[ Economy > Short Takes ]

Chaebol lobby accepts five-day workweek

  In a sudden about-face, a major lobby group for business conglomerates has reluctantly accepted a government proposal to introduce a shortened workweek system without any reduction in workers¡¯ base pay.
  ¡°The government¡¯s proposal for a five-day workweek is not totally satisfactory,¡± Hyun Myung-Kwan, vice chairman of the Federation of Korean Industries (FKI), said during a meeting with local reporters.
  ¡°But considering the reality of current labor/management relations, it would be better to implement the government¡¯s proposal in order to prevent the issue from further fueling labor disputes.¡±
  The remark is the first show of support from local employers¡¯ groups for the government proposal in a controversy that has dragged on for more than two years. The decision came one week after the Korea Metal Worker¡¯s Federation, one of the country¡¯s largest umbrella labor unions, reached an agreement with their employers to adopt a five-day workweek without pay reductions. The union held a one-day strike in November to protest introduction of the shorter workweek if it meant pay cuts. Experts say that the business federation appeared to opt for the government¡¯s proposal out of fear that unions in other industries might repeat the same tactic.
  The government¡¯s bill, which has been pending in the National Assembly, is a compromise between respective proposals from the labor and business communities. Labor unions called for the reduction of weekly working hours to 40 from 44, without any cuts in pay and other compensations, while the business community has insisted that workers accept less pay and holidays in return for shortened work hours. The government bill calls for an approximately 50-percent cut in overtime work.

Korean equities undervalued

  Korean equity prices are still undervalued compared with rivals in other economically advanced areas such as the United States, France and Hong Kong, said a report released by Goodmorning Shinhan Securities.
  The average price/earnings ratio of 108 firms listed on the Korea Stock Exchange was 8.3 as of the end of June, well below the average 20.11 P/E ratio of the world¡¯s nine main equity markets, indicating that Korean shares have a great deal of upside potential, the report stated.
  Japan came atop the list with its Topix 30 recording the highest P/E ratio at 40.83. Next were the United Kingdom with a 19.7 P/E ratio, Taiwan with 19.6, Germany with 18.69, the United States with 18.48, Singapore with 16.14, France with 15.82, Hong Kong with 13.81 and Mexico with 11.63. The P/E ratio refers to a valuation of a company¡¯s current share price as compared to its per-share earnings, and is calculated by dividing market value per share by earnings per share. In general, a high P/E ratio projects a high rate of earnings in the future.
  Meanwhile, the price/book (P/B) value ratio of the surveyed Korean firms stood at 1 as of the end of June, lagging behind the United States¡¯ 3.77, France¡¯s 2.05, Taiwan¡¯s 1.6 and Hong Kong¡¯s 1.54, according to the report. The P/B ratio is used to compare a stock¡¯s market value to its book value, assets minus liabilities. A lower P/B ratio could also mean that a stock is undervalued.
  Furthermore, the return on equity (ROE) of the surveyed firms was recorded at 12.8 percent, higher than the world average ROE of 10.98 percent. The ROE of the U.S. shares was the highest at 20.42 percent, trailed by Mexico with 15.44 percent and France with 12.94 percent, the report indicated. The ROE is a measure of a corporation¡¯s profitability, and is calculated by dividing net income by shareholder equity.

Carmakers post record exports

  Korea¡¯s automobile exports jumped nearly 24 percent year-on-year during the first six months of this year, off setting sluggish domestic demand, according to the Korea Automobile Manufacturers Association.
  According to the association, Korean automakers shipped a record 843,000 vehicles overseas during the first half of 2003, up 23.9 percent from a year earlier and surpassing the previous record of 790,000 units exported three years ago.
  Car exports have been rising since October 2002, the organization noted.
  It attributed the strong first-half showing to increased shipments of mid- and large-size sedans and sports utility vehicles that are more profitable than other types of car. The value of vehicles exported during the first half totaled $7.9 billion, up 31.7 percent from a year earlier, according to the association.
  Hyundai Motor Co.¡¯s car exports rose 21 percent year-on-year to 495,000 vehicles during the January to June period, while its affiliate, Kia Motors Corp., enjoyed a 32.7-percent increase in overseas shipments during the same period, according to the organization.
  GM Daewoo Auto & Technology Co. exported 15.5 percent more vehicles in the first half than a year earlier, and Ssangyong Motors Co. experienced a year-on-year increase of 24 percent.

Seoul to increase financial support for exporters

  The Korean government will drastically increase its financial support for the export sector as the national trade situation is expected to worsen in the face of a strengthening won and delayed recovery in the global economy.
  The decision comes after officials of the Ministry of Commerce, Industry and Energy and the ruling Millennium Democratic Party held a policy consultation meeting to discuss measures to enhance Korea¡¯s export competitiveness.
  They agreed to increase the Bank of Korea¡¯s soft loans for exporters to 2 trillion won ($1.7 billion) from the current 1.3 trillion won and the government¡¯s credit guarantee to 50 trillion won from 46 trillion won.
  Among other incentives, the ruling political camp also agreed to extend the period of tax benefits for investment in facilities and for spending on research and development by another three years. The current incentive period was due to expire at the end of this year.
  A top economic official said yesterday that provincial governments will have greater autonomy in deciding their budget and taxation in line with the Roh Moo-Hyun administration¡¯s policy of promoting regionally balanced development.
  Planning and Budget Minister Park Bong-Heum said that the central government would delegate more authority to local administrative entities to levy taxes on provincial resources and to make and implement their own budgets.
  ¡°The move is necessary to disperse more resources to provincial governments in order to promote greater local autonomy,¡± said Mr. Park, speaking at an international forum on Korea¡¯s plans for decentralization.
  His remarks came as a government survey underscored the growing gap between Seoul and provincial areas in terms of economic activity and industrial infrastructure.
  According to a survey by the Ministry of Commerce, Industry and Energy, Seoul and the surrounding metropolitan area accounted for 47 percent of the national output in 2001, up from 45.7 percent from 1990.
  Also, 53 percent of the nation¡¯s manufacturing companies were located in Seoul and nearby Gyeonggi Province in that year.
  While the bulk of industries operating in the capital area are considered high-growth sectors, such as electrical and electronics, the provinces were still dominated by traditional industries like textiles and chemicals, the survey showed.
  The Seoul area accounted for more than 62 percent of the nation¡¯s research and development spending while 66 percent of research facilities were concentrated in the greater metropolitan area comprising the capital and Gyeonggi Province.
  The ministry is drawing up a five-year plan to develop provincial economies that will involve moving hightech businesses and research and development facilities to outlying areas, ministry off icials said. The plan will be completed by the end of the year.
  ¡°The five-year plan will give priority to reducing the industrial gap by restructuring industrial bases and building high value-added industries in provincial areas,¡° an official said.