fully operating the global network to work together with partners and competitors.
If they have left many possibilities open, they now need to prick up their ears like a rabbit and grasp the situation accurately with a wider perspective. Hyundai Motor Chairman Chung Eui-sun stressed “the international situation is unstable and difficult to predict,” and added “We should always move quickly with scenarios,” at a press conference held in New York back in April. He said he was trying to improve the ability to predict the future by strengthening communication with the media, government and the outside world. In fact, he was the first chairman to head to the United States due to the concerns over the IRA issue last year.
If they have secured strong information network, they should move quickly and agilely get out of the crisis, focus on speedy management. According to a survey of 240 companies with 30 or more employees nationwide by the Korea Employers Federation, 51.3 percent of the companies predicted that 2024 would be the year when the Korean economy returns to normal. This shows that the year 2023 would be tough, but could turn next year’s rebound on the other hand.
Fortunately, companies are fully prepared. It can be seen in the same context that companies left most of the top commanders and hired a large number of young leaders in the regular appointments at the end of last year. Cash assets that have been steadily accumulated since the pandemic can be a winning move since it can serve as a means to overcome the crisis. At the same time, it can be invested and can carry out M&A. In 2019, when the chip industry faced bad downturn with recession, Samsung Chairman Lee Jae-yong said that real ability comes out in times of crisis. In fact, Samsung showed the potential to quickly recover its performance in 2020 and 2021.