By Choi Sung-jin
Since the 2008 global financial crisis, advanced countries have been shifting their industrial focus back to manufacturing, trying to increase added value and encouraging “buy home-made goods” campaigns, Korean industry experts say.
In the United States, for example, General Motors, which was driven to the verge of bankruptcy in 2009, is regaining its vigor, and Shinola’s sales of wristwatches are rising steadily as two symbols of the recovering manufacturing sector there.
The situations are not much different in other industrial countries. French consumers are now buying home-made underwear, such as Le Slip Francais and Commune de Paris, like hot cakes while government and business officials in Italy and Japan are also reviving “made-in-Italy” and “made-in-Japan” fervor.
This is a far cry from a few decades ago when these industrial countries shunned manufacturing as a declining industry, the experts say.
These countries are stepping up efforts to increase added value in the manufacturing sector while speeding up the return of manufacturers who went abroad in search of lower costs. They learned a lesson from the 2008 financial crisis that they should not give up manufacturing industries with low comparative advantages, the industry watchers say.
The U.S. has selected manufacturing as the strategy to rebuild its crumbled economy. According to the “Reshoring Initiative,” a nonprofit organization, 818 U.S. manufacturers that had gone abroad returned to America between 2010 and 2015, bringing 124,852 jobs back home.
Also noteworthy is U.S. consumers’ preference for home-made products. In a survey last year, 84 percent of respondents said they “felt like buying made-in-USA goods.” From the late 19th century to early 20th century, small, underdeveloped countries have conducted national campaigns to promote domestic industries, and their 21st century version is happening in advanced countries to prevent the outflows of their jobs.
“The former Kim Dae-jung government played down manufacturing as a smokestack industry and the Lee Myung-bak administration wanted to turn Korea into a financial hub and tried to buy out Lehman Brothers just two months before it collapsed,” said Chang Ha-joon, a professor at Cambridge University during a lecture at the weekend. “Had Korea bought the U.S. investment bank, the nation’s economy might have crumbled, too. Manufacturing still constitutes the backbone of the national economy.”
While advanced countries are pushing to revive manufacturing, Korean manufacturers’ competitiveness has been sliding, the experts say.
The Korean industry’s strength -- low-cost, highly-skilled labor -- is rapidly losing ground with the rise of China and India as global manufacturing powerhouses. Because it has a small domestic market, Korea cannot give up its manufacturing industry, most experts agree.
At a weekend forum hosted by the Korea Chamber of Commerce and Industry, Professor Chang cited the case of two industries as examples.
“If Korea is to replace the automobile industry with medical industry, the nation should expand the latter’s size to 1,300 times larger than now, which means Korea’s population should also grow to several hundred million,” he said. “Switzerland and Singapore are the two countries with strong services industries. Yet they are also the worlds’ Nos. 1 and 2 manufacturing powers in terms of per capita added value created.”
For Korea to upgrade its manufacturing competitiveness, it should urgently tackle several tasks, the experts say. Above all, it needs to speed up digitalizing domestic manufacturing facilities, improving productivity and product quality at the same time, they say.
The Ministry of Trade, Industry and Energy, for instance, has been running a“Manufacturing Innovation 3.0” campaign since 2014, modeled on Germany’s “Industry 4.0” policy. Unlike Germany, which sharply upgraded its productivity through automation, Korea remains content with applying enterprise resource planning (ERP) on the outdated manufacturing lines of small and midsize businesses, they say.
“Korea’s policymakers, instead of working out short-term countermeasures to prevent further hollowing-out of domestic industrial base, should come up with a mid- to long-term vision to upgrade industrial structure and develop a new growth engine,” said Lee Bu-hyeong, a senior fellow at Hyundai Research Institute. “It is also important to reduce labor-management conflicts and relax regulations.”