Korea is Three Times More Dependent on Imports than Japan.

Research found out that the Korean economy is becoming more dependent on imports due to its trade structure where increases in exports lead to increases in imports of raw materials and intermediate goods. It was also found that the share of the service industry in the economy is rapidly outpacing that of the manufacturing industry.

This is the founding of the Bank of Korea`s year 2000 statistics compiling the annual transactions of products and services. The extensive statistics, released Thursday, is compiled every 5 years.

▽ Dependency on imports three times higher than that of Japan

The Korean economy`s dependency on imports, which means the share of exports and imports in all the products and services provided to the domestic market, increased dramatically to 29.2% in 2000 from 23.4% in 1990 and 24.9% in 1995.

This means that 30% of components and parts required to produce a product should be bought from other nations. Japan recorded 10.8% in the dependency on imports, one third of the Korea`s figure.

Moreover, export`s effects of inducing imports increased from 0.30 in 1995 to 0.37 in 2000, meaning that 37% of production factors should be bought from overseas to produce one export item. Kim Jong-kui, the director of the division for statistics on input and output in the Bank of Korea, said that with more export items produced using imported intermediate goods, the added vale of the overall industry is decreasing. He stressed that more investments should be made on the domestic production of raw materials and components for a sustained growth.

▽ Rapid increase in the share of the service industry

The share of the service sector in the overall industry increased to 39 % in 2000 from 30.3% in 1990, 34.1% in 1995 while the share of the manufacturing industry has been declining from 49.6% in 1990 to 47.6% in 1990 and 46.5% in 2000. Cho Seong-jong, the director of the division for statistics, said that rising share of the service sector in the economy inevitably occurs with the growth of the economy. But, the director said, that it is not desirable for the service sector to grow too rapidly without securing strong competitiveness.

The share of investment in the final demand plunged to 22.4% in 2000 from 28.9% in 1990 and 29.6% in 1995, which indicates sluggish investment.

Consumer spending in 2000 was worth 352,3710 trillion won, 1.7 times higher than 202,9713 trillion won in 1995. But over the same period, wages of employees increased by just 1.5 times, which indicates more lavish spending of Korean people.

Joong-Hyun Park sanjuck@donga.com