Beleaguered Korea Inc.

The Korea Times

The Korea Times

Opinion

Thu, November 30, 2023 | 23:14

Editorial

Beleaguered Korea Inc.

Posted : 2023-05-02 16:35

Updated : 2023-05-02 16:35

It's still ― and always ― the economy, stupid.

The Korean economy is in bad shape right now.

In the first quarter, the economy grew only 0.8 percent year-on-year, less than half of its growth potential of 2 percent.

Exports fell in April, continuing seven straight months of declines, as outbound shipments of semiconductors, which pulled Korea through the COVID-19 pandemic, were mired in a severe slump.

In the past, the Korean won's weakness led to an export increase thanks to improved price competitiveness. Now, however, the weak currency pushes up the import prices of raw and intermediate materials more steeply, worsening trade profitability.

Moreover, trade with China, which had long been the lifeline for Korean exporters, showed the biggest deficit. Korea's export products, not only memory chips but consumer goods, are not as popular as before in the world's largest market. It may get worse as Korea has moved closer to the U.S. amid the escalating global hegemonic battle between the G2.

The nation's already high household debt shows signs of aggravation. Lenders expanded credit supplies when the interest rate was low. Still, many borrowers are unable to repay interest and principal amid recent rate hikes. Little wonder the IMF revised Korea's growth projection downward four times, while upping forecasts for the global economy. There seem to be few bright spots in Korea Inc. for now.

Experts say another economic crisis is looming ― or has already begun. Still, the government shows few signs it is dealing with a crisis. It frequently holds emergency meetings of economic ministers. President Yoon Suk Yeol chairs monthly export-promotion meetings. However, the results are barely visible. There can be a difference of view on whether the government should take short-term boosting steps and risk further inflation. But it can ill afford to do nothing. So what should it do now?

After the release of the monthly trade report on Monday, Trade and Industry Minister Lee Chang-yang reiterated his intention to expand tax credits for chipmakers. That may be necessary to bring semiconductor makers back home, even partly. But Samsung Electronics and SK hynix have long moved their stages to America and China. Korean trade diplomats must focus on helping these companies get subsidies from the U.S. and upgrade their Chinese plants by persuading Washington and appeasing Beijing. Their risks are more political than economic.

Korea should go further. Seoul must not remain content with "maintaining close consultations" in the semiconductor area, but obtain exceptional treatments. That should be the price for Korea betting everything on the U.S. and jumping on Washington's global strategic bandwagon ahead of all else.

If he wants to remain as Korea's "No. 1 salesman," Yoon must do all he can to turn the "technological alliance" with the U.S. into action. Korea must get ahead of its global rivals in future growth engines like quantum computing, artificial intelligence, bio, space and small modular reactors.

In its economic and industrial relationship with America, Korea must be like a second China just before the ongoing decoupling, not a second Japan. The U.S. helped China's industrial surge to keep Russia in check. Now, it must do so for Korea to keep China in check.

On the other hand, when Japan emerged as its archrival in the early 1980s, America nipped it in the bud using monetary and industrial weapons. Korea will not, and cannot, be the second Japan to threaten the U.S.' status in the global economy. The two countries can prosper in a genuine sense of win-win as the source technology provider and its commercial utilizer. In industry, at least, they should become one.

We hope Yoon will induce some actions remotely similar to his U.S. counterpart if they have indeed formed such a solid personal camaraderie or rapport as the presidential office claims. Only then will the Korean people understand why their leader is so "serious" about the U.S., and the MZ generation fathom why Yoon belted out the 1970s hit, "American Pie" during his state visit to Washington, D.C. Otherwise, Koreans will say in the parliamentary elections next April, "It's still the economy, stupid."