Low Competitiveness
The Hyundai Research Institute announced on Nov. 16 that Korea recorded an export added value outflow of 44.7 percent in 2011, while the average of the United States, Japan, Germany, and China was limited to 23.1 percent during the same period.
This means that Korea paid US$447 to other countries when its exports were US$1,000. The percentages were 18.7 percent for Japan, 19.9 percent for the U.S., 23.3 percent for China, and 30.5 percent for Germany. The pace of the outflow was also faster in Korea. Specifically, Korea’s percentage increased from 38.7 percent to 44.7 percent between 2007 and 2011, while the increment was just 2.2 percentage points for the U.S., 2.1 percentage points for Japan, and 0.8 percentage points for Germany. China’s dropped from 26.6 percent to 23.3 percent during the period.
The outflow was particularly conspicuous in the chemical and steel industries. Petroleum and coal refining and nuclear fuel production posted a ratio of 88.2 percent, followed by chemical manufacturing (52.5 percent) and steel and metallic mineral manufacturing (47.7 percent).
“This is because the sectors are still relying on the export of universal products while failing to develop their industrial structures,” the research institute explained, adding, “In addition, the materials and components sectors have yet to be further developed to be less dependent on the imports of intermediary and capital goods.”
In 2011, the ratio of major intermediary goods import to the national GDP was 12.7 percent for Korea, which exceeded each of the four manufacturing leaders. Also, the ratio of the import of capital goods for use in manufacturing activities was 4.0 percent, whereas the percentages were 2.5 percent, 1.3 percent, and 2.2 percent for China, Japan, and the U.S., respectively.
Additional challenges include the persistent technology trade deficit and relatively low labor productivity. Korea’s technology export-to-import ratio was 0.41 in 2011 and its manufacturing productivity was US$24.6 per hour in 2009, while the average of the top three was US$62.80.