Urgent economic action neededKorea’s exports in October plunged 15.8 percent year on year, the largest-ever fall since 2009 in the aftermath of the global financial crisis. Export volume also sank 9.4 percent. Exports have been depressed throughout the year, dragging down the overall economy.
The government, however, reiterated that the stagnation was due to temporary factors of low oil prices and a stronger won against the yen. Choi Kyung-hwan, deputy prime minister for the economy, until recently said the economy could grow near 4 percent this year if exports pick up.
But most trade and economic experts are skeptical of a near-term rebound in Korean exports. Mainstay exports of automobiles and ships have fallen sharply, and shipments of most other key export items like steel and petrochemicals have all been reduced except for semiconductors and mobile phones.
Korea has accounted for no more than 3 percent of the global demand for the last five years. Items that rank top in the global export market have been reduced to 65 in 2013 from 73 in 2009.
The slowdown in the Chinese economy, which has been the biggest customer of Korean raw and intermediary materials, and fast improvement in China’s manufacturing capacity and technology have taken toll on Korean exports.
The areas China has been concentrating on directly compete with Korea’s mainstay industries.
The 10 key industries accounted for 86.3 percent of total Korean exports as of 2014, up sharply from 55.9 percent in 1980. Korean industrial products would have to compete directly with Chinese counterparts, whose quality is getting better on top of price competitiveness.
But the government remains oblivious. Policy redirection for industrial restructuring in order to avoid direct competition with China, and development of new growth areas, expansion of the services sector, and improvement in the investment environment have been needed for the last decade in order to retool the economy away from the traditional manufacturing sector and carve out new growth model for a sustainable economy.
Unfortunately, the government and the National Assembly have not paid enough attention or taken actions. They must accelerate reforms in the four sectors in order to raise efficiency in economic infrastructure and work together to draw up new strategy to promote exports and growth before it is too late.
JoongAng Ilbo, Nov. 2, Page 30.