Korea Risks Repeating Japan's Lost Decade, AlixPartners Says
Korea Risks Repeating Japan's Lost Decade, AlixPartners Says
(Bloomberg) -- South Korea is in danger of falling into a lost economic era like Japan as the nation lacks new growth drivers and is struggling to break out of a prolonged period of slow expansion, according to AlixPartners LLP.
Manufacturers such as shipbuilders and automakers are battling low productivity, high wages and overcapacity, while semiconductors provide an illusion of economic growth, said Yung Chung, Seoul-based managing director of the New York-based consulting firm.
The country is also lagging behind in frontier industries including artificial intelligence, fuel-cell electric vehicles, robotics and bio-pharmaceuticals, he added.
If the global economy enters a recession, export-dependent Korea could face a crisis as falling external demand combines with a sluggish domestic environment, Chung said in an interview. Not only are companies failing to make headway in newly growing industries, there’s little sign of aggressive government policy to lead the way, he said.
Samsung Dependence
Although combined net income of Kospi-listed non-financial companies increased 6.5 percent in the January-September period, if Samsung Electronics Co. is excluded, it’s down 7.7 percent, Korea Exchange data show.
The auto industry needs major changes with labor unions working collaboratively with management to fix uncompetitive parts of operations, according to Chung.
He’s also concerned about an increase in so-called zombie companies, especially in shipbuilding. “If these zombie companies continue to survive with government led financial subsidies, the economic impact could be like the snowball rolling downhill,” he said.
To contact the reporter on this story: Kyungji Cho in Seoul at kcho54@bloomberg.net
To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Brett Miller, Beth Thomas
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