[Gangnam Perspective] When Companies Owe a Debt to the State

At the end of last month, Chung Eui-sun, Chairman of Hyundai Motor Group, met with President Lee Jae Myung and stated, "We have received significant help from the state, and I will make sure to repay this debt." Just fifteen days after Chung expressed gratitude for the United States–Korea Tariff Negotiations, on the 16th, President Lee met with seven business leaders and made eight requests. I believe the president laid out in detail how companies should repay their debt of gratitude in the form of these requests.
Five of the eight requests are universally reasonable: 1) Increase domestic investment; 2) Pay attention to regional industries; 3) Make good use of investments in the United States; 4) Offer practical feedback for regulatory reform; 5) Participate in strengthening the employment safety net. These are tasks that companies have always undertaken and should continue to do.
Through the recent tariff negotiations, companies have incurred two types of obligations to the state. If export tariffs to the United States are reduced from 25% to 15%, Hyundai Motor and Kia Corporation will see their net profits increase by more than 3 trillion won. Samsung Group, SK Group, Hanwha Group, and HD Hyundai will also benefit. This profit is the companies' 'direct obligation.' On the other hand, as a result of the tariff cuts, large amounts of dollars may flow out to the United States, potentially causing a chain reaction of rising exchange rates, interest rates, and prices. This negative impact is the 'indirect obligation' companies owe.
Companies can repay their obligations by enhancing national competitiveness—generating higher earnings, paying more taxes, and increasing employment. They can also raise supply prices for regional small and medium-sized enterprises and invest in strengthening industrial infrastructure. If investments in the United States are leveraged as growth opportunities and companies compete vigorously in a deregulated environment, it could be a win-win for everyone. The president’s first five requests are impeccable and have been widely praised by the media.
In contrast, the remaining three requests—whether they are requests, criticisms, or hopes—are somewhat ambiguous and warrant further consideration: 6) If you need tax cuts to do business, there may be an issue with international competitiveness; 7) Since labor costs are a small portion for large companies, show some flexibility; 8) The government will purchase subordinated bonds to encourage risk investment.
From a corporate perspective, these could be interpreted as signals to refrain from demanding tax cuts, reconsider wage adjustments, and take on high-risk investments. Of course, reducing taxes or labor costs does not immediately boost corporate competitiveness. However, it is unusual for the government to request restraint in sensitive decisions related to pricing. Issuing subordinated bonds could expose companies to reputational risks, and the government buying such bonds with taxpayer money is controversial. Still, none of these three are impossible—fiscal policy, labor, and mutual growth are all important.
What is more concerning is not the explicit requests, but the discussions that took place beforehand. According to a research institute official, a government representative referred to as S said, "Thanks to the government’s diplomatic efforts, companies are reaping financial benefits. Is it desirable for companies to enjoy all the fruits alone? Is there a way for companies to contribute a portion of these gains back to the government?"
S’s perspective overlooks the market, where households, companies, and the government—the three main economic agents—work together to ensure the smooth flow of money and people. Diplomatic achievements are public goods for the national system. Even if a company benefits, it should not provide special compensation through private channels; it suffices to pay taxes, create jobs, and invest in proportion to its gains. In this context, the president’s requests 1 through 5 are reasonable, and while 6 through 8 require some explanation, they are not unfeasible.
However, S’s idea crosses the line. It is unlikely that such a plan will be implemented as is; it may already have been abandoned or be transformed into a more general policy. Nevertheless, if the fundamental notion that a separate contribution is needed to repay the debt persists, or if someone pushes for it more strongly, it could become a serious problem.
If companies owe a debt to the state, fulfilling their original responsibilities diligently is sufficient. The moment such obligations become a matter of transaction, power becomes privatized.
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