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Korea’s Textile and Clothing Industry still Sees China as a Major Trading Partner

发表时间:2009-08-21      发表评论



-- Meeting with Mr. Myeng-keun Ha, V. Chairman of Korea Federation of Textile industries at the First Private Sector Consultative Committee’s Meeting chaired by ITCB (International Textile and Clothing Bureau) in Geneva this June.
                            By Dennis K. Zhao

On June 2-3, International Textile and Clothing Bureau held its inaugural meeting for Private Sector Consultative Committee (PICC) in Geneva on June 2-3 to discuss the issues of common concerns and impacts that challenged textile and clothing sectors against global economic recession. Important representatives from ITCB’s member countries, especially from its private sector were present and shared the views regarding economic performance and export. Mr. ZHAO Hong, chief editor of this magazine was also present to have a face-to-face interview with some of the private sector representatives who gave informative message in their respective industries. The following message was from the presentation presented at the PICC and from the interview with Mr. Myeng-keun Ha of Korea Federation of Textile Industries.

Korea’s Textile and Clothing Industry
Mr. Myeng-keun Ha, V. Chairman of Korea Federation of Textile Industries, stressed that Textile and clothing industry is one of Korea’s major industries in terms of employment, production and export. This industry has provided 252,000 jobs, taking a share of 8.7% in Korea’s manufacturing industry, and its export reached $13.3 billion in 2008, a share of 3.2% against its national total export with $4.5 billion in trade surplus in T & C, a remarkable contribution to the country as we see that its total export from manufacturing industry had a trade deficit for $13.3 billion.

Korea’s textile and clothing export was experiencing a historical change during Quota period that witnessed a continued export growth until late 1990s. That means since 2000, T & C export has declined. More obviously since 1993, fabric has replaced clothing as major export product.

This table shows that Korea’s fabric export forms a major pillar in its export structure, taking 60.4% of its T & C export in 2008. If we look back into the history, the situation was quite different before 1990 when raw material, yarn and fabric were major imports items. Also since 1990, import of clothing has sharply increased, especially the low and medium-priced products from China, high-priced products from Italy, Japan and the USA. As of 2008, China’s share of these imports rose to 60.%, Italy 5.3%, Japan 5.3% and Vietnam 4.4%.

Trade Deficit with China, but Trade Benefit from this Largest Market for Korea’s Export
Speaking of trade balance in textile and clothing, the KITA’s data show that Korea is enjoying trade surpluses with many trading partners except China and Italy that separately represents a low & medium-priced import and high-priced import into Korea’s market to meet the different consumption demand. In 2008, Korea exported to China for $2623 million while import from China for $5357 million with a trade deficit for $-2734 million.

Even though, China is the largest exporter to Korea’s market with a trade balance in favor of China for 2,734 USD mn in 2008, the historical record shows that China has always been a major importer for Korea’s products, and from 2004 on, China became Korea’s largest export market.
       
China started to import from more countries and regions from the world to feed its domestic market demand and export-oriented processing industry as its export was growing in the last 10 years, Korea still managed to maintain its strong presence in China’s market. If we take a look at Korea’s export last year that witnessed $13.3 billion in total, but $2.623 billion went to China, meaning approx.20% of its T & C export was shipped to this country.

Overseas Investment with a Drop in China and a Rise in China’s Competitors
China was once the largest investment beneficiary from Korea that saw the advantage of the local low labor costs and policy preferences accorded to investors in a sense of tax heaven for 2-year tax-free operation, 3-year half-taxed business income and not very strict compliance with social securities. The attracting policies ushered in a lot more Korean investment into textile and clothing industries. In 2000, China got a total of $191 million investment from Korea and came up to the peak value for $274 million in 2004 just one year prior to the quota termination in 2005 that saw $239 million investment, and this downtrend did not last long. In 2007, the investment from Korea jumped to $218 million in 2007 against a low level of $185 million in 2006. But since China reinforced its implementation of labor law, obliging all the employers to add costs to social securities for its workers, many Korea-funded textile and clothing companies closed in China and restarted operation in other countries. China experienced a free-drop in Korea investment all the way down to $95 million in 2008, hitting historical lowest.

When asked why Korea’s investment started to go down in China and whether or not Chinese enforcement of labor law might have been the reason for that, Mr. Ha explained in a clear-cut term that the labor law was indeed one of the reasons, but there is another important ground that Korea exporters wanted to diversify their production and export bases instead of staying fixed to only one country. For strategic outlook and structural layout, the investment should go to those countries where they are either close to the market or their labor costs and other policy preferences are obviously advantageous.

Textile and Clothing Trade and between Korea and ITCB members
Korea’s trade with these member countries and economies have remained a favorable trade balance except with China and India both of which have kept trade surplus for $2734 million and $118 million in favor of these two trading partners respectively. On account of that, Korea’s trade with its ITCB member economies registered for a deficit of $1388 million. But on the optimistic side, its trade with the world in textile and clothing export has enjoyed a trade surplus of $5195 million.

