Research Institute Issues Economic Warning

The Samsung Economic Research Institute (SERI) warned that if South Korea does not regain its competitiveness in the government and the social sector within 10 years, it might fall into a long-term economic recession.

Furthermore, the SERI analyzed that even though South Korea’s competitiveness is not so bad in the field of individuals and corporations compared with other countries, it shows a low level of competitive edge in the government and the social sector.

In a policy presentation commemorating the first anniversary of foundation of the National Assembly’s market economy and social safety net forum held at the Lawmakers Hall of the National Assembly on June 29, SERI stated that South Korea’s level of “system competitiveness” stood at 21st out of 30 member nations of the Organization for Economic Cooperation and Development (OECD).

System competitiveness, which SERI devised by utilizing its own internal evaluation indexes, is a yardstick that estimates how well each government, company, society, and individual harmonizes with the market and innovates dynamically.

As for individuals and corporations, South Korea’s competitive edge ranked 11th and 15th among OECD nations, respectively. However, the government and the social sector stood at 19th and 20th, which fell behind the former two fields. South Korea was ranked 21st in the overall estimation, lower than its ranking in each section.

In its report entitled “Charming South Korea-G10 in Y10 Project: a Strategy to Join the 10 Advanced Nations in 2015,” the SERI proposed its view, saying, “Given China’s economic development, the upcoming aging society, and unification costs that will snowball in the future, this year in particular among the next 10 years to come is the most important period for the country, since it is an off year.”

Jung Ku-hyun, head of SERI, warned, “If South Korea fails to join the G10 (10 advanced nations) by 2015, it will be hard to become a member of the G10 for several centuries to come,” adding, “If South Korea lets this opportunity slip away, it might be faced with a worst-case scenario like the long period of recession experienced by Japan.”

Yun Sun-bong, vice president of SERI, noted, “Political schedules, including local elections in 2006 and the presidential election in 2007, are burdensome for an economic recovery,” adding, “Taking into account a period of two years that is required to administer state affairs efficiently regardless of who will take office in the next presidential election, unless the incumbent administration and the National Assembly throw their energy into the economic recovery, it will be difficult for South Korea to advance to the G10 by no means.

Young-Hae Choi Im-Sook Ha yhchoi65@donga.com artemes@donga.com