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[EDITORIALS]Rigorous Restructuring Needed

Published: 05 Jan. 2003, 19:47

The National Statistical Office's report that Korea's industrial production declined 2.7 percent in June from the previous year was shocking, not because the industrial output recorded its first contraction in 32 months, but because the report involved all structural problems of the economy.

Last Friday's report by the statistics agency carried two main points. One is that the recession of the semiconductor business has caused the industrial production drop. The other is that capital spendings have been declining. Semiconductor production tumbled 16 percent in June, pulling down the total industrial output growth into negative territory. It exposed the vulnerability of the Korean economy, which depends too much on the one item, the semiconductor. The outlook for the Korean economy is dim, since it is not clear when the global information technology sector, which uses semiconductors as essential parts, will recover.

Capital spending has marked negative growth for the last eight consecutive months, threatening the Korean economy like a time bomb. Investment in equipment is a part of the domestic aggregate demand and thus plays a role in the future. If the decline in capital spending is prolonged, the Korean economy will become so fragile, just like a child going without food, that it will not be able to share the benefit from the recovery of the global economy.

The negative growth of industrial production is the most obvious signal of the recession. Now that the Korean economy's real situation and its problems have been proved through the figures, households, companies and the government should have a sense of the impending crisis and find a breakthrough. Either the optimistic view intentionally held by the government's economic policy team at the start of this year or too pessimistic views recently spreading is not rational. We should solve the problems by keeping cool.

The roles and duties of the government and the political sector are especially important. Instead of attributing the economic difficulties only to the global business slowdown, they should take the policies to boost the economy, while conducting rigorous restructuring to enhance the nation's competitiveness.