Business chief says pace of economic downturn accelerating

(ATTN: RECASTS headline; UPDATES throughout with biz head's remarks, details; TRIMS)
SEOUL, March 12 (Yonhap) -- The downward pace of South Korea's economy is
accelerating as exports collapse and domestic consumption remains sluggish, the
head of the nation's largest business lobby said Thursday.

Cho Suck-rai, chairman of the Federation of Korean Industries, said business
leaders are "deeply worried" about what he called the "worst-ever business
environment" facing the global economy.
"The pace of downturn in the Korean economy is accelerating further than the
foreign exchange crisis," Cho said, referring to the 1997-98 Asian economic
crisis when South Korea sought a bailout from the International Monetary Fund.
"Looking ahead, we agreed that the economic recession will likely worsen because
of a credit squeeze, sluggish consumption and a sharp decline in exports," Cho
said.
Cho made the remarks at this year's first meeting between CEOs of South Korea's
major business conglomerates -- including Samsung, Hyundai Motor and LG -- which
form the backbone of the Asia's fourth-largest economy.
South Korea's economy is on the brink of falling into its first recession in a
decade, hit by the deepening global slump. Exports, which account for about 60
percent of the nation's gross domestic product, plunged 32.8 percent in January.
The economy grew 2.5 percent overall last year, marking the slowest growth since
1998, when it shrank 6.9 percent. Finance Minister Yoon Jeung-hyun has predicted
the economy will contract two percent this year.
Despite the gloomy economic outlook, Cho said the nation's top 600 companies will
invest a total of 87 trillion won (US$58.7 billion) this year, an amount similar
to their combined spending last year.
"We have agreed to frontload spending in the first half to help boost domestic
consumption and create jobs," Cho said.
As the economy slips closer towards recession, the government of President Lee
Myung-bak is calling for conglomerates to spend more.
Park Hee-tae, chairman of Lee's ruling Grand National Party, last week urged
conglomerates, known as "chaebol" in Korean, to boost corporate spending to
create jobs in return for sweeping government deregulations recently passed
through the National Assembly.
"It's time for the chaebol to open their cashboxes," Park told reporters.
On Wednesday, Samsung Group, the nation's biggest conglomerate, said it will hire
5,500 university graduates this year, up from an earlier forecast of 4,000.
The move appeared to be in line with a government-initiated "job sharing" scheme,
which calls for big companies to cut salaries and redirect the savings from the
pay cuts into hiring more workers to avert American-style layoffs.
On the same day, LG Group announced it will invest 11.3 trillion won this year,
unchanged from last year's spending.
Hyundai Motor Group also said it will spend nine trillion won in facility and
research investment this year.
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