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(EDITORIAL from Korea Times on Sept. 30)

All News 07:18 September 30, 2016

Weakening competitiveness
: Korea lagging behind Asian neighbors in labor market efficiency

The 2016 World Economic Forum's Global Competiveness Index (GCI) report released Wednesday ranked Korea 26th out of 138 countries for the third consecutive year. This is far below Korea's highest GCI ranking of 11th in 2007. Korea has continued to be stuck in the mid-20s range in global competitiveness since then, except for 2012 when it placed 19th.

The report shows the Park Geun-hye administration has failed to raise Korea's competitiveness, resulting in the country trailing other Asian countries such as Singapore, Japan and Hong Kong. The report showed that Korea and Thailand are the only two countries in the Asian Pacific region whose GCI ranking has consistently slid over the past decade. Japan and Hong Kong, ranking 8th and 9th, placed ahead of Korea, while China, in 28th place, is catching up swiftly. At this rate, it will not be long before China overtakes Korea in global competitiveness.

President Park Geun-hye is partly responsible for not having been able to lift the country's competitiveness during her term in office, even though she has stressed the need to overhaul four key sectors ― the labor market, the public sector, education and the finance industry ― to carry the nation forward. The GCI index shows Park's plans for reform in these key sectors have not resulted in visible outcomes.

The report contains some important lessons for leaders in government and business about what areas Korea needs to work on to raise its competitiveness.

In particular, it highlighted the urgent need for labor reform. Korea's inefficient labor market has been one of the primary reasons holding back its progress into an advanced country. The level of backwardness in Korea's labor market is not consistent with the size of Korea's economy or its global standing.

In an assessment of the labor sector, Korea ranked 77th in market flexibility. The report found Korea lagging way behind global standards in crucial areas such as cooperation between labor and management, ranking 135th, only ahead of Uruguay, Trinidad and Tobago, and South Africa. Asian rivals such as Japan, Hong Kong, Taiwan and China placed much higher in this area, ranking 7th, 14th, 16th and 47th, respectively.

Some greedy unions should take a big share of the blame for this. The anachronistic culture of Korea's labor movement is eating away at the country's competitiveness. Prolonged strikes by unions of some of Korea's largest companies, such as Hyundai Motor, is one of the reasons for the country's low ranking in labor market efficiency. A greedy union that habitually goes on strike hurts the company, and in the case of key industries such as automobiles, the economy.

Korea also placed low in other important areas such as female participation in the workforce where it placed 90th.

The country will further slide in global competitiveness unless it undergoes a major overhaul of the labor sector. The government should focus on its labor reform agenda during the remainder of President Park's term.

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