[EDITORIALS]Falling dollar creates concernThe strengthening Korean won against the dollar and the sharp surge of international oil prices is abnormal. The ideal values for exporters ― a won level of 1,050 to $1 and oil prices at $40 per barrel ―have been broken.
The Korean won is now facing an era where the dollar can fall below the 1,000 won mark and the price of Dubai crude oil, which hit a high of $43.84 per barrel, seems to remain fixed at a high price.
For the Korean economic structure, which imports raw materials and products for later export, the recent situation is most undesirable.
The pressure that domestic companies feel is extreme. Samsung Electronics loses 20 billion won ($19.8 million) in profits every time the won appreciates 10 won against the dollar. When oil prices rise a dollar, Korean Air faces an addition 30 billion won in annual costs.
In order to prevent currency shocks, companies are increasing overseas production and offsetting rising oil prices through cutting primary costs.
Movements by Korean companies are reminiscent of those made by Toyota Motor when the yen strengthened against the dollar after the “Plaza Agreement” in 1985. Toyota Motor started to persistently increase production overseas while tightening their management belts.
Today, the overseas production of Toyota Motor takes up 45 percent while domestic production takes up 55 percent, making the company less sensitive to foreign exchange fluctuations.
But there is pain in the process of getting used to the changing external environment. In addition, companies have to anticipate possible reductions in personnel recruitment that could lead to lowered production abilities.
At least Korean companies’ influence and market share in the global market has greatly improved.
The controlling interest of domestic companies in the semiconductor, mobile phone and shipbuilding sectors in global markets have largely increased. The quality of Korean products has also improved.
At a time of a strengthening Korean won against the dollar and high oil prices, the political parties and government should be in emergency mode. This is not the time to be swayed by signs indicating a recovery of the domestic economy. It is time again to renew the call for revitalizing the economy which has slipped behind other national issues recently.