Jeong Manki: "Korea's appeal is declining, investments are not coming... Urgent need for opposition's regulatory cooperation"

"Need for a Corporate Environment Comparable to Major Countries at Minimum"

[Asia Economy Reporter Moon Chaeseok] Jeong Manki, Vice Chairman of the Korea International Trade Association (KITA), made a candid statement on the 15th, saying, "The decline in Korea's attractiveness as a business location compared to foreign countries is the cause of export sluggishness and a truly serious problem. The opposition party must take the lead in regulatory reform." Korea recorded a record export deficit of $12.69 billion (approximately 15.6594 trillion KRW at the time of calculation) last month.

Vice Chairman Jeong made these remarks during a press briefing titled "Diagnosis of Recent Export Sluggishness Causes and Response Directions" held on the morning of the same day at COEX in Samseong-dong, Gangnam-gu, Seoul. Cho Sanghyun, Director of KITA's International Trade and Commerce Research Institute, and Jang Sangsik, Head of Trend Analysis Office, were present. Jeong mentioned, "I was considering how to communicate with the media, and since export performance was poor, I decided to hold this briefing."

Jeong explained the causes of Korea's export sluggishness by dividing them into short-term and long-term factors. In the short term, he pointed out that Korea's export structure, which is mainly composed of intermediate goods sensitive to economic fluctuations, is problematic. He expected the situation to improve as U.S. inflation eases and China's reopening (resumption of economic activities) materializes. He said, "In the short term, the poor performance is due to the export structure focused on intermediate goods. This year, depending on external conditions such as China's economic resilience, the resolution of the Russia-Ukraine situation, and IT demand, we will see a flexible recovery."

He emphasized that the more important issue is the long-term decline in Korea's attractiveness. He criticized that without cooperation from the opposition party, neither exports nor the Korean economy can be improved. Jeong said, "The real problem is that future export prospects become uncertain due to concerns about weakening export foundations, but the opposition party is increasing 'Galapagos regulations' such as the Yellow Envelope Act and the Standard Freight System on top of existing excessive regulations. They have no interest in what happens to our products overseas." He added, "The government is at least trying to reform regulations, but in my opinion, it is right for the opposition party to take the lead."

He also presented specific alternatives. He said that the U.S.-style 'One-In, Two-Out' system or the U.K.-style 'One-In, Two or Three Out' system, where one new regulation is introduced only if two existing regulations are abolished, should be introduced promptly. He stressed the necessity of establishing a system to prevent excessive legislation by lawmakers. He said a regulatory impact assessment system for legislator-initiated laws should be created. Jeong stated, "To increase domestic investment and strengthen the export base, the domestic business environment must be made at least equal to that of foreign countries."

However, he did not provide a clear answer to the issue of local residents opposing facility construction, such as the SK Hynix semiconductor cluster in Yongin. When asked about the roles of the political sphere, government, and economic organizations and who should resolve the issue, he repeatedly said, "It is a really difficult problem." Jeong said, "Economic organizations can only appeal, and ultimately, local governments must take a firm stance to resolve it. It is important to design the system well, such as having the central government facilitate competition among local governments when selecting sites initially."

Jung Manki, Vice Chairman of the Korea International Trade Association (center), briefs on "Diagnosis of Recent Export Slump Causes and Response Directions" on the morning of the 15th at the Startup Branch in COEX, Gangnam-gu, Seoul. Attendees from the left are Jang Sangsik, Head of the Trade Trend Analysis Office at KITA, Vice Chairman Jung Manki, and Cho Sanghyun, Director of the International Trade and Commerce Research Institute.
[Image source=Yonhap News]
Photo by scape@yna.co.kr
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KITA expects the effect of Korea's export recovery due to China's reopening to appear around the third quarter. Kang Naeyoung, Senior Researcher at KITA, who released a report titled "Analysis of the Impact of China's Reopening on Our Economy" three days ago, responded on-site, "It is forecasted that Korea's export volume will increase by 0.55 percentage points due to China's reopening." Director Jang Sangsik also said, "When the effect of China's reopening fully materializes in the second quarter, the export increase effect in Korea will appear one to two quarters later. We judge that the export increase effect will appear around the third quarter."

KITA disclosed 15 pages of data on Korea's export status on-site. In summary, Korea's export sluggishness is particularly severe compared to overseas, and the cause was poor performance in China and Vietnam. The decline in intermediate goods and IT was painful.

In the fourth quarter of last year, Korea's exports decreased by 9.9% compared to the same period the previous year. The decline was larger than major countries such as China (-6.9%), Japan (-4.6%), and Germany (-1.9%). Last month, it was also -16.6%, which is more severe than Japan's -15.8% for the period from the 1st to the 20th of last month.

This was due to a decrease in intermediate goods exports. Of the $17.5 billion (approximately 22.3265 trillion KRW) decrease in exports in the fourth quarter, 85.7%, or $15 billion (approximately 19.137 trillion KRW), was due to intermediate goods. By country, intermediate goods export performance was China (-17.8%), Vietnam (-10.7%), Japan (-13%), the U.S. (0%), and Hong Kong (-41.7%). By item, IT products such as semiconductors (-44.5%), SSDs (storage devices, -63.8%), and displays (-36.0%) showed a clear decline. Non-IT intermediate goods exports such as steel (-25.9%) and petrochemicals (-25.0%) also decreased significantly.

KITA diagnosed that the semiconductor slump was the most severe among these. They prepared separate materials related to semiconductors and explained in detail. Last month, the decrease in semiconductor exports accounted for 52.4% of the total decrease, amounting to $6 billion (approximately 7.654 trillion KRW). It decreased by 44.5% compared to January last year and has declined for six consecutive months. Both memory (-57.3%) and system (-25%) semiconductors were sluggish.

The decline in semiconductor exports was larger than that of competitor Taiwan. Korea's performance was -7.8% in August last year, -5.6% in September, -17.4% in October, -22.9% in November, -29.1% in December, and -44.5% in January this year. Taiwan recorded surpluses from August to October and had -3.9% in November and -2.4% in December.

This content was produced with the assistance of AI translation services.