Korean firms’ working profitability relative to their belongings has practically halved over the previous twenty years, a report confirmed Monday.
Based on the report by the Korea Chamber of Commerce and Trade (KCCI), the working return on belongings (OROA) of the nation’s high 1,000 firms by gross sales fell from 4.2 % in 2004 to 2.2 % in 2024.
OROA, calculated by dividing working revenue by common complete belongings, measures how effectively an organization makes use of its belongings to generate earnings from core enterprise operations.
The info signifies that 100 million received ($68,700) in belongings generated 4.2 million received in revenue in 2004 however solely 2.2 million received in 2024.
“Given the numerous fall in company profitability, it’s essential to intently look at whether or not the federal government’s help insurance policies have really helped strengthen the expansion capabilities of native firms,” stated Joo Ji-hwan, a researcher on the Korea Institute for Industrial Economics and Commerce.
“If this development persists in the long run, it might result in a decline within the general vitality of the financial system,” he added.
The KCCI proposed that the federal government redesign its company help insurance policies to reward firms reaching each development and revenue in an effort to reverse the downward profitability development and restore financial momentum.
“It’s essential to encourage firms whose earnings are rising, moderately than defending these whose earnings are declining, to spice up development charges,” stated Lee Jong-myung, head of the KCCI’s business innovation division.
“It’s time for a paradigm shift in company development insurance policies to remove the contradiction the place firms select to keep away from development attributable to tiered laws.”
