Publish your story on AsianInfo.org - Personal experiences, opinions, articles,
 or any information related to Asia. 
More Info...

 


 Search for AsianInfo.org
 Korea's Main Page 
 Seoul's Main Page 
 
Korea's Economy - Main Page

Korean Mining and Manufacturing

Introduction

For the past three decades, the Korean economy has maintained a GNP growth rate of 9 percent. In 1997, Korea's exports recorded US$136.2 billion, a surge of 170 times more than the US$8 million export value in 1970. The major factors contributing to this remarkable and sustained growth were high-quality manpower, an outward-looking development strategy, and enlightened government policies.

In the process of economic growth, Korea has carried out effective industrialization. The share of primary industries in the total industrial structure decreased steadily from 26.6 percent in 1970 to 14.7 percent in 1980 and to 5.7 percent in 1997. The share of manufacturing industries increased from 21.5 percent in 1970 to 29.2 percent in 1990 but dipped to 25.7 percent in 1997. Construction and SOC (Social Overhead Capital) surpassed other sectoral growth with a share of 16.9 percent in 1997, compared with 6.6 percent in 1970. The share of the service industries was 51.5 percent in 1997, by far the greatest growth sector in the economy.

As a result of structural reforms in the economy, Korea was able to build a strong industrial foundation, especially in the areas of electronics, automobiles, shipbuilding, and petrochemicals. For example, Korea's shipbuilding industry is second only to Japan's and holds 32 percent of the world market share. In the semiconductor industry, three Korean firms supply more than 40 percent of the global demand for DRAMs. Automobiles and petrochemicals rank fifth in the world in terms of production.

Since November 1997, however, the currency crisis and financial meltdown have threaten the remarkable economic growth Korea has achieved over the past three decades. With the pervasive restructuring and rebuilding phase, the economic situation has started to right itself, although industries and firms are still facing great strains. Industries which are highly dependent on domestic market sales have suffered the most due to the sluggish demand. These industries include the construction, steel, petrochemical, machinery, textiles, and most services industries. On the other hand, the export-oriented industries will be able to escape the current recession relatively unharmed.

High technology products, including semiconductors, telecommunications equipment and computers, will fare quite well compared with the lower value-added products.

On balance, the financial crisis has dealt a terrible blow to industry, but the strong firms and their respective industries are weathering the harsh conditions. Many industries are using the crisis as an opportunity to restructure and to redefine their business strategies in preparation for the intensified competition of the coming century.

This report provides a synopsis of selected sectors in the mining, manufacturing, construction and service industries in Korea. These summaries use the latest available data to offer an overall picture of Korea's industry. 

Back to Top...


Mining

The Korean mining industry had once contributed more than 70 percent of foreign exchange earnings in the 1950s. Its current contribution rate to GNP, however, stands at a low 0.3 percent level although its production scale has expanded at an average annual growth rate of 10 percent during 1985-1996.

Although Korea is poorly endowed with natural resources, especially metallic minerals, it has relatively abundant industrial mineral resources which are important raw materials in cement, glass and ceramic industries. In 1996, cement industries used more than 72 million metric tons of limestone, 1 million metric ton of silica stone and 1.3 million metric tons of clays in order to produce 52.2 million metric tons of clinker.

Korea consumed about US$4 billion and locally produced about US$1.2 billion worth of minerals in 1996 based on current prices. The average import ratio of non-fuel minerals stands at about 70 percent; however, about 98 percent of metallic minerals must be supplied from abroad. Only 10 of the 45 Korean metallic minerals satisfy more than 90 percent of domestic demand.

To utilize endowed mineral resources more efficiently, the priority of mining policy has been given to developing value-added and environmentally friendly technologies to ensure workers' safety. Also, to secure its supply sources, the government has established a master plan for the long-term supply of strategic minerals through 2010.

Back to Top...


Manufacturing

Machinery Industries

Automobiles

The automotive industry caters to new, on-road, completed vehicles such as cars, trucks, and buses. Parts and accessories are not included in this chapter. The seven key automakers and their myriad of suppliers produce passenger cars (comprising large, medium and small-size cars, and minicars), commercial vehicles (i.e. buses and trucks) and special vehicles (i.e. recreational vehicles).

