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The Financial Times of London ran a special report on Korea¡¯s economy under the headline ¡°Seoul Sleepwalk.¡± The report depicted Korea¡¯s economy as having awoken suddenly and wandering around as if in a daze, like a sleepwalker.
The reason why export powerhouse Korea is in danger of losing its direction becomes clear when we compare the Beijing and Ulsan plants of Hyundai Motor. Workers at the Beijing plant produce 68 cars per hour and receive US$360 per month. In contrast, workers at the Ulsan plant make 55 cars per hour and receive $4,580. Korean workers make ten times more than their Chinese counterparts, yet produce less. If you look at the situation from a purely economic standpoint, Hyundai should close down the Ulsan plant and expand the one in Beijing. If not, Hyundai Motor will lose out to Toyota which has a plant in Beijing and Mercedes Benz which has a plant in Shanghai. Only the workers and management at Hyundai Motor seem to be oblivious of this simple fact.
The Korean economy has lost its vitality. Private sector investment fell to just 28 percent of gross domestic product last year. It wasn¡¯t always that low. In 1998, private sector investments accounted for 30 percent of GDP and 40 percent in 1996. This decline in investments shows businesses have lost the urge to prepare for the future. To outside observers, it¡¯s clear that time is running out for small and mid-sized businesses in Korea, as the big business customers seek to buy products at lower prices, while Chinese competitors are ratcheting up the heat. There are also numerous ¡°zombie¡± companies that are surviving with government aid, even though their products have lost their appeal.
There is nothing surprising about the Financial Times article. For some time now, the facts reported in the piece have been widely known in the industry. What¡¯s shocking is that the fact that Korea¡¯s economy has been sleepwalking has been known around the world for some time, yet the president doesn¡¯t seem to be aware of this. At his cabinet meeting on Tuesday, the president spoke at length about the departure of former Gyeonggi Province governor Sohn Hak-kyu from the Grand National Party. But he didn¡¯t say a word about the state of the economy. Not a single one of his ministers mentioned the Financial Times article. The so-called commanders and sentries who lead and guard Korea¡¯s economy are all dozing off. People who pay no attention to the setting sun end up having to sleep on the streets. It¡¯s a shame that the ones who will pay the greatest price for such laxness are the Korean people.
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