Korean businesses concerned about impact of political unrest

Volatility in exchange rates, foreign sentiment, policy consistency to weigh on firms

By Nam Hyun-woo

President Yoon Suk Yeol’s declaration of martial law and its subsequent lifting are raising fears among Korean businesses over economic repercussions, as the political unrest is expected to deal blows to domestic consumption, exchange rates and foreign sentiment on the country’s stability.

According to officials and sources from major conglomerates, including Samsung, SK and LG, emergency meetings were held overnight among executives and relevant employees following Yoon's declaration of martial law around 10 p.m. on Tuesday.

Similar meetings continued throughout Wednesday at several major companies here, even though the president lifted martial law in the early morning, as businesses anticipate that the political turmoil may continue over Yoon’s presidency and, in turn, affect the Korean economy.

Samsung Electronics and its affiliates each held emergency meetings involving its key staffers after martial law was declared to analyze the impacts on their operations.

CEOs of SK Group affiliates held a meeting on Wednesday morning to monitor the latest developments in the market and discuss their responses to the possible economic impacts stemming from the ongoing political turmoil.

LG Group companies also held emergency meetings to closely monitor economic indicators and discussed ways to improve their preparedness for possible market volatility. LG Group notified its employees to work from home on Tuesday night, because its headquarters is located close to the National Assembly in Yeouido, Seoul.

HD Hyundai Group Chairman Kwon Oh-gap convened an emergency meeting of affiliate presidents and asked them to “focus on preventing risks in foreign exchange and other financial risks” while having “a sense of crisis” as the situation in and outside of the country is expected to develop urgently.

Officials said those meetings were mostly about analyzing the economic impacts stemming from the unrest, as well as their relations with the Yoon administration.

“Though martial law was lifted in just six hours, related political risks are looming larger,” a conglomerate official said, citing the opposition’s increasing efforts to impeach Yoon and a sweeping resignation of presidential staffers.

“The resignation or impeachment of the president is a matter of politics. For businesses, however, the focus is on assessing and discussing how such major political events might impact consumer sentiment, exchange rates and other economic factors.”

A second conglomerate official said the most critical point for businesses is the increased uncertainty.

“This is an unprecedented situation, and no one can predict the extent of its impact or the type of repercussions it may bring,” the second official said. “Our top priority is to monitor how both domestic and international markets will respond. The real challenge lies in the uncertainty of what kind of aftermath may unfold.”

A third conglomerate official said his group is closely monitoring currency movement, while affiliates doing overseas business are making efforts to reassure their foreign counterparts and investors about the Korean economy’s stability.

The immediate impact was reflected in the share prices of major companies. The benchmark KOSPI and secondary bourse Kosdaq each shed 1.44 percent and 1.98 percent from a day earlier, while top cap Samsung Electronics inched down 0.93 percent to close at 53,100 won. Except for SK hynix, which gained 1.88 percent, the top five stocks on the KOSPI all suffered drops.

State-run companies related to Yoon’s economic initiatives also declined. Korea Gas Corp., which benefited from Yoon’s initiative to explore gas reserves in the East Sea, plunged 18.75 percent, and nuclear power technology firm KEPCO E&C also shed 15.77 percent.

On the other hand, the shares of Kakao Group surged on Wednesday, as investors bet on the growing calls for Yoon’s impeachment. Messenger operator Kakao Corp. gained 8.5 percent, while its mobile transaction affiliate Kakao Pay soared 22.49 percent.

Kakao Group has been at odds with the Yoon administration, facing regulatory punishments from various government agencies. Yoon said in November last year that “Kakao must be regulated by the government because its business practice is very unethical.”

While businesses are bracing for the possible impact of the latest political turmoil, economy-related ministries also entered into emergency mode, with ministers holding urgent meetings to keep the situation under control.

According to officials, most of the ministers canceled their schedules planned for Wednesday and held emergency meetings.

Among them, Minister of Trade, Industry and Energy Ahn Duk-geun held a series of emergency meetings and closely assessed the factors affecting the domestic real economy across key sectors. The ministry oversees Yoon’s flagship economic initiatives — such as the gas exploration project and the exportation of nuclear power plants to the Czech Republic. These projects may face uncertainties depending on Yoon’s political fate.

After those meetings, all Cabinet members, including those ministers, expressed their intention to resign, though it remains unclear whether their resignation was approved.

While ministries emphasized their focus on mitigating volatility and keeping the stability of their operations, businesses are already expressing concerns over possible reversals in industrial policies championed by Yoon and subsequent flip-flopping in the government’s policy directions.

“Businesses align their strategies and practices to a certain extent with government policies,” a fourth conglomerate official said. “But when the administration’s future becomes uncertain, companies now have to analyze the potential impacts thoroughly. The sustainability of ongoing industrial policies is also unclear, leaving everyone in a state of uncertainty. For now, all we can do is prepare for every possible scenario.”

The political campaigns of labor unions are also weighing heavily on businesses. The Korean Confederation of Trade Unions, one of the country’s two biggest umbrella unions, said Wednesday it would go into a general strike for an indefinite period, demanding Yoon’s immediate resignation.

The union said that it would “stop Yoon’s madness by stopping production,” claiming its strike is aimed at protecting the country’s democracy. The union also said that Yoon has been suppressing labor unions and the strike will be “a new starting point to end the polarized and unfair era.”

Another umbrella union, the Federation of Korean Trade Unions, which is relatively moderate, said Wednesday it would leave a tripartite dialogue involving employers and the government and demanded Yoon’s resignation.