Koreans shift emphasis to quality in textile exports
It wasn't planned this way, but the textile industry remains the mainstay of the Korean economy and the most important single contributor to export earnings.Skip to next paragraph
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K. I. Lee, public relations director of the Lucky group, says: "We though textiles would be out by now. But instead, the factories are working 24 hours a day."
Hwang Don, director of the Korean Traders Association, adds: "If all had gone well with our planned shift to heavy industries, textiles would have been phased out as the mainstay of our economy.
"Instead, of course, they contributed about one-third of the country's total export earnings last year."
In its exhaustive study of the Korean economy published in mid-1980, the Korean Exchange Bank declared: "Textiles, the initial driving force behind the industrialization of Korea, remain one of the nation's most important industries in terms of its contribution to production, employment, and exports.
"Even though its relative importance has slipped over the years with the upgrading of the industrial structure, it maintains a vital position and will continue to do so in the next few decades."
As with several developing countries, the textile industry provided a suitable platform on which to build economic growth.
Korea entered the world textile market with its first exports of cotton goods valued at $279,000 in 1957 and has never looked back. Synthetic fiber production was introduced in 1959 and now dominates industrial output.
Textile exports have grown at an average annual rate of 35 percent and production at 26.4 percent. Korea today accounts for over 6 percent of the world's textile exports and about 3.5 percent of its production.
Even in disastrous 1980, when the industry suffered more than most, it still managed to post an export contribution of more than $4 billion.
In fact, many Koreans argue that a continued strong textile industry is vital as the key provider of capital for the diversification into heavy industry desired by the government.
The Korean Exchange Bank study estimates that textile exports will reach $10 billion in 1986, when the next five-year economic plan reaches its climax in achieving an over- all export level of $50 billion.
Even though the textile industry's share will thus have declined to about 20 percent, the bank still reckons that Korea will have risen to first place in the world export market for textiles with a dominant 10 percent share.
One of the main problems facing the industry, it says, "is a growing trend toward international trade protectionism, to which the industry must respond by producing higher value products and diversifying its markets."
The fact is that currently the United States, Western Europe, and Japan account for 71 percent of Korean textile exports, and efforts to diversify have met with only limited success so far.
The other major problem analyzed by the bank report, and one in which industry leaders concur, is wage cost inflation of over 30 percent through the second half of the 1970s. This severely damaged Korea's price competitiveness against other developing countries with cheaper labor costs.
Korea was able to enjoy an advantage for so long partly because its textile materials and finished garments were often the products of Dickensian Sweatshops.
Low wages, appalling working conditions, and long hours were a national scandal that came to a head when attempts to unionize the work force were met by some managements hiring goon squads to break up strikes.
The bad publicity this generated overseas, however, eventually led to more enlightened management -- encouraged also by the country's general labor shortage that encouraged more mobility in search of better wages and conditions.
Korea, therefore, can no longer look forward to increasing sales on the basis of cheapness. Cotton textiles, for example, have already been lost.
Says Hwang Don of the Korean Traders Association: "We have had to make way for others, like China, Taiwan, Malaysia, and Sri Lanka. We're competing against the Chinese in Japan, for instance, and we're losing. Change is inevitable and we will have to go the same way as Japan."
Overall, many companies are planning their business strategy on the assumption of at least five more good years, and the loss of pure price competitiveness within 10 years or so.
New investment is being channeled into technology and new machinery to enhance quality.
As one businessman put it: "The emphasis from now on must be to sell one high-priced garment instead of a dozen cheap ones."