Korea’s T & C Investment in ITCB Members
Korea was very early to relocate its production overseas to cut down costs to improve profit margin by investing in textile and clothing sectors in different regions. The overseas investment was aimed at maintaining cost-competitive production to sustain export from the country that it has invested and to push forward more exports of its fabrics and yarns to the countries where it has clothing production. The result could be seen in its total investment and export figure to that country. The following table is given to show Korea’s investment in ITCB’s members, and compare this table with the table above to find out Korea’s investment returns.

Impact of Financial Crisis on Korea’s T & C Industry
The global financial crisis was sweeping all corners of life, and the cross-board effect, once like an iceberg, now darted out of water and is being felt in textile and clothing industry in Korea. Korea has a good picture of its national economy as a whole as it keeps an increased foreign reserves (USD 199.8 bn in Nov.2008 rises to USD 211.8 bn April 2009) and stabilized stock market (Korea Composite stock Price Index: 916.85 Oct.2008 to 1,392.17 May 2009). Moreover, its trade surplus of USD6.2 billion was recorded as monthly high in April, 2009 and the accumulated surplus reached USD 9.5 billion. Mr. Ha pointed out that even though the slowdown continues due to precipitous fall in exports and domestic demand, signs of moderate improvement are to be made in late 2009 in national economy.

But the impact on textile and clothing sector is obviously more severe than expected. In production, rapid decrease in foreign and domestic demand adversely affected plant operation that is running under capacity. Textile production indexes decreased abut 10% in 5 months since Nov. 2008; In consumption, slowed clothing consumption due to lowered consumer confidence posed a headache to the industry as the sales growth rate of clothing was 12% on year-on-year basis in Oct. last year and dropped down to 1.3% in March 2009. In Export, the following table is given to show how serious the export situation is in 6 months since the financial crisis in Nov. 2008.
        
Also in import aspect, continued drop was caused by climbing exchange rate and deteriorating domestic demand (drop by 27.6% in 6 months); in domestic investment, facility investment is expected to decrease this year as was the case in 2008 due to the financial crisis. Reduction of investment was caused by rapid decline in foreign demand and lack of funds due to insufficient liquidity. According to Korea Development Bank, domestic investment record and plan for textile and clothing industry was chalked down from USD873 million in 2006 to USD 891 million in 2007, USD 636 million in 2008 and USD 497 million in 2009.

Prospects of Export
In spite of all the difficulties, Mr. Ha is of confidence that Korea’s textile and clothing industry is expected to pick up its export mildly from the second half of this year with the stabilization of international financial market. There are positive factors to support his confidence as he believes the better result will be able to be achieved on account of the improved price competiveness due to exchange rate depreciation, the improved capital flow due to supply of liquidity led by government, and the flexibility to respond to various demands of buyers. What is equally important is the domestic countermeasures to be taken for this industry. Mr. Ha reiterates importance of development of “new textiles”, which stand for nano, super, smart, eco-friendly textiles, by converging textile and IT, BT & NT, also by securing core technology of industrial textiles including auto, aerospace, construction and medicals.

In Korea’s textile growth strategy, Mr. Ha went on to underline the transformation of this industry into “value -added” production base by globalizing domestic fashion brands and strengthening collaboration among stream lines. With this, active marketing becomes a must to promote export. Korea’s textile and clothing industry will launch active marketing campaigns in foreign markets by participating in major exhibitions and intensifying market developing activities such as in Premiere Vision, Texworld, Preview in SEOUL, DAEGU, SHANGHAI and the US.

With all these advantages as Mr. Ha was proud to speak out, Korea is the world’s 6 largest supplier of T & C that is made possible with its stream-lined industrial structure and 60 years of quality and process know-how. In FDI and FTAs, Korea is increasing overseas investment and marketing bases in 120 countries, and signed FTAs with USA and other major countries, and its strong innovativeness in developing new textiles coupled with its geographical advantage in the center of Northeast Asia are all the contributing factors for its future growth.

“Korea textile and clothing industry is sure to weather through this financial storm and continues to contribute to the economic growth of ITCB member countries like China, Guatemala, and Latin American Countries and ASEAN countries and strengthens cooperative relationship with these countries through global investment in T & C and the expansion of FTAs.” So says Mr. Myeng-keun Ha, V. Chairman of Korea Federation of Textile industries


Mr. Myeng-keun HA
(Executive Vice-Chairman of Korea Federation of Textile Industries(KOFOTI))
Mr. Myeng-keun Ha was born in 1947. He received a bachelor’s degree in business administration in 1970 from Seoul National University in Seoul, Korea. Also, he holds a master of business administration degree from Northwestern University, USA.
 
Before joining the Korea Federation of Textile Industries, Mr. Ha had been involved in a variety of activities in public sector. From 1987 to 1988, he served as the Director General of Bureau of Capital Goods Industries, the Ministry of Trade and Industry. In 2002, he was appointed as the Standing Commissioner of the Korea Trade Commission, Ministry of Commerce, Industry, & Energy. He also worked as the Executive Vice Chairman of the Seoul Chamber Commerce & Industry from 2003 to 2004.
 
From 2005 to now, Mr. Ha has been serving as the Executive Vice Chairman of the Korea Federation of Textile Industries located in Seoul, Korea.

 

稿件来源:中国纺织杂志英文版

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