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Forest for the trees

Jan 06,2018
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“In the new year, domestic and international conditions will improve,” Prime Minister Lee Nak-yon said at a New Year’s meeting with business executives on Wednesday. “Thaad retaliations have been lifted, and political uncertainty is clearing as North Korea’s Kim Jong-un has mentioned inter-Korean talks.”

He diagnosed the Korean economy as having passed a tunnel. He did not forget to mention the grounds that support the government’s rosy prediction, such as economic growth rising to the 3 percent level, the trade balance exceeding 1 trillion won ($940 million) and Korea becoming the world’s sixth-largest exporter.

Did the executives agree with this perspective? A survey of 2,100 manufacturers released the next day by the Korea Chamber of Commerce and Industry begs to differ. The index was at 86, suggesting pessimists outnumber optimists.

In the survey, 52.1 percent of companies said exchange rates were the biggest external uncertainty. On Thursday, the won’s value rose against the U.S. dollar by 2.3 and closed at 1,062.2 won per dollar, the highest in three years and two months. The rise of Korea’s currency could affect companies that depend on exports.

The won’s rise in value is ironically related to semiconductors, which were the biggest contributor to the 3 percent growth last year.

Semiconductors trade in U.S. dollars, and the more semiconductor products are exported, the more U.S. dollars are supplied in the currency market. This lowers the value of the dollar, causing the won’s value to rise.

Businesses are concerned that exchange rates and pro-labor policies from the government could hinder their year. However, the government doesn’t seem very interested in these concerns.

Prime Minister Lee made it clear that pro-labor policies would continue. The government understands that a minimum wage increase, work hour reduction and expansion of regular employment could add burdens, Lee said, but the current labor environment must not be left uncorrected.

Why do government and business have different views? The government might mistake the semiconductor boom as the reality of the overall economy. Until the third quarter last year, operating profit at Kospi-listed companies rose by 26.1 trillion won compared to the previous year.

But the increased profit excluding semiconductor manufacturers like Samsung Electronics and SK Hynix was only 100 billion won. This is the reality of the Korean economy. Rather than seeing what it wants to see, the government should invite voices from the field to maintain 3 percent growth this year.

JoongAng Ilbo, Jan. 5, Page 29

*The author is an industrial news reporter at the JoongAng Ilbo.

KIM DO-NYUN