Annual Report 2010
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Reinvent SERI Samsung Economic Research Institute Annual Report 2010 President’s Message The past year was a time of anticipation as Korea and its neighbors steadily shed the effects of the global financial crisis and started looking more to the horizon again. 2010 also was a period of reflection as we ended the first decade of the 21st century. Indeed, the global economic order has taken a dramatic shift, with emerging economies wielding a stronger voice as industrialized nations struggle with huge debt and other stifling burdens. Now, a multiple-polar global economy and bigger government presence is the new norm, breaking new ground and fanning uncertainties about future directions. Accordingly, we at Samsung Economic Research Institute (SERI) shifted gears in 2010. An emergency research initiative that began when the global financial crisis erupted ended and scrutiny of the post-crisis paradigm began. Two major papers reflected the reprioritizing: “Post- crisis Changes in the World Economic Order and Responses,” and “A Post-crisis Korean Economy.” The former predicted changes in global economic leadership, the role of government and international cooperation in the next decade. The latter identified problems that could weigh down Korea’s economic stability and growth over the next decade and provided solutions. Other major papers spoke to the new paradigm in Korea’s business environment. “The Mobile Big Bang and the Future of Corporate Management” explored the instant popularity of smartphones in 2010 and their impact on how companies will operate. “Global Leading Companies’ M&As” examined how new growth engines can be acquired, a new paradigm for Korean companies, which have traditionally grown organically. Finally, papers about Korea’s rapidly aging population and the role of Korean women in the workplace touched on crucial issues in the nation’s economic equation in the new decade. In the 2000s, SERI continued to become more of a global research institute. We opened a branch in Beijing, formed joint research centers with the EU, launched an English website www.seriworld.org and an English language journal SERI Quarterly, and participated in many international seminars held in Korea and abroad. Yet, much work still needs to be done. Going forward, we will be steadfast to three principles. First, SERI will intensify its joint and convergence research, which provides creative solutions in macroeconomics, technology and industry, corporate management and public policies. Since problems are complex and complicated in the modern society, they need to be viewed from various perspectives, including industry and technology, corporate management and social- cultural aspects as well as an economic perspective. Second, SERI will conduct “smart research” projects, which will diversify research methodology and strengthen outbound channels by adding mobile and social network services. Also, we will improve our research quality by utilizing collective intelligence on the Internet and create a research system that allows close interaction with readers. Third, SERI will continuously enhance its brand value. SERI is highly regarded as Korea’s top private research institute, but we know complacency is a major risk. Therefore, SERI will need to continuously improve its research methods and operational processes. Through these endeavors, I believe that SERI can become the leading think tank not just for Samsung and the Korean economy, but also for the global economy as a whole. Finally, I would like to take this opportunity to express my sincere gratitude for the care and support that you have extended to SERI. I hope that you will sustain your backing and advice so SERI’s leading role may continue in 2011. CHUNG Ki-Young President & CEO Samsung Economic Research Institute CHUNG Ki-Young President & CEO Samsung Economic Research Institute CONTENTS President’s Message 02 Review of Korean Economy in 2010 05 SERI Activities 21 Research Calendar 22 Symposium & Forum 26 Publications 35 Cyber SERI 36 SERI China 42 SERI Quarterly 45 EU Brief 46 Creative Solutions 47 Top Ten Hit Products of 2010 95 About SERI 97 History 98 Organization 100 Mission & Vision 102 Research Areas 103 Consulting Areas 104 Review of Korean SERI Economy in 2010 2010 06 Samsung Economic Research Institute Review of the 2010 Korean Economy Korea posted robust economic growth of 6.2% in 2010. The strong performance, well above the potential growth rate, was especially commendable, considering many countries continued to reel from the aftershocks of the crisis. However, it is premature to announce that the Korean economy has completely overcome the crisis. The Korean economy’s chronic problems, including heavy reliance on the semiconductor and automobile industries, and getting jobs for the hard-to-employ, have yet to be resolved. Corporate earnings have improved but they are still behind global leading companies. Moreover, Korea’s financial markets and exports remained vulnerable to external shocks. 