The average shipments of 46 monopoly industries came to 323.8 billion won (US$279 million) over the past five years, 5.3 times larger than the total average of 60.8 billion won for the mining and manufacturing industries. (Yonhap)
SEOUL, Dec. 30 (Korea Bizwire) — Industries including tobacco, beer and sugar that have been monopolizing the market for decades are very stingy with investments such as research and development (R&D), due to lack of pressure from foreign countries to compete due to high concentration in the domestic market.
According to the results of the 2017 Market Structure Survey released Friday by the Fair Trade Commission (FTC), the average shipments of 46 monopoly industries came to 323.8 billion won (US$279 million) over the past five years, 5.3 times larger than the total average of 60.8 billion won for the mining and manufacturing industries.
Among them, railroad cars had the highest concentration of the domestic market, accounting for 92.7 percent. Beer was next in line with 88.7 percent. Sugar with 87.3 percent, and cigarettes with 87.3 percent followed.
The figure is already well above the average domestic concentration of 78.9 percent in 46 monopolistic industries, more than double the 36.2 percent average for the whole.
This can be interpreted as minimal pressure for South Korean companies to compete against foreign firms.
Notably the concentration ratio (CR3) – the market share of the top three companies – were 99.6 percent for cigarettes, 99.4 percent for beer and 94.7 percent for sugar.
This is interpreted as an indication of serious oligopoly behavior that occupies the entire market.
These items have characteristics of process industry that require large-scale facilities for production, an FTC official explained.
Tobacco, which used to be a state monopoly; sugar with large facility sizes and high initial investment costs; and beer, which requires a sophisticated distribution network, have maintained a monopoly structure for decades due to difficulties in securing distribution channels.
Maybe it’s because there are no competitive drivers for further growth.
The R&D investment ratio of these items was 0.9 percent for cigarettes, 0.4 percent for beer, and 1.1 percent for sugar, which is less than half of the average, or 2.6 percent, of 46 monopolistic structure maintenance industries.
D. M. Park (dmpark@koreabizwire.com)
