[OUTLOOK]‘Long winter’ if we lose skillsHypocrisy hides behind a cover of goodness, but its aims are evil. Can evil be the route to goodness sometimes? No matter how we widen our roads, no matter how we restrict drivers from driving their cars every 10th day or even every other day, the traffic congestion just seems to get worse. This makes me start to feel evil. Make more cars and take them all on the roads. When all the cars are stuck on the streets unable to go anywhere, people will look for a way out.
Sometimes, however, we can’t afford the luxury of waiting for long. The exodus of Korean firms abroad is one such case. It would be a gamble, not an evil, if we say, “Leave as you wish,” but when an industrial vacuum is created, people will regret it. Only two out of 10 Korean firms that venture into China settle there successfully. The success rate of Taiwanese firms in mainland China is 25 percent, Singaporean18 percent, Japanese 15 percent and Korean firms is 8 percent, according to statistics I have seen. We need to confirm the credibility of such statistics, but the comment of a Korean businessman stationed in China lamenting the current situation was resounding: “They are like dayflies rushing towards a mosquito smudge in a summer night.”
Why do the firms all rush to China then? The foremost reason is low wages. But just because the average wage in China is one-seventh of that in Korea does not mean that it lowers the price of a product one-seventh as well. Considering the fact that human labor costs take up about 14 percent of total costs, prices would be 12 percent cheaper. Another reason is peace in labor-management relations. This, too, however, is not all that it seems. There are no strikes or walkouts led by union members with red bands around their heads blocking the factory entrances, but the intervention from the Communist Party and industrial councils in large foreign-owned firms is growing. The need for interpreters in directing work is an additional disadvantage of doing business in another country. In conclusion, wages or labor-management relations are not the decisive factors that are making Korean firms fly up and away to China.
What is it, then? It is the anti-corporate atmosphere in society here since the inauguration of the Roh Moo-hyun administration and group selfishness on the part of the labor unions. Instead of being encouraged for their part in creating jobs and incomes, our companies are made targets of reforms and liquidation. The government’s lackluster attitude, that it has no power to hold businesses back when they are determined to leave in this age of globalization, is also part of the problem. The selfish and arbitrary struggle of some labor unions is also a factor that drives companies away from home. There is definitely a “labor aristocracy” in our society. Unless these aristocrats restrain themselves, the exodus of our companies is inevitable and the jobless “slaves” will rise against them.
The Japanese economy, whose escape out of the ten-year recession is taking longer than expected, is seeing an increase in consumer spending and more jobs are being created. There is news to make us envious as well. According to a Samsung Economic Research Institute report, Japanese firms that established factories abroad are returning to Japan. They are returning to solidify their domestic connections for material, components, equipment and technology and to prevent core technologies from leaking abroad. This turnabout took place because of a realization that having a full production base at home and protecting technology brings bigger long-term benefits than does moving abroad in search of low wages and easy labor-management relations.
Japanese companies with technology can expand their exports through foreign subsidiary companies. However, the story is different for Korean businesses, whose domestic components can always be replaced by Chinese ones. Hyundai Motor Company is fortunate in that it was able to take along its component production to China. More than 50 percent of the components Hyundai uses are domestic, 25 percent from its affiliates in China and 26 percent from their subsidiaries at home. This is a rare case. The Chinese youths who are working so earnestly on our production assembly lines will one day grow up to be the backbone of Chinese auto industry who will compete with us with the technology they learned from us.
The Samsung report warns that if we continue to neglect the accumulation of our core abilities domestically and pay attention only to production abroad, we will see a “long winter” come over our manufacturing industry. This long winter must be avoided at all costs.
* The writer is a columnist of the JoongAng Ilbo. Translation by the JoongAng Daily Staff.
by Joseph W. Chung