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[Op-ed] Return to a `Sandwiched Situation?`

Posted October. 02, 2009 08:43,   


Korea’s situation is often likened to being sandwiched between Japan, which has a considerable lead over Korea, and China, which is rapidly catching up. Samsung Electronics and Hyundai Motor are world leaders in certain sectors but their chairmen say they are worried about Korea five to six years from now. A consulting company described Korea in the 21st century as being squeezed in a nutcracker, meaning the country must overcome this tough situation as soon as possible. The company warned that Korea could be crushed by a nutcracker made of iron rather than being sandwiched wrapped in slices of soft bread.

The Korean economy has grown stronger since the onset of the global economic crisis last year. It has enjoyed cost competitiveness in foreign market thanks to a hike in the won-dollar rate. “Made in Korea” products are considered similar in quality to those of Japan but cheaper and far superior in technology that China’s. Thus the country has enjoyed a “reverse sandwich” situation. A buyer from a foreign automaker said early this year, “Korean car parts are competitive in three aspects: quality, price and technology” while visiting “Buy Korea” fair for Korean exports.

Japan and China will never leave Korea alone, with the latter making huge strides. Korea Trade-Investment Promotion Agency President Cho Hwan-ik said, “Japanese companies such as Sony are introducing cheaper products, while Chinese players are aiming at the high-end market.”

The Japanese yen has gained strength recently, but its weakening could lead to Korea easily losing price competitiveness. China has secured a string of cutting-edge technologies and leading core enterprises en masse around the world over the past few years. Korea could soon lose its technological lead over China. Cho called the situation a “reverse reverse sandwich.” Though Korea has enjoyed a “reverse sandwich” situation for a certain period of time, it is poised to return to the “sandwich” period.

The Korean economy cannot beat those of Japan and China with a moderate level of competitiveness. New export markets must be developed by banking on specialization. Korean players must penetrate the Chinese market, which is growing at an exponential pace. Korean exports cannot win only with cheap prices, but must have an edge in overall aspects including branding and distribution. China announced a plan on “reshuffle and promotion of ten major industries” this year, and has begun efforts to cultivate large conglomerates with global competitiveness. If Korean companies lose ground in the competition with these Chinese industries and return to the “sandwiched” situation, Korea could kneel just before joining the league of advanced nations.

Editorial Writer Hong Kwon-hee (konihong@donga.com)