An Analysis of Regional Export Competitiveness Using Export Structure Sophistication Index: With a Focus on Gyeongnam

Korea, a small open economy, is characterized by its high dependency on the international environment and this also applies at the municipal level. In the past, Korea’s economy grew by exporting goods of its main industries and in this process, certain strategically selected provinces paved the way in developing the region and Korea’s economy by acting as an exporting foothold. One such province, Gyeongnam, has consistently increased its export volume, ranking third amongst the country’s regions only behind Ulsan and Gyeong-gi in 2011 and has been a leading player in bringing wealth into the country. At that time, exports accounted for around 80 percent of Gyeongnam’s GRDP, reflecting the high trade dependency of the region. However, the role of trade in Gyeongnam has diminished over time and now its export volume recently ranked 7th in the country in 2018. Furthermore, its export growth has fallen short of its total GRDP growth raising concerns about the role of trade in the region’s growth. The reasons for this decrease in exports can be explained by the increase in US protectionism, China’s growth slowdown and structural reform and changes due to diversification of the global supply chain. Gyeongnam’s exports, in particular, are highly biased to a few products and countries. For example, more than 30 percent of the region’s exports are related to shipping whilst exports to the US and China each take up 15.1 percent and 11.3 percent of its exports, showcasing its serious dependency on the two countries. These characteristics make Gyeongnam’s exports more likely to be highly and directly vulnerable to international factors, such as changes in industry or the country’s economy. As such, for Gyeongnam to gain competitiveness in the changing international trade environment, its export structure must encompass higher value-added and high-tech products. This paper aims to diagnose and analyze Gyeongnam’s export structure and through this try to find lessons to help increase the region’s trade competitiveness. In sum, the paper aims to learn how Gyeongnam can change its export structure to move up the value chain by utilizing preexisting resources such as labor and technology to their fullest.