Facility investment growth near zero
2008-11-18 10:00:00|
According to the Bank of Korea, facility and construction investment expanded a mere 0.4 percent in the January to September period from a year earlier. Machinery orders by private-sector firms had their worst performance since the compilation of such data began in 1997. Facility and construction investment has been meager since 2002, after posting minus 2.9 percent growth in 2001. After a rebound of 5.1 percent in 2002, investment dropped to 4.1 percent in 2003, 3.6 percent in 2004, and 1.3 percent in 2005. In 2006, there was a slight pickup with 2.6 percent growth. Experts warn that the latest sharp slowdown in construction and facility investments could harm the country`s economic growth potential, further deepening the domestic downturn. The BOK report predicted that investment growth will slump into negative territory once again in 2008 if the sluggish trend continues. Slack corporate investment has been a bane to the country`s export-led economic growth. Asia`s fourth-largest economy expanded 0.6 percent in the third quarter of 2008 from a year ago, the slowest in four years because of weakening domestic consumption and slowing export growth. The sour economic conditions have driven many builders, who had relied on the housing market boom to repay bank loans, out of business. The construction sector has been plagued by an accumulating stock of unsold homes. Companies in general have been reluctant to commit to domestic construction and facility investments since the previous Roh Moo-hyun administration, which was criticized for implementing futile regulations that only discouraged investment. Companies have been complaining of high corporate tax rates, ineffective incentives and strict facility construction regulations. Such conditions drove Korean companies to invest overseas. Fewer corporate investments at home translate into lost opportunities for creating new jobs and raising domestic capital. The Lee Myung-bak administration, which has struggled to encourage corporate investment through deregulation and incentives, now has the added challenge o... |
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