In 1995, the Korean automotive industry ranked as the fifth largest automotive producer in the world, with over million units of export. The industry also received a stronger and more noticeable presence in the Korean national economy, occupying a share of 8 percent of total exports and 9.6 percent of the total employment in the manufacturing industries. However, the Korean auto industry has plunged into a severe slump since the second largest assembler, Kia Motor Corp., went bankrupt and the Korean exchange market collapsed in late 1997. In fact, Kia Motors' bankruptcy was rooted in Kia Group's excessive investment in its steel and construction industries rather than in the automotive industry.

The domestic sales of vehicles have been sluggish since the mid-1990s. The growth rate of domestic sales, which had no growth in 1995, recovered to an increase of 5.7 percent in 1996 by virtue of the minicar boom. These rates show a sharp contrast to the two-digit growth rate the Korean assemblers enjoyed in the domestic market since Korea's rapid motorization of the late 1980s. The recent crisis of the Korean economy, however, has caused a painful decrease in domestic sales.

In the next several years car exports will increase considerably. This is because the Korean car assemblers will gain advantage with price competitiveness as a result of the Korean won devaluation and the reduction of real wages. In addition, the recent rapid motorization of developing economies will contribute greatly to Korean car exports. According to Ward's projection, new car registration in developing economies will increase from 13.6 million units in 1995 to 42.8 million in 2015. As of 1996, the ratio of exports to less-developed countries in Korea's total exports reached over 50 percent. This figure shows that less-developed countries have become the new main export markets for Korea.

Back to Top...


Shipbuilding

The shipbuilding industry involves the construction, repair, conversion and demolition of all sorts of ships. This synopsis focuses on shipbuilders that build ships of medium size or larger, about 5,000 GT (gross tonnage) or more.

In 1997, the Korean shipbuilding industry's production was valued at US$6.94 billion (7.4 million GT), a 5.3 percent increase over 1996. All production was destined for export markets. About 20 percent of exports belong to domestic ship owners, that is, exports that are conditional on the purchase of BBC (Bare Boat Charter). Orders have increased, from the end of 1996 onward, largely due to low prices for ships and ship substitution demand. Orders for 1997 amounted to US$10.4 billion (12.7 million GT), marking a 47.6 percent growth over 1996.

In 1998, the Korean shipbuilding industry will experience many difficulties. Orders on the world market are expected to decline on account of a decrease in ship demand. The main reason behind this decrease is the bankruptcies of Halla Engineering and Heavy Industries and Daedong Shipbuilding which lowered Korean shipbuilders' financial credibility. Furthermore, monetary stringency, resulting from the foreign currency crisis, has exacerbated the slowdown among shipbuilding firms. In order to improve international confidence, the industry is expected to implement the adjustment policies set out to overcome the current economic situation. On the other hand, the industry can enjoy superior price competitiveness to Japan as a result of the Korean Won's depreciation.

Back to Top...


General Machinery

The general machinery industry is a typical capital goods industry, which supplies production equipment and parts to every sector of the economy. This industry consists of engines & turbines, machine tools & metal processing machinery, agricultural machinery, construction & mining machinery, transportation & stevedoring machinery, air-conditioning & refrigeration machinery, chemical equipment, printing machinery, textile & leather processing machinery, rubber & plastic processing machinery, among many others.

Korea's general machinery industry recorded continuous increases in production and exports during the 1990-1996 period as a result of increases in domestic and overseas demand. Demand for general machinery is characterized by sharp cyclical fluctuations since it is tied to investment decisions which are highly sensitive to overall economic conditions.

In 1997, however, the production of general machinery recorded US$37.7 billion, a decrease of 12.2 percent compared to last year. This negative growth rate was due to the sharp shrinkage of domestic equipment investment and the overall slowdown of the Korean economy.

The exports of general machinery in 1997 decreased a slight 0.5 percent compared to the previous year. Korean exports to Latin America and Central and Eastern Europe were active but exports to the United States were sluggish because imports from Japan proved more price competitive that from Korea's as a result of the weakened yen. Also, the rapid currency depreciation of Southeast Asian countries such as Thailand, Indonesia and Malaysia had a negative effect on Korean export demand for general machinery. The imports of general machinery decreased by 27.2 percent due to the sharp shrinkage of domestic equipment investment. Consequently, the trade deficit of the general machinery industry recorded US$7.2 billion in 1997, significantly down from the 1996 deficit of US$13.2 billion.

