이미지 확대South Korea may have to settle as a part of a supply chain to global multinationals, given the exodus of foreign capital due to labor risk, waning competitiveness and slow innovations, according to a joint study by Jeonbuk National University, Maeil Business Newspaper and Korea Economic Research Institute.
Signs are already evident. Output at car producers under ownership of foreign capital has halved as local factories failed to win new orders from overseas headquarters frustrated with poor productivity, labor unrest and resistance to reforms.
GM Korea has been losing money for the last six years. Output was at 55.5 percent of full capacity as of November this year. U.S. parent General Motors had to reflect potential liability of up to $1.03 billion in its third-quarter financial report in light of the legal dispute between the Korean unit’s management and labor.
The auto parts industry is at risk due to the woes of finished car producers. Many suppliers are being taken over by Chinese capital at dirt cheap prices, said one industry source.
Foreign as well as domestic capital is shunning the market, laden with heavy regulations, labor rigidity and waning productivity.
Foreign direct investment to Korea stopped at $14.5 billion last year, 19th in the global scale, according to data compiled by the United Nations Conference on Trade and Development (UNCTAD) and pale against U.S. with $251.8 billion and China with 139 billion. It even trailed behind Indonesia with $21.9 billion and Vietnam with $15.5 billion.
Overseas investment by Korean enterprises has been surging by a record pace. This year, Korea’s overseas investment is expected to hit $50 billion, sharply higher than $38.9 billion last year and more than doubled from $23.6 billion in 2015.
“Despite unrest from Brexit, Europe poses as a better market,” said an analyst at the Korea Institute for International Economic Policy.
Future is in doubt due to slow innovation drive. The number of future technologies-related patents in the bio, ICT, nanotech, medical and pharmaceutical sectors that Korean companies filed shrank from 1,660 in 2010 to 1,111 in 2015. Korean origins in the list of unicorns, startups with valuation of minimum $1 billion make up a mere 11 out of 419 names, according to CB Insights.
By Han Ye-kyung, Kang Gye-man, Lee Jong-hyuk and Lee Ha-yeon
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]
