Global Adjustment in Korean Textiles Dennis McNamara A combination of chronological compression and coordination of serial production has distinguished global adjustment in Korean textiles. Compression denotes the rapid pro- gression from origins to maturity and then decline in what has become one of the world's leading textile manufacturing and exporting nations. One consequence of rapid development has been inconsistencies in the formation of independent industry institutions necessary for adjustment, such as industry associations. Coordination denotes matching supply and demand along a long domestic line of pro- duction for export. This line stretches from upstream synthetics and spinners, all the way down to fashion and garments. Three distinct patterns of coordination have dominated the Korean production line. 1) Intra-firm coordination within textile chaebol such as Kabool, Kolon, or Tongkook demand extensive investments upstream and downstream, but permit economies of scale and scope, and facilitate planning and quality control. 2) Inter-firm coordination by the Korean Federation of Textile Industries [KOFOTI] mobilizes state and industry support for extending and refocusing the production line, but remains hampered by excessive competition within the industry, and by conflicting demands between smaller and larger producers. 3) Industry-level supervision of the production line through state control of quotas, trade relations, prices, labor, and on raw material imports, as well as through macrolevel state controls in finance and trade. This paper focuses on the role of associations in global adjustment. Three levels of co- ordination were critical in addressing the market imperfections of a fast-growing industry, particularly in finance and in balancing production for domestic and foreign markets until recently. I conclude that without a greater role for industry associations in the face of state withdrawal from industry-level coordination, contention rather than productive competition will hamper adjustment along South Korea's long production line. T he Asian financial crisis has brought dislocation to South Korean workers, drastically reduced incomes among the mid- dle class, and a perilous squeeze on credit for makers and marketers in the Republic. Statistics offer an impersonal but nonetheless dramatic picture of the change. The season- ally adjusted unemployment rate reached 7% by June of 1998, and some estimate will reach as high as 11% in 1999. 1 Positive growth in Gross Domestic Product of 5.5% in 1997 is now projected at negative growth of 7.9% in 1998. 2 Global adjustment in key export in- dustries has now drawn the attention of the International Monetary Fund, World Bank, and major international allies, as well as the attention and energy of South Korean govern- ment and business alike. Overlooked in the dire picture of bankrupt firms and over- exposed banks is the fact of continuing strong exports, including textiles and fabrics. The total value of textile and garment exports in 1997 climbed to $18.5 billion, a 4.5% increase over the previous years, and the value is projected to increase a further 3.5% in 1998 to $19.1 billion. 3 The fact that South Korea remains among the top six or seven textile exporting nations in the world markets despite the financial crisis lends credence to national goals of $25 billion worth of annual textile exports early in the next century. Yet continued growth demands painful adjustments and it is not yet clear whether industry institutions, including firms, trade associations, and government ministries can remobilize energies from earlier efforts at expansion in a joint effort of adjustment. With a history stretching across five critical decades of change in international markets, Korea's textile industry documents the shift in cross-border economic interdependence Volume 8 Number 1 March 1999 # Blackwell Publishers Ltd 1999. 108 Cowley Road, Oxford OX4 1JF and 350 Main St, Malden, MA 02148, USA. CREATIVITY AND INNOVATION MANAGEMENT 48