2011 will be a pivotal year in which the economy’s ability to fully rebound and return to its pre-crisis growth track will be tested. In this sense, major tasks for the 2011 economy can be summarized as steps that emphasize “Stability and Growth.” Korea has reached crossroads where it has to discard the previous success strategy of “Select and Focus” and adopt a new strategy of “Growth and Stability” in order to lay the foundation for sustained growth. Review of Korean Economy in 2010 Samsung Economic Research Institute 07 I. Korean Economy in Retrospect for 2010 1. Rapid Recovery of the Real Economy Korea posted robust economic growth of 6.2% in 2010, a sharp increase from 0.2% in 2009, during the global financial crisis. The strong performance, well above the potential growth rate,1 was especially commendable, considering many countries continued to reel from the aftershocks of the crisis. At the outset of 2010, the main task of the Korean economy was to facilitate a smooth transition to private sector-led growth from government-led growth. This was successfully done as the private sector saw signs of recovery. Thus, in both qualitative and quantitative terms, Korea’s economic growth in 2010 should be positively assessed. During the year, government spending growth decelerated to 3.4% from the 5% in 2009. This can be interpreted as an indication of the government’s effort to restore fiscal soundness by reining in economic stimulus.2 Meanwhile, private consumption, facilities investment and exports increased sharply, a sign that private sector’s resilience had recovered in 2010. Major Macroeconomic Indicators (Unit: %) Government Private Facilities Exports GDP Spending Consumption Investment 2009 5.0 0.2 -9.1 -13.9 0.2 2010 3.4 4.1 24.5 28.3 6.2 Note: Exports are based on customs clearance and other variables are based on national spending account. Source: Bank of Korea, ECOS.; The Korea International Trade Association, Kita.net. 1 Korea’s potential growth rate was estimated to fall to 4% due to the global financial crisis. 2 Ministry of Strategy and Finance (September 27, 2010). 2010-2014 National Financial Management Plan. 08 Samsung Economic Research Institute Exports spearheaded the 2010 recovery. After declining 13.9% in 2009 due to depressed global trade in the wake of the global financial crisis, exports rose 28.3% in 2010 year-on-year, regaining their status as the nation’s primary growth engine. As fallout from the crisis persisted in many countries, Korea’s mainstay export industries made inroads with their primary export items to post record shares of global markets. Accordingly, Korea rose to the world’s seventh-largest exporter in 2010. The strong recovery in exports spurred higher facilities investment, halting a two- year decline.3 In particular, two major export drivers, the semiconductor and automobile industries, pushed up overall facilities investment by as much as 24.5% in 2010. As corporate profits rose on the back of favorable exports and facilities investment, more hiring and increased wages at companies followed. That, in turn, helped lift private consumption, which rose 4.1% despite an end to most government economic stimulus. In 2009, private consumption grew by only 0.2% mostly due to fiscal stimulus measures such as Hope and Work Project, a public work program, and the Cash for Clunkers auto program. Creation of an Economic Virtuous Cycle in 2010 Favorable Posted 28.3% growth Exports Strong performance of the IT and automobile industries Expansion Posted 24.5% growth of Investment Investment in machinery such as semiconductor machinery expanded. Improvement 323,000 jobs were created in Employment The number of employed increased in the manufacturing sector for the first time in five years. Increase Consumption grew 4.1% in Consumption Wage growth and easing of interest payments Source: Bank of Korea. 3 Facilities investment growth stood at -1.0% and -9.1% in 2008 and 2009, respectively. Review of Korean Economy in 2010 Samsung Economic Research Institute 09 In short, the Korean economy achieved solid growth in 2010 with a virtuous cycle of strong exports - an increase in investments - improvement in employment - private consumption. Korea’s Economic Growth 8 6 Annual Economic Growth 4 2.1 1.4 2 0.7 0.5 0 2.3 0.2 6.1 -2 -4 Quarterly Economic Growth (quarter-on-quarter) -6 2008 1Q 2Q 3Q4Q 2009 1Q 2Q 3Q 4Q 2010 1Q 1Q 3Q 4Q Source: Bank of Korea. However, it is difficult to say that the virtuous cycle became fully entrenched. Despite overall improvement in the labor market, the number of hard-to-employ didn’t decrease substantially. Moreover, Korea’s financial markets and exports remained vulnerable to external shocks. As a result, Korea’s recovery lost steam in the second half of 2010 as internal and external uncertainties mounted. 2. Weaknesses in 2010 Korean Economy (1) Contrasting industrial performance In 2010, manufacturing industry’s production expanded by 17.1% year-on-year.