Central bank warns labour costs soaring past rivals and eroding competitiveness South Korea's central bank has warned that the country's high wages are pushing up inflation and suppressing economic growth, with labour costs in South Korea exceeding those in Singapore, Hong Kong and other regional competitors. Although at US$1,869 the average monthly salary in South Korea remains lower than in many other developed nations, including the US and Japan, the rate of increase has been faster. During the past three years, wages increased by 22.4 per cent, compared with an 8 per cent rise in the US, 2.9 per cent in Hong Kong and 3.9 per cent in Singapore. In Japan, wages fell 9 per cent with an 8.8 per cent drop in Taiwan. Park Seung, governor of the Bank of Korea, has said high wage increases are contributing to South Korea's high costs of business and have dampened economic growth while eroding the country's competitiveness. He has called on the government to improve South Korea's high-cost/low-efficiency labour structure by reforming the education system and improving labour-management relations. Larger wage bills have encouraged an exodus of manufacturers in search of lower labour costs, from South Korea to other countries, especially China. This has worsened unemployment in the country, which rose last year to 3.4 per cent from 3.1 per cent in 2002. Meanwhile, South Korea posted its largest monthly export figures off the back of demand from China, according to the Ministry of Commerce. In April, the country exported US$21.7 billion worth of goods which helped push the country's trade surplus to a five-year high of $2.91 billion. South Korea is one of the world's biggest exporting nations, with products ranging from cars to steel and electronics. Exports have risen across the board with only ship building showing a slight decline. Semiconductors, the country's flagship export, were up 62 per cent from a year ago. Last week's announcement from Beijing that it could take measures to cool its economy caused severe jitters in financial and business circles in South Korea. Seoul's Finance Minister Lee Hun-jai has sought to ease those fears, saying China's economy was still predicted to grow by 8 per cent and domestic demand would still remain strong. 'Although the nation will be affected by China's tightening policies in the short run, there is no need to overreact,' Mr Lee said. 'Controlling the overheating economy will help the world's fastest-growing economy avoid a hard landing, which will be beneficial.' And analysts remain optimistic. 'Export strength will be maintained by the global expansion, though its pace could be checked by a slowdown in China, capacity limits and a stronger won,' said Oh Suktae of Citigroup, which raised its target for South Korea's gross domestic product forecast for this year from 5.8 to 6.3 per cent.