Korean businesses on the coming crisis in Korean manufacturing.

While reading through this post at the Marmot’s Hole, I was very happy to come across a link to the “Korea Economic Reader” email service available from here, which I’d heard of previously but only really needed (and desperately) since the focus of my blog shifted with my favorite post from Korean women in bikinis to more academic subjects. As you can see for yourself, the site itself is a little…if I had to put it politely, I’d say eclectic, so I avoided the links to Quakers and the Seoul Hash Harriers and instead I clicked on the “Understanding Korea” link as soon as I found it. Once there, I basically fell in love at first sight, for it appears to be such a treasure-trove of links to articles about Korea that it’ll take me months to go through it. I’m so stoked that I would have made it my homepage, currently a countdown to my much overdue 4 week holiday in Australia and New Zealand, but for the damn automatic music…a big faux pas to readers with baby daughters sleeping in the next room.

Given my favorite post, then naturally this link first caught my eye. I’m very very tempted to cut and paste those four articles from it here, partially because they’re all very relevant to the blog, but mostly because I want to move my lapse from academia and into bikinis in the previous post as far down my front page as possible. This blog is my public face to future employers after all. But even I have some limits to articles that I’ll paste up here if they’re only a click away, and indeed three of the four are very interesting but basically repeat what I have said earlier on the subject. But there is one with new information (to me), and what’s more it’s from a Korean source, my first on the subject, so I’m in like Flynn:

Is the Korean Economy ‘Sleepwalking’?

The Chosun Ilbo, March 21, 2007

The Financial Times of London ran a special report on Korea’s economy under the headline “Seoul Sleepwalk.” The report depicted Korea’s economy as having awoken suddenly and wandering around as if in a daze, like a sleepwalker.

The reason why export powerhouse Korea is in danger of losing its direction becomes clear when we compare the Beijing and Ulsan plants of Hyundai Motor. Workers at the Beijing plant produce 68 cars per hour and receive US$360 per month. In contrast, workers at the Ulsan plant make 55 cars per hour and receive $4,580. Korean workers make ten times more than their Chinese counterparts, yet produce less. If you look at the situation from a purely economic standpoint, Hyundai should close down the Ulsan plant and expand the one in Beijing. If not, Hyundai Motor will lose out to Toyota which has a plant in Beijing and Mercedes Benz which has a plant in Shanghai. Only the workers and management at Hyundai Motor seem to be oblivious of this simple fact.

The Korean economy has lost its vitality. Private sector investment fell to just 28 percent of gross domestic product last year. It wasn’t always that low. In 1998, private sector investments accounted for 30 percent of GDP and 40 percent in 1996. This decline in investments shows businesses have lost the urge to prepare for the future. To outside observers, it’s clear that time is running out for small and mid-sized businesses in Korea, as the big business customers seek to buy products at lower prices, while Chinese competitors are ratcheting up the heat. There are also numerous “zombie” companies that are surviving with government aid, even though their products have lost their appeal.

There is nothing surprising about the Financial Times article. For some time now, the facts reported in the piece have been widely known in the industry. What’s shocking is that the fact that Korea’s economy has been sleepwalking has been known around the world for some time, yet the president doesn’t seem to be aware of this. At his cabinet meeting on Tuesday, the president spoke at length about the departure of former Gyeonggi Province governor Sohn Hak-kyu from the Grand National Party. But he didn’t say a word about the state of the economy. Not a single one of his ministers mentioned the Financial Times article. The so-called commanders and sentries who lead and guard Korea’s economy are all dozing off. People who pay no attention to the setting sun end up having to sleep on the streets. It’s a shame that the ones who will pay the greatest price for such laxness are the Korean people.

Not earth-shattering, and I don’t have much to add because I want to go to bed, but it’s a start. Obviously this (editorial it sounds like) is less an insightful and piercing critique of the industry and more a pretty blatant jab at Roh Moo-Hyun, whom the conservative Chosun Ilbo is no great fan of…but then it’s probably true. While the lame-duckness of his presidency was partially unavoidable, Korean’s natural fear of authoritarians making their presidents limited to single five-year terms, I actually thought the right guy won in 2002…only to become disgusted with him for his bowing to netizens, continuation of the Sunshine Policy, economic populism, and overall complete FA achieved in the last 5 years; not for nothing has Korea been considered by many commentators to have just experienced a lost decade like Japan did in the 1990s (see here and here), and the Asian Financial Crisis can’t be blamed for it forever. Having said all that, it remains to be seen if sufficient attention is paid to this issue by the most likely next President Lee Myung-Bak come November. Here’s hoping.

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