Report urges diversifying away from IT exports

Korea’s manufacturing industry has improved to a level similar to that of advanced countries, but it is heavily reliant on IT businesses, according to a report released Sunday by Hyundai Research Institute. With the rise of China as an IT rival, the report says Korea needs to diversify its exports in manufacturing.

According to the report, Korea scored 106.9 in the manufacturing export acceleration index in 2013, just behind Japan (111.7 points) and Germany (108.5 points). In 2000, Korea scored 94.3 points, while Germany earned 104.8, Japan 103.4 and the United States 100.8.

Despite the remarkable growth, however, the report said the improvement doesn’t look healthy as it heavily relies on one sector.

In 2013, Korea earned 107 points in the semiconductor and electronics part export index, which was higher than Germany (92.3 points) and Japan (100.4 points). It added that 26.7 percent of Korea’s exports in the manufacturing industry were from IT businesses. The country also scored 100.4 points in the precision instrument sector with growing exports to beat out Germany (98.3 points) and Japan (95.1 points), but 66 percent of the sector was represented by the display business.

The report said Korea needs to diversify its product lineups for export as China is chasing the country fast. China was only 77.3 in the manufacturing industry acceleration index in 2000, but 91.3 in 2013. With its price competitiveness, China’s index in the steel business improved from 89.8 in 2000 to 104.5 points in 2013, which is only 4.1 points lower than Korea’s 108.6 points.

Korea scored 96.5 points in the chemical industry in 2013 and has not been successful in narrowing the gap with Germany (103.3), Japan (104.9) and the United States (101.4). And it has been challenged by China (91.7). The gaps with China in the oil and coal businesses have been narrowing each year.

The report added that China became a real threat in the manufacturing business as a production base for many global companies. Other than IT, China also is growing fast in the video and audio system industry. In the petrochemical industry, the report said China might beat Korea in the near future.

“The government needs to provide policies that can support businesses other than the IT industry,” said Cho Kyu-rim of Hyundai Research Institute. “It also needs to try to improve the overall industrial structure by developing plans that can support new growth and high-value-added industries. It also needs to help businesses to foster more high-quality researchers and technologies in the manufacturing industry.”

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]