To develop its domestic export industries, Korea needs to benchmark Germany, a local think tank said on Monday.
By Choi Sung-jin
“Between 1994 and 2015, Germany’s exports increased 3.1 times while Japan’s exports grew only 1.57 times,” the Institute for International Trade, affiliated with Korea International Trade Association, said in a report.
The institute said Germany was far ahead of Japan in export growth because of its strengthened price competitiveness with the use of euro, its low corporate tax rate was low, plus positive labor reform.
Also helping Germany’s exports were its efforts to attract foreign investment, and the push for German manufacturers operating abroad to return, the report said.
It also praised the Germany government’s policy to accept positively refugees and immigrants to replace its dwindling workforce.
Japan, on the other hand, experienced the slower growth of export industries because of its reluctant market opening, an increase in overseas manufacturing, labor shortage resulting from a rigid immigration policy and its export structure focusing on shipments of intermediary goods, mainly to emerging countries.
“Korea’s export, the growth rate of which has remained at a single-digit rate since 2012, has similar problems to Japan in that the share of overseas production is high among major export industries and its reliance on emerging economies, including China, is too high,” the report said. “If such structural reasons remain unsolved, the nation’s export recovery may take far longer than expected.”
The report said Korea, following the example of Germany, needs to expand shipments of high-tech parts and materials to industrial countries. It added that the nation should also carry out labor reform and reach a social consensus on immigrant laborers.
“The West European country has managed to make its businesses relocate their overseas plants back home through labor reform and lower corporate taxes,” it said. “Korea, too, should try to ‘re-localize’ industrial production by improving the domestic business environment.”