Korean Industries at Stake

The sports outfit manufacturer “A” company, which entered the Chinese market in 1995, has recently expanded its factory by three times. It has also employed 500 more workers, increasing the total number to 1000.

During that time, the number of manufacturing workers in Korea has been reduced from 100 to 15. Currently, the headquarters in Korea conducts only research and development (R&D) duties.

“In the case of manufacturing workers, the Korean employees’ monthly payment is 10 times bigger than that of Chinese workers. The difference in salary is so much that it is indispensable to blow up the investment to China,” remarked the spokesperson of “A” company.

The assertion has soared up that the manufacturing industry is walking out of Korea as the days roll by, but the high value-added industry or the service industry which can substitute the void are not growing quickly to fill in the gap, and the whole industry is becoming devoid of substance.

The Korea Chamber of Industry & Commerce (KCIC), on November 16, passed on that this devoid of substance in industry field is reaching a dangerous level, releasing the report, “The Situation of Industrial Devoid and the Counter-measures.”

In the past 13 years, 880,000 jobs in the manufacturing industry has vanished. According to KCIC’s report, the amount of overseas investments, which was steady with about 1,000 cases a year, has increased to about 1,800 cases a year, showing an 80 percent increase during that time. The amount of investment has also reached approximately the 10% level of the investments in factories in Korea. Cutting-edge industries such as the cellular phone industry are also wrapped up with the hot wind of transfer overseas.

In fact, the newly founded corporations in June was reduced to 504, half of those (1084) founded in June 2002. The amount of jobs in the manufacturing industry has also been reduced from 5.04 million in 1990 to 4.16 million in 2003, with approximately 880,000 jobs lost.

Korean companies have created a million jobs in China – The report has counted on that the biggest reason for the industrial devoid is China. As of 2001, 790,000 jobs have been created in China by Korean companies. Considering the investment tendency in China nowadays, the employment level might pass the one million mark. KCIC assumed that since the monthly employee payment in China is only 10 percent that of the Korean employee payment, about 100,000 jobs might vanish in Korea during the same period.

In addition, the Chinese provincial governments have competitively held expositions for investment in Korea, cleaning up the investment requests. It seems that the Korean companies will fix its plan to enter the Chinese territory more eagerly.

At the investment exposition of Yentai, China, which was held at 63-Building, Yeoido, Seoul, on November 12, about 600 foreign investment related employees of Korean companies participated.

Growth Latency also shows “Red Light” – The report also pointed out the lack of growth in service industry which ideally will fill in the devoid of manufacturing industry.

It focused on that the ratio of “Manufacturing support service industry” such as the logistics and the manufacturing suppliers constitutes only 6.9 percent of the total industries, lower than that of the advanced countries (13-20 percent). On the other hand, the ratio of “Non-manufacturing related service industry,” such as restaurant and lodging accommodations, constitutes 21 percent, much higher than that of the U.S. (15.2 percent)

“If the devoid of manufacturing industries continues to be ignored, there is a possibility for damage to the national growth latency,” remarked Sohn Se-won, the chief of management inspection team of KCIC. He also added, “The countermeasures, such as alleviation on the restrictions of development on the lands of metropolitan area, are urgent.”

Jong sik Kong kong@donga.com