Nation must hurry to stop productivity drop, inventory pile-up
Manufacturing constitutes the foundation of a nation's economy. There can be differences by country and era, but manufacturing is the basis of national competitiveness and can never be neglected. In the case of Korea, manufacturing accounts for about 30 percent of its gross domestic product. Therefore, manufacturers' troubles directly lead to a national economic crisis.
Domestic manufacturing is in serious trouble. Unsold inventory is piling up, and production capacity has been declining. According to Statistics Korea, manufacturers' inventories in August increased 1.1 percent from the previous month and swelled 4.6 percent from a year ago. Production has been losing steam, too, marking steep drops almost every month this year.
Immediate concerns are about increasing unemployment. Adversely affected by industrial restructuring to cope with the protracted business slump, the number of manufacturing workers declined for the fifth month in a row in August. Local manufacturers, faced with a financial crunch amid higher minimum wages and shortened working hours, are taking self-help steps by curtailing new recruitment. Some are moving factories abroad to cut labor costs and dodge regulations.
The Moon Jae-in administration should put a priority on reviving the manufacturing industry. The current undue reliance on semiconductor makers will result in huge aftereffects. Policymakers ought to remember how the unprecedented semiconductor boom from 1993-1995 ended with the horrible currency crisis in 1997. As if by coincidence, the global financial crisis in 2008 came after Korea's D-RAM production marked record growth from 2002-2004.
The government should strengthen the foothold for another manufacturing take-off. Examples in advanced countries demonstrate only strong manufacturing can ensure industrial stability. Fourth Industrial Revolution, such as artificial intelligence, the internet of things, self-driving vehicles and biotech, are also finding their bases for hardware in manufacturing. Countries are increasing added value through the fusion of future industries and existing manufacturing.
This is the point Korea should benchmark. The time is long past to strive to restore its status as a "global manufacturing powerhouse." The entire nation ought to do its best to resurrect manufacturing, as the "root of industry."
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