[KOREA TIMES]Korea Struggles to Cut Reliance on Export

Korea Struggles to Cut Reliance on Export

By Yoon Ja-young
Staff Reporter

The government is seeking ways to strengthen the country's domestic market, as the export-oriented economy has made the country vulnerable to outside shocks.

The Ministry of Strategy and Finance has said the services sector will be developed but many economists say there is no magic short-term solution to expand the domestic market and reduce the overreliance on exports.

The ministry said Korea will have to shift its focus from export-oriented mass manufacturing to the domestic market, while enhancing productivity.

It cited falling dynamism, high dependency on overseas market and income polarization as challenges the economy will face next year.

According to the Bank of Korea (BOK), exports accounted for 55 percent of the nation's gross national income (GNI) in 2008, up 11.2 percentage points from the previous year, and well above Britain's 26.3 percent, Japan's 22 percent and the U.S.' 18.5 percent.

In a report to President Lee Myung-bak on next year's economic management plan, Finance and Economy Minister Yoon Jeung-hyun predicted a paradigm shift in the global economy and industrial structure, triggered by the global financial crisis.

He sees little possibility of robust growth in the global economy amid many uncertainties.

Yoon predicted 5 percent economic growth next year, with consumption growing over 4 percent and facility investment by around 11 percent.

Some 200,000 jobs will be created and the current account will mark a $15 billion surplus, while inflation should remain stable at 3 percent, he said.

President Lee will regularly chair a national employment strategy meeting next year as the government's focus is creating more jobs through growth.

Lee said that the expansionary fiscal policy should continue next year though the economic outlook has turned increasingly positive.

"There are still a lot of uncertainties in the global economy," the President said in a meeting with policymakers and economists at Cheong Wa Dae, Thursday.

The government plans to continue its expansionary policy, but will gradually slow it down in keeping with economic trend and job market conditions. Financial policy will also be in expansionary mood for the time being.

Another focus of economic policy next year will be stabilizing the livelihood of the working class.

Considering that college tuition is a big burden on the household economy, loans for students will be expanded.

The government will continue its drive to secure more growth engines. To try and increase the birthrate, households will be given incentives to have more children, such as support for the medical expenses of pregnant mothers.

The authorities are also considering bringing the elementary school entry age forward by one year, to lessen the burden of nursery school fees.

They are also considering attracting more talented foreigners to Korea.

chizpizza@koreatimes.co.kr