[OUTLOOK]Time to look at compound exportsBecause China is a country whose economy depends heavily on exports, its fast transformation into a production giant is a matter of concern. China now threatens to wipe out our entire manufacturing industry. While domestic industries experience a feeling of crisis over China's ascent, and hesitate to invest in facilities, or have gone abroad with their factories in search of cheaper labor and land costs, direct foreign investment in Korea has shrunk in contrast.
Of course, not all that China's economic growth brings us is bad. As a neighboring country of China, we are in a most advantageous position to gain access to a vast market, plentiful labor and resources. It is a proven fact in economic history that when the economy of a big country develops, the neighboring countries gain from it. It is, however, necessary that we acquire a correct understanding of just how this equation comes about in order to apply it to Korea-China relations. In other words, we need to give serious thought to just what we're going to base our economy on in the next 5 or 10 years. What will be the new route of success for our export-based economy?
The weakness in our economy is reflected in a continual decrease in unit prices. The export unit price last year was merely half of that six years ago, and in between these two periods the average rate of decline was a staggering 9.8 percent.
Fortunately, we have been able to make up for this decline in unit price by increasing our volume of exports. But now with a China that is competitive both in price and quality of goods, we need a higher level of export strategy that can transcend even the economic drive we've had so far.
An alternative development we might consider is a "compound export" strategy. A compound export is an export of both goods and services. A compound export strategy would aim at expanding and enhancing the value level of our exports based on a balanced development of goods and services. We need to grow out of the one-dimensional strategy in export goods of relying on cheap labor that we have been using and focus on higher value products and higher value manufacturing processes. We also need to develop our service industry, starting with distribution, tourism and finance in order to strengthen our service exports. Developing our distribution industry would not only create several forms of added value but also reduce the distribution costs of our industries and thus increase our competitiveness.
The development of the service industry will not only directly contribute to the promotion of our service exports, but it will also serve to increase the competitiveness of our goods exports. This is the beauty of compound exports.
In order to bring about compound exports, we first need to roll up our sleeves in the field of technology enhancement and develop products that will give us an edge. The key to a technology breakthrough lies in human resources. We need to train quality human resource individuals and create an environment where they are given due preferential treatment. At the same time, we need to reinforce systemic assistance to research and development.
In addition, efforts must be made to graft information technology into more conventional industries. Advanced information technology is one of our strengths. Many conventional industries have already seen their competitiveness grow and their export volumes increase through applying elements of information technology to their businesses. By encouraging such a union throughout the entire industry, we will be able to provide powerful momentum for our economic growth.
We should also turn our attention to pursing a more active strategy using the Korean Peninsula's geographical situation as Northeast Asia's center, located between Japan, the world's largest technology center and China, the world's largest manufacturing center. With a "free economic region bill" passed by the National Assembly earlier this month, we now have sufficient grounds to advance on our strategy as the center of Northeast Asia. Given our progress, it is advisable for the government to create a separate agency to efficiently pursue the matter when there is a government reshuffling next time.
By pursuing a compound export strategy with the attitude that we can fly higher and see farther than our neighbors, we can revive our economy and ride on the back of China's rapid ascent －－ instead of getting trampled under its hooves.
* The writer is the chairman and CEO of Korea International Trade Association.
by Kim Jae-chul