South Korea may lose out to China
South Korea may lose out to China
SEOUL: Monthly drops in exports were mere aberrations to the Korean government and corporations, which had grown accustomed to watching overseas shipments continuing to increase with few disruptions. But their complacence began to ebb a short while ago, and finally their confidence waned completely when it was announced early this month that exports had declined for the fifth consecutive month in July, this time plunging by as much as 20 percent.
News about the biggest year-on-year monthly drop in more than three decades had top government policymakers and corporate executives running scared. They were understandably worried that Korean exports could possibly be headed for a long-term slump as their major markets -- the United States, Japan and Europe -- continue to show few signs of an early recovery.
The main cause of a decline in overall exports was the slackening demand for computer chips in the United States and other advanced nations, where the information technology sector went into a nosedive earlier this year. As a result, the portion of semiconductors in Korean exports dropped from a monthly average of 15.9 percent last year to 10.9 percent last month.
On the other hand, autos, shipbuilding, petrochemicals and steel products, which are also leading Korean export items, fared much better than computer chips.
Under these circumstances, it would be logical to believe Korean exports would regain vitality once the so-called New Economy in the United States and elsewhere is powered again by information technology. Indeed, many decision-makers in the government and corporate planners actually say so, and they may be right because a slump in semiconductor exports will be transient though it may last longer than the usual.
But when it comes to a long-term export strategy, this group of people is misguided because they have failed to factor searing competition from emerging economies -- particularly China -- into their predictions.
Some Korean corporations are feeling the heat of fierce competition with China, which is no longer a country depending solely on low wages to churn out low-end products. They have ample reason to fear that they may sooner or later take a drubbing from their Chinese counterparts in world markets.
First of all, Korea and China will soon have to compete head- to-head against each other in exporting autos, petrochemicals, steel products and textiles -- manufactured goods that are included among those the Chinese government is determined to develop as its major export items in the near future.
In addition, China's transformation into an industrial powerhouse, which would pose a direct threat to Korea, is aided by multinational corporations operating in Asia, which are transferring their production facilities to China. World pundits are already predicting that before long, industrial bases in other Asian countries will be hollowed out.
With China fast catching up, Korea needs to overhaul its policy on industrial production and export strategy. And timely guidance has recently come from Bain & Company, a U.S.-based corporate consultancy, which proposed in July that Korea develop conventional industries into knowledge-based ones, invest more in education, research and development and induce brains and investments from abroad.
Be it with or without advice from a consultancy, it certainly is time for Korea Inc. to reinvent itself. In this regard, it is heartening to see the Ministry of Commerce, Industry and Energy working on proposals that include the development of new technologies, the combination of conventional manufacturing with information technology, biotechnology and other new technologies and the integration of different industrial sectors for the production of new products.
The new industrial policy also needs to incorporate initiatives from entrepreneurs as it did in the early 1970s when the late founder of Samsung Group, Lee Byung-chul, decided to invest huge amounts of money into the risky business of semiconductors -- an item, which, notwithstanding its current setbacks, has since grown into an engine of growth not only for the corporate giant but for the entire nation.
We may find another trailblazer in Chung Moon-soul, founder of Mirae Corp., a producer of chip-making equipment, who has donated 30 billion won to KAIST, a Daejon-based research-oriented university, to create a new department for the integration of information technology and biotechnology.
Such initiatives will certainly help the government formulate a new industrial policy and build a new industrial base under the policy, which is badly needed to generate future growth.
-- The Korea Herald/Asia News Network