By Yoon Ja-young
Staff Reporter

A leading economic think tank warned Wednesday that local companies that outperformed global rivals over the past year are facing five major risks that could derail their robust performance next year.

Namely, they are the revival of three highs ― the appreciation of the local currency, rising interest rates and expensive oil prices ― as well as the other four risks ― lingering uncertainties over exports, the deepening sandwich phenomenon between China and Japan, rising costs linked to the reduction of greenhouse emissions and shaky management-labor relations.

"Korean companies have recorded relatively good performances in the third quarter, despite the global recession. Business optimism prevails for 2010, but there are risks to watch out," said Kim Sung-pyo, a research fellow at the Samsung Economic Research Institute.

He said the most serious risk in 2010 was the revival of the three highs. The Korean won, which traded at 1,570 won per greenback on March 2, has gained 35 percent in value, and is now trading at below 1,160 won per dollar. Dubai crude oil, meanwhile, rose 77 percent, nearing $80 per barrel from slightly over $40 in March. The interest rate is also picking up, having risen by 0.39 percent to 4.26 percent from March.

Kim estimated that the three highs would get more serious in 2010, expecting the won-dollar rate to reach 1,100 won, oil prices to hit $83.9 and interest rates of 6.4 percent.

"In the past when three highs prevailed, the global economy was in good shape, but things are worse now as low growth is expected to continue for the time being," Kim said.

He said the dangerous trio would weaken the price competitiveness of Korean products.

He advised companies to set up comprehensive risk management systems to cope with the problem. He said minimizing cost and developing high value added products was essential to tide over the three highs.

Another risk is uncertainties in Korea's export markets. As major economies in the United States and the EU falter, global demand is not recovering.

"Businesses should find out how customer needs have changed following the crisis, and should enhance competitiveness in brand and design and develop premium products," Kim said.

He also showed concern over Korea being sandwiched between Japan ahead of them and China closing behind. "The Chinese firms are rising as global powers thanks to a huge domestic market and state support," he said, adding that Korean firms should seek overseas M&A opportunities, and also select growth engines.

He pointed out that businesses would face rising costs associated with the green growth drive. "A passive attitude could put firms at risk," Kim said, advising firms to actively cut costs by adopting green technologies and innovating their manufacturing processes.

Local companies are advised to turn their products into environment friendly ones. "This is not something that one can avoid. It is a must for survival," Kim said.

He added that firms should focus on communication and building up trust with labor unions, as relations are likely to be unstable after the crisis.

chizpizza@koreatimes.co.kr