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[Editorial] Facilitating investment
More efforts needed to sustain economic growth
By Korea HeraldPublished : July 30, 2013 - 20:33
Samsung Electronics Co. announced last week that its revenue and operating profit soared by 20.7 percent and 47.5 percent from a year earlier to a record 57.46 trillion won ($51.5 billion) and 9.53 trillion won, respectively, in the second quarter.
The strong performance was attributed largely to increased sales of the company’s mobile devices and higher chip prices as well as seasonal demand for electronics products. According to the data compiled by a local research firm, the company shipped a record 76 million smartphones in the April-June period, compared with 69.4 million in the previous quarter, continuing to keep the largest global market share at 33.1 percent.
Buoyed by the impressive quarterly performance, it unveiled a plan to spend a record 24 trillion won on facilities investment this year, up from 22.85 trillion won last year.
As many analysts note, however, caution should be taken that the set of record figures released by the giant manufacturer will not give any illusions about a struggling economy, which depends on a handful of export-dependent large companies. Figures from the central bank show that Samsung Electronics Co. and Hyundai Motor Co. account for more than 20 percent of the combined sales of all listed firms. In terms of operating profit, their share goes up to nearly 50 percent.
In this unbalanced structure, it seemed natural that there was cool reaction to the announcement by the Bank of Korea last week that the economy grew at its fastest pace in two years in the second quarter. Mainly on the back of the government stimulus package and a rise in consumer spending, gross domestic product increased by a seasonally adjusted 1.1 percent in the period from the previous quarter. The economy grew by less than 1 percent for the preceding eight quarters in a row.
The central bank expects the economy to expand by 2.8 percent this year, but it will not be easy to achieve the goal in the absence of additional stimulus and a further increase in private consumption for the rest of the year. These conditions make it all the more necessary to boost corporate investment, which has declined for the past three years. Facility investment decreased by 0.6 percent in the second quarter, dragging down the possible growth rate. With a higher sense of urgency, efforts should be made to accelerate deregulation and offer incentives to enhance corporate investment especially by small and mid-sized enterprises.
The strong performance was attributed largely to increased sales of the company’s mobile devices and higher chip prices as well as seasonal demand for electronics products. According to the data compiled by a local research firm, the company shipped a record 76 million smartphones in the April-June period, compared with 69.4 million in the previous quarter, continuing to keep the largest global market share at 33.1 percent.
Buoyed by the impressive quarterly performance, it unveiled a plan to spend a record 24 trillion won on facilities investment this year, up from 22.85 trillion won last year.
As many analysts note, however, caution should be taken that the set of record figures released by the giant manufacturer will not give any illusions about a struggling economy, which depends on a handful of export-dependent large companies. Figures from the central bank show that Samsung Electronics Co. and Hyundai Motor Co. account for more than 20 percent of the combined sales of all listed firms. In terms of operating profit, their share goes up to nearly 50 percent.
In this unbalanced structure, it seemed natural that there was cool reaction to the announcement by the Bank of Korea last week that the economy grew at its fastest pace in two years in the second quarter. Mainly on the back of the government stimulus package and a rise in consumer spending, gross domestic product increased by a seasonally adjusted 1.1 percent in the period from the previous quarter. The economy grew by less than 1 percent for the preceding eight quarters in a row.
The central bank expects the economy to expand by 2.8 percent this year, but it will not be easy to achieve the goal in the absence of additional stimulus and a further increase in private consumption for the rest of the year. These conditions make it all the more necessary to boost corporate investment, which has declined for the past three years. Facility investment decreased by 0.6 percent in the second quarter, dragging down the possible growth rate. With a higher sense of urgency, efforts should be made to accelerate deregulation and offer incentives to enhance corporate investment especially by small and mid-sized enterprises.
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Articles by Korea Herald
