New Export Engines
The Korean government held the Ninth Trade and Investment Promotion Meeting on February 17.
The Ministry of Industry, Trade and Resources reported a plan to promote the private sector’s entries into new businesses to create new export engines in addition to investment promotion measures. The plan aims to ramp up exports of five new export items instead of Korea’s current leading export items and in the mid- to long-term, to promote investment in new industries.
Some experts analyzed that the plan might indicate that the government judged that Korea’s traditional key export items such as IT and petrochemicals would hardly recover. They said that the government knew that there was no silver bullet to this problem except for waiting for external factors such as the slowdown of the Chinese economy and a drop in oil prices to make a recovery.
The Ministry of Industry, Trade and Resources said in the meeting that Corporate Korea will step up exports of five consumer goods such as cosmetics, pharmaceuticals, agricultural products, fashion apparel, household items and baby products to offset additional drops in Korea’s exports. These five customer items are mostly for domestic consumption. They are made usually by small and mid-sized companies. The government already had policies to give support to such companies and make an improvement to their online export systems.
The meeting was devoid of policies to support Korea’s leading export items such as information and communication technology (ICT), petrochemicals, automobiles and shipbuilding. “We will slow down a drop in exports of Korea’s major products,” the ministry said.
This change in the government’s policies exemplified that the government understood that the weakened competitiveness of Korea’s key industries could not be addressed by its simple support. Korean petrochemical, shipbuilding and steel companies are struggling in a long slump due to low oil prices. To top it off, gluts from China dealt a heavy blow to them.
Lately Corporate Korea has been suffering a slump in exports of its major ICT products such as cell phones, semiconductors and displays. In January, Korea’s ICT exports plunged 17.8 percent from a year earlier. Most of all, they have been on the skids for four straight months since October last year. Drops in their exports have expanded.
Experts point out that the drop in Korea’s exports cannot be blamed only on deteriorating external conditions. They say that the competitiveness of Korea’s export products has been weakened as Korea’s export policies have focused on leading Korean export products only, failing to respond to changes in the global market.
China’s low-priced products are already threatening Korean products in the ICT and automobile sectors. “It is not only external conditions that has been making Korea’s exports slump,” said Joo Hyung-hwan, Minister of Industry, Trade and Resources in a meeting with the presidents of companies of the 30 largest business groups in Korea. “The basic cause is that the competitiveness of Korean companies has been weakened and Korea did not create alternative new cash-cow industries.” In this regard, the government came up with measures for entries into new industries instead of export promotion measures.
The problem is that it will be difficult to make up for the drop in the short term with the measures for entries into new industries at a time when the drop in exports becomes prolonged. In the event that the drop in exports continues to debar manufacturers from escaping their slumps, it will be hard for domestic consumption promotion policies to work out as hoped by the government. This will also have a negative impact on job security for laborers.
“It is a major decision to nurture new industries and develop new competitiveness,” said a professor at a Seoul-based university. “But due to the export-oriented Korean economic structure, this state will bring a crisis to the Korean economy if nothing is done to it. Special measures should follow.”