South Korea lags behind US, Japan in manufacturing

The stagnating growth of South Korea's manufacturing industry is feared to have a negative impact on its national competitiveness, a report said Sunday. According to the report by Hyundai Research Institute (HRI), the local manufacturing sector accounted for 2.8 percent of the world's manufacturing industry's total value added last year, slightly down from 2.9 percent in 2005. South Korea ranked fifth this year in the global manufacturing competitiveness index compiled by consulting company Deloitte and the U.S. Council on Competitiveness, down from third place in 2010, the think tank said. "The overall competitive edge of the South Korean manufacturing sector has been improving, but South Korea has poorer factors than the United States and Japan," the HRI said. According to the think tank, South Korea's annual growth rate of investment in manufacturing tumbled to 5.4 percent in 2011 from 32.5 percent a year earlier. Over the cited period, the increase rate for the U.S. soared to 14.1 percent from 1.1 percent with the figure for Japan jumping to 13.3 percent from 0.6 percent. South Korea's unit labor cost is also higher than comparable figures for the U.S. and Japan, negatively affecting the price competitiveness of local manufacturers, the think tank said. The unit labor costs measure the average cost of labor per unit of output and are calculated as the ratio of total labor costs to real output. South Korea also falls far behind the United States and Japan in the manufacturing sector's per-capita value added and science infrastructure, the think tank said. Noting that manufacturing is an important element of national competitiveness, the HRI called on the government to induce manufacturing companies to invest more by lifting regulations and adopting business-friendly tax policies, and to promote entrepreneurship.