Seoul: Excessive regulations on large companies may have cut the country’s gross domestic product (GDP) by up to 111 trillion won ($75.2 billion) in 2025, a major business lobby argued on Tuesday, calling on the government to ease regulatory burdens on firms seeking to expand.
The Korea Chamber of Commerce and Industry (KCCI) made the assessment in a report, noting that the so-called “growth penalty,” which refers to additional tax and regulatory burdens imposed on companies as they grow in size, weighs on the overall growth of Asia’s No. 4 economy, reports Yonhap news agency.
“South Korean companies are deliberately curbing their growth in response to regulations, limiting their workforce to 50 or 300 employees, or pursuing corporate spin-offs to avoid regulatory thresholds,” the KCCI said.
The KCCI said its research showed that such distortions in the corporate ecosystem reduced the country’s annual GDP by 4.8 per cent in 2025.
For example, the number of small companies with fewer than 50 employees that remained at the same size for over five years was estimated at nearly 60 per cent of the total, marking a sharp increase from around 40 per cent in the 1990s, it noted.
“This indicates that companies’ tendency to maintain the status quo to avoid regulations has become more clear,” the KCCI said.
The likelihood of a small business growing into a mid-sized company is currently estimated at just 2 per cent, while the probability of it becoming a large conglomerate stands at a mere 0.05 per cent, it added.
“By proactively revamping regulatory and taxation policies, the government needs to introduce incentives to encourage businesses to improve productivity voluntarily,” Park Jung-soo, a professor of economics at Sogang University, said in the report.
Around 40 per cent of South Korean manufacturers expect economic conditions to deteriorate this year amid increased volatility in the foreign exchange (FX) market, a poll showed last week.
(IANS)
