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‘Wage hike pressure due to inflation will be hardest’

July 14, 2022 - 15:22 By Kim So-hyun
KCCI chairman Chey Tae-won talks at a press conference at the organization‘s annual forum held in Jeju on Wednesday. (Yonhap)
An upward pressure on wages caused by inflation will be the biggest ordeal for businesses in the long run, said Chey Tae-won, who is chairman of both SK Group and the Korean Chamber of Commerce and Industry, the nation’s largest business lobby.

“Dealing with inflation was expected,” Chey told reporters at the KCCI Jeju Forum which opened Wednesday on Jeju Island.

“I think it will be much more difficult especially for small- and medium-sized companies which hire a lot of people.”

Since the Lehman Brothers shock in 2008, the world has never really retrenched; countries kept raising interest rates and releasing money into the economy, and after years of barely holding up by injecting cash, two things -- a supply chain crisis due to the US-China conflict and the Russia-Ukraine war -- happened simultaneously, leading to a blowup, Chey explained.

The US-China trade war led to major disruptions in global supply chains, and then the Russia-Ukraine war broke, sending energy and grain prices north, he said.

“We didn’t see a major inflation until now because prices of manufactured goods kept going down. But from now on, I think we’ll face a shock beyond those problems, and the money that had been released over the years will increasingly add on to the inflation,” said the chief of South Korea’s second-largest conglomerate by assets.

“Looks like we’ll see a recession, likely next year too.”

Chey said SK Group’s multibillion dollar investment plans could change due to higher costs of borrowing and raw materials.

“There is a possibility that plans made last year may change. As interest rates are going up, I think we may strategically and tactically delay investments,” he said.

“As material costs have gone up too much, adjustments are likely. Investments can be delayed, but we have no plans to cancel any.”

SK Group had said in May that it will invest 247 trillion won ($188 billion) by 2026 in key growth engines such as semiconductors and biotechnology.

Chey said he thinks Korean companies will manage to tide over the inflationary shock as they have gone through many hardships before, and are built to withstand crises.

Regarding calls on giving Samsung Electronics Vice Chairman Lee Jae-yong and Lotte Group Chairman Shin Dong-bin special pardons ahead of Liberation Day on Aug. 15, Chey said granting them the special pardons would help the economy. South Korean presidents have customarily given special pardons for convicted politicians and tycoons on Aug. 15.

“Pardons are the president’s rights. Asking for leniency if possible has always been my stance,” he said. “We’re asking for pardons to let them widen the scope of their activity and allow them to work more freely, which would help the economy.”

About Korean businesses struggling in China, he said giving up on China is not an option as it is a huge market, and that Korea and China need to continue economic cooperation to make progress.

Chey also said normalizing ties with Japan is a task Korea should keep working on.

By Kim So-hyun (