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(EDITORIAL from The Korea Times on June 4)

All News 09:12 June 04, 2016

Sluggish exports
--Government, corporate sector need to update strategies--

The latest Ministry of Trade, Industry and Energy data showed a continued fall in exports despite some signs of stabilization in May. Korea's exports stood at $39.78 billion last month, down 6 percent from the same period a year ago and marking a decline for the 17th consecutive month.

The year-on-year monthly export fall rate in May marked the slowest this year. Although the declining pace slowed last month, experts believe that it is difficult to see this as a sign of easing in the chronic export slump.

The record-breaking losing streak in exports is worrisome because it is not a temporary phenomenon and is the result of a combination of a wide range of factors at home and abroad. As Korea is heavily dependent on exports for growth, the corporate sector and the government have some serious work to do to revitalize them. They need to update their strategies with effective responses to the factors that are causing the downward trend.

The main reason for the lackluster exports is slowing growth in China, which accounts for a quarter of Korea's exports, and the industrial sophistication of Korea's largest export market. Exports to China fell 9.1 percent last month.

The latest data show that Korea's conventional export strengths are losing their competitiveness. Exports of nine key items including ships, general machinery, auto parts, semiconductors, cars and wireless devices all fell. Diversification of exports is the key to overcoming the slump. Now is the time for Korean companies to develop new products that transcend existing flagship exports.

Korean companies are lacking the kind of innovative drive found in Chinese and other major rivals in developing new growth engines. Recently, it was reported that Shanghai-based automaker SAIC is partnering with Alibaba for connected cars, an inevitable trend in the auto industry. The Korean corporate sector should take note of the SAIC-Alibaba venture, an industrial fusion for new products that is missing among Korea's top conglomerates. Korea has global leaders in IT and automobiles and they should work together to create synergy in manufacturing products that can capture the Chinese market.

During a recent meeting with business leaders, President Park Geun-hye said, ‘'Excellent products, services or systems built on innovative ideas will attract attention everywhere." With this spirit, Korean companies need to develop new products that can create demand in China.

President Park has pledged to change Korea's heavy dependence on conglomerates for exports; and so the government needs to promote exports from small- and mid-sized firms.

Another reason for Korea's export slump is the increasing labor costs combined with falling prices. The President's economic team needs to come up with policies to improve labor market flexibility and adaptability to a changing global environment.

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