By Choi Sung-jin
Local analysts have long lamented that Korea Inc. is sandwiched between high-tech Japan and low-cost China. This still remains true but the two giant neighbors have switched positions.
Made-in-China products, which used to challenge Korean goods with low prices, are now moving ahead of the latter in terms of technology. At the same time, Japanese exports, which have an edge on price competitiveness thanks to a weak yen, are threatening to crowd Korean competitors out of the market, according to a recent survey.
According to a survey the Federation of Korean Industries conducted on 30 industry groups and business associations, 21 of the 30 responded that they are lagging behind in price competitiveness. Nineteen industry associations said Chinese competitors have already caught up with them in technology, too, or will do so in three years.
Compared with Japan, 13 associations said they are behind their Japanese counterparts in technology, while 14 replied that their price competitiveness is similar, or inferior, to Japanese industries. Asked to predict their future competitive edge, 22 out of 24 respondents made a pessimistic forecast about competing with China while 13 out of 20 respondents made similar replies in comparison with Japan
As to the current economic situation, 20 among the 30 said it is “very serious” and will last for a lengthy period with seven regarding it as “a little serious” but also believe that it will end soon. When compared with the 2008 global financial crisis, 15 respondents said they have the “same” sense of crisis with seven replying it is even more serious now than seven years ago.
The report by the lobby group for family-controlled conglomerates cited deregulation, corporate tax cuts, tax credits and subsidies for research and development as four necessary things to enhance competitiveness. “The government should make bold regulatory reforms and policy supports to businesses to help them break through the limitation of growths and develop new future industries,” said Yu Hwan-ik, head of the FKI’s industrial headquarters.