The general machinery industry is in a growing period from the viewpoint of technology development, largely by virtue of the government's Five-Year Parts Localization Plans which began from the mid-1980s and the government's Capital Goods Industry Development Plan launched 1995.

Under the current financial crisis, most small and medium general machinery firms will face hard times due to the difficulty of financing. As a result, many small and medium general machinery firms may go bankrupt.

Also, the export of general machinery in 1998 will slightly increase compared to last year. Owing to the Won depreciation against the U.S. dollar, the price competitiveness of general machinery will improve, but the downward direction of the Japanese yen value against the U.S. dollar will create tough competition for Korean exporters. In addition, the import environment of major machinery industry exporting countries such as those of ASEAN and China will deteriorate due to the currency crisis of Southeast Asia.

Back to Top...


Precision Machinery

The precision machinery industry produces measurement equipment, medical devices, watches, camera, and similar equipment and instruments.

The precision machinery industry (PMI) is an advanced industry in which the market grows rapidly with the increasing income level and industrial development. Korea, with its limited natural resources, is deemed to have significant potential in this sector since it is a technology-intensive industry with little energy consumption. Many other developed and developing countries share a similar view that the precision machinery is a high value-added industry with great potential, and thus seek to promote it.

Korea's PMI, however, is still in its infancy and accounts for less than 2 percent of total manufacturing output. Compared to its more advanced competitors, moreover, Korea's PMI tends to be more export-oriented, labor-intensive and has less value added. Since the 1980s, Korea constantly sought to develop its precision machinery industry, mainly for the purpose of import-substitution. In the 1990s, the nation succeeded in establishing its own brands for selective items. However, as the demand for precision machinery shifted from simple, analog-based products to digital ones that are compatible with various computer systems, Korea had to rely on more imports for its needs.

The recent necessary overhaul of the Korean economy has had positive as well as negative influences on the further development of PMI. The imperative for the government and industry is to carefully evaluate various factors in devising policies. Favorable external economic changes such as the depreciation of the Korean Won against the U.S. dollar and the decrease in import demand for precision machinery as a consequence of the reduction in domestic investments, are unlikely to dramatically improve Korea's balance of trade in precision machinery due to intensifying competition from other Asian countries. The devalued Won could hurt the profitability of PMI which relies heavily on the import of key components. However, a lower Won will have a positive overall impact on the establishment of Korean brands that have been ignored due to low brand image.

The average annual growth rate for global PMI has decreased in the 1990s due to the global recession, but is expected to maintain a steady growth rate in the future due to increasing demand for more sophisticated products. Medical instruments have maintained a 7-8 percent annual growth rate, but measurement devices and watches, which are Korea's main precision machinery exports, showed a 5 percent decline in annual growth rate. In 1997, both the domestic demand and exports decreased and, as a result, production was reduced by 7.6 percent. Despite its short history, however, Korea's PMI has reached an initial stage of export industrialization due to the continuous technological development, diversification of import sources and fostering of local industries.

Back to Top...

Information provided by the Korean Embassy

 


Search

Search results will be shown at the bottom of the web page.

AsianInfo.org was established in order to introduce Asian cultures 
and traditions to the world through 
the internet.

If you believe AsianInfo has quality, useful information and would like to help - become a Sponsor!

If you are a corporation and would like to place advertising on our site, click here.


Other Search Engines

Google

Disclaimer:  AsianInfo.org does not guarantee the complete accuracy of the information provided on this site or links.  Do your own research and get a professional's opinion before adhering to advice or information contained herein.  Use of the information contained herein provided by AsianInfo.org and any mistakes contained within are at the individual risk of the user. 

(We do not provide links to, or knowingly promote, any violent or pornographic sites.)

Suggestions  |  Organization Info Become a Sponsor  |  Privacy Statement

 Copyright © 2000 AsianInfo.org - All Rights Reserved.- Copyright Policy