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The Problem of Oversupply in Korean Industries and Countermeasures

Author Oh Yeong-seok, Park Sung-keun, Park Yu-mi, Meng Ji-eun, Kim Pil Date 2017.12.20 Page
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The purpose of this study is to identify implications for future policymaking on proactive industrial restructuring, based on analyses of the crisis of competitiveness facing Korean industries today, the patterns of competitiveness loss and oversupply plaguing those industries, and the empirical effects and cases of business reorganization.

 

This study is structured as follows. In Section 2, we explore the characteristics and shortcomings of the current ex post corporate restructuring policy, examine the significance and content of the Special Act on Corporate Revitalization (SACR) that was introduced to support proactive industrial restructuring, and compare that Act to the Industrial Competitiveness Reinforcement Act (ICRA) in Japan to draw implications for Korea. In Section 3, we analyze the competitiveness of Korean industries from the perspectives of growth potential, profitability and stability, changes in the components of aggregate demand, and changes in the supply components. The section also provides an analysis of oversupply in Korean industries, accompanying theoretical discussions of the definition and operationalization of oversupply. The section also provides estimates of oversupply in Korea through the application of two different standards: the contrasting ICRA and SACR definitions of oversupply. In Section 4, using a model of quantitative economic analysis, we empirically analyze whether the financial performance of restructured firms is structurally superior to the financial performance of unrestructured firms. In Section 5, we delineate policy implications for proactive industrial restructuring and business reorganization in Korea on the basis of the foregoing analyses.