Expanding overseas helps firms at home

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Expanding overseas helps firms at home

When Korean companies increase their overseas manufacturing facilities, it helps their Korean subcontractors’ performance and creates more jobs without hurting the subcontractors’ performance in Korea, a report released by the Korea Economic Research Institute said Friday.

The report said conglomerates’ active expansion will help their subcontractors boost their readiness to be capable of global production, which will give them a chance to penetrate overseas markets and hire more workers.

Analyzing the case of Hyundai Motor’s Beijing operation, the institute said the domestic revenue of the automaker’s subcontractors based in Korea was 14 percentage points higher and their exports are 16 percentage points higher compared to non-Hyundai subcontractors in 2011, when the automaker’s Beijing operation’s car sales surged in China.

The research compared performances including recruitment in Korea, domestic revenue and exports from 179 of Hyundai Motor’s subcontractors with 9,000 non-Hyundai Motor subcontractors in 17 industries from 2000 to 2011.

In 2011 alone, Hyundai Motor’s subcontractors hired 44 more workers than non-Hyundai Motor subcontractors. The former earned 25.4 billion won ($ 22.8 million) higher in revenue and 9.8 billion won higher in exports compared to the latter in the same period, the research showed.

Since its establishment in 2002, Hyundai Motor’s Beijing operation has produced 4 million cars as of 2012.

It ranks as the fifth-largest carmaker in terms of the number of vehicles sold in China, according to the China Association of Automobile Manufacturers in 2012, a notch higher compared to 2011.

The Beijing operation makes 1 million vehicles a year, the largest capacity among Hyundai Motor’s overseas production plants, the report said.

“Hyundai Motor expanding its global value chain boosts its subcontractors’ revenues and this has added more jobs there, too,” said Choi Nam-seok, a senior research fellow at the institute. “It’s crucial for small and medium-sized companies to participate in big companies’ global-value-chain expansions as this will not only help create more jobs but also help smaller companies enhance global competitiveness. To make this happen both SMEs and conglomerates need to closely work together when the latter is seeking global expansion.”

According to market observers, major conglomerates including Samsung Electronics and Hyundai Motor’s portion of overseas revenues and oversees employees were up 60 percent as of 2011 as many are seeking to open overseas production lines to save manpower expenses and increase their presence in target countries.

“The case of Beijing Hyundai Motor shows Korean manufacturers’ going overseas doesn’t always lead to the decrease of jobs in Korea,” Choi said. “It generates positive effects in and out of Korea simultaneously.”

BY KIM MI-JU [mijukim@joongang.co.kr]

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