Korea - profile of textile industry in South Korea including manufacturing, productivity, wages, cotton suppliers, and outlook of cotton market - U.S. Dept. of Agriculture, Foreign Agricultural Service report

South Korea is a highly competitive market both in the quality and price of its textile products. Korea ranked third in worldwide textile exports in 1990 behind Italy and Germany, with exports valued at $14.7 billion. Textiles are Korea's second largest export commodity, and the textile industry plays a key role in Korea's economic growth. Textile exports are projected at $15.1 billion for 1991. There are approximately 18,000 firms engaged in textile manufacturing. The total number of installed spindles at the end of 1990 amounted to 3.75 million, down 1 percent from the previous year. Likewise, the number of operating spindles (operation ratio) declined from 96.1 percent of spindlage capacity at the end of 1989 to 94.8 percent by the end of 1990. The number of installed looms was 54,902, a 14-percent decrease from the previous year. The number of looms operating during 1990 were 49,571, a 16-percent decrease from 1989. Over the past several years, wages have increased faster than productivity. For example, Korean textile workers average monthly wages increased 21 percent in 1989 while production only increased 6 percent. Wage increases are not the only problem, however. The industry has been facing acute labor shortages. Reportedly, the labor force decreased 27 percent in the last 5 years. With Korea's economy growing so rapidly, employment in the textile industry is considered to be one of the least attractive occupations. In response to manpower shortages, some companies have moved, or are planning to move, into Southeast Asia where they can take advantage of low wages. At home, in addition to manpower shortages and higher wages, the industry has comparatively low productivity due to a high percentage of old facilities, and a low degree of automation. Consequently, plans are in effect to spend approximately $690 million to upgrade the industry's spindle and weaving machines by 1995. These measures should reduce labor costs and increase production of high quality, high value yarns. The hope is that modernization will offset the lack of skilled labor, and counteract increased competition from other countries having abundant resources and low wages. The United States should continue to be South Korea's main cotton supplier. South Korea is the world's eighth largest cotton consumer, and the world's second largest cotton importer. Since Korea does not grow cotton, demand is met entirely by foreign suppliers. In MY 1990/91, Korea imported nearly 2.0 million bales, with 60 percent originating from the United states, followed by Australia, China, Pakistan, and India. U.S. export commitments as of November 7, 1991, for MY 1991/92 totaled 825,000 bales, already 40 percent of Korea's projected import needs for this marketing year. Current estimates are that Korea will import about 2.1 million bales in MY 1991/92. The United States hopes to supply over 50 percent of that demand.

OUTLOOK

Price will play a major role in determining the origin of cotton brought into Korea. However, the GSM-102 credit guarantee program will contribute considerably to the United States maintaining a sizable share of Korea's cotton market. Korea purchases $200 million annually under the GSM-102 program. This year, Korea will also participate in the program. Although the programming level in MY 1991/92 of $200 million remains unchanged, the payback period has been reduced from 18 to 15 months. U.S. opportunities to export raw cotton to this market should continue because of reliable sources. The U.S. market share is also being boosted by rising consumer incomes and more discriminating tastes that demand higher quality textile products. Moreover, Korea's attempts to move into higher quality yarn and fabric markets should help boost imports of cotton, particularly ELS varieties. The United States is the major supplier of extra-long staple cotton to Korea. Additionally, the Korean textile industry feels that the introduction of high-volume instrument (HVI) classing in the United States, and in Korean mills will ensure a more uniform cotton quality supply, and make it easier to resolve cotton quality disputes with the United States than with the other foreign suppliers who are not basing their cotton exports on HVI testing. [Tabular Data Omitted]

Priscilla Andrew, Agricultural Economist, Tobacco, Cotton & Seeds Division, Foreign Agricultural Service, USDA.

COPYRIGHT 1991 U.S. Department of Agriculture
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