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Hong open to meeting the conglomerates

With Japan retaliation weighing on the GDP, discussion welcomed
July 06,2019
Finance Hong Nam-ki said he is open to meeting with heads of five chaebol - Samsung, Hyundai Motor, SK, LG and Lotte - to discuss the economic retaliation by the Japanese government.

“I don’t see any reason to not meet?” Hong said on Friday when asked if he has any plans to do so.

He he did not offer additional details after arrangements were made by the Blue House when asked if he was scheduling the meeting with the heads of the conglomerates together with the Moon Jae-in administration’s new policy chief, Kim Sang-jo.

Hong would only say that he will discuss the issue of the recent retaliatory trade restrictions with them.

“As we said, we will be taking necessary actions, including filing a complaint to the WTO,” Hong said. “I hope you would understand we’re reviewing such possibilities.”

On Wednesday, the Blue House policy chief said he was scheduling meetings with Samsung’s Lee Jae-yong, Hyundai Motor’s Euisun Chung, SK’s Chey Tae-won, LG’s Koo Kwang-mo and Lotte’s Shin Dong-bin.

“We have contacted the five conglomerates and raised the need for communication between the government and the business community,” regarding the restrictions imposed by the Japanese government, Kim said.

Since Thursday, Japan has been restricting the export of fluorinated polyimide, hydrogen fluoride and photoresists to Korea. These are key materials in the manufacturing of semiconductors and displays.

It was Japan’s response to the Korean Supreme Court’s ruling in October that ordered Japanese companies to compensate Koreans who were forced laborers during World War II.

KB Securities on Friday raised concerns that the trade barriers set up by the Japanese government would have an impact on Korean economic growth.

The report noted that semiconductor exports account for 6 percent of the nation’s gross domestic product (GDP). If export volume shrinks 10 percent due to the Japanese restrictions, the Korean economy could lose 0.6 percentage points of its growth.

The report noted that the Korean semiconductor industry has a three-month inventory on the restricted materials. Additionally, because of semiconductor inventories, the companies will be able to endure the current situation until the end of the year.

But the additional moves by the Japanese government could further impact the Korean economy negatively.

The Japanese government is reported to be looking into removing Korea from its “white list” of countries that receive preferential treatment in terms of export procedures. Korea has been on the white list since 2004, as it is considered to not be a security risk to Japan. It is one of the 27 countries that benefit from export application waivers.

If Korea is removed from the list, the number and the variety of items facing export restrictions could expand and affect other industries, such as automaking. That would be a major blow to the already shaky economy.

The Korean government earlier this week lowered its economic growth target from a range of 2.6 percent to 2.7 percent to a range of 2.4 percent and 2.5 percent, citing global instability and weakening semiconductor exports.

Yet when making the announcement, the Finance Ministry said it had not factored in Japan’s retaliatory measures in its growth projection.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]