Declining manufacturing sector raises concerns

[THE INVESTOR] With the deterioration of manufacturing sector here, industry experts are concerned that producers may opt for low-cost facilities overseas with local jobs fleeing to other developing countries.

According to a report by Hyundai Research Institute, the contribution level of the manufacturing industry to the country’s economic growth has decreased from 3.5 percent in 1970s to 1.4 percent most recently. Experts cite that the decreasing measure of the added value in manufacturing as the reason behind the lack of influence. The number decreased from 18 percent to 5.2 percent in the same period. 

South Korea has become more reliant on foreign countries for manufacturing goods. The dependency level stood at 13.9 percent in 2009, but increased to 18.5 percent in 2014, further indicating the exodus of Korean companies out of the country.

At the same time, the sales of manufacturing companies that receive foreign direct investment increased from US$ 157 billion in 2009 to US$ 371 billion in 2014, an increase by 2.4 times, while local manufacturing companies’ sales increased by 1.7 times in the same period.

“When the industry-wide restructuring takes place, manufacturing sector’s economic contribution will worsen,” Lee Boo-hyung, a senior researcher at Hyundai Research Institute said. “It is important to come up with a long-term vision to develop the industry and find a new growth engine.”

By Ahn Sung-mi (sahn@heraldcorp.com)