[Asia Economy Reporter Jeong Hyunjin] As concerns grow that the Korean economy is entering a contraction phase and will suffer significant damage due to the intensifying US-China hegemonic conflict, a proposal has been made to expand and reorganize the control tower for global supply chain reconstruction through a public-private joint effort.
On the 28th, the Federation of Korean Industries (FKI) presented 15 tasks through the "Next Government Policy Tasks for Enhancing Industrial Competitiveness." The FKI evaluated that "our economy has entered a contraction economy characterized by a decline in national wealth creation ability due to weakening potential growth and a persistent and prolonged low-growth structure," adding that "the intensifying US-China hegemonic conflict and the spread of protectionism have become major risks to the highly trade-dependent Korean economy." It further mentioned that the competitiveness of key industries is declining and new growth engines are lacking, highlighting tasks that the government should support.
First, the FKI suggested the need for a "National Strategic Materials Management Public-Private Joint Special Committee" to jointly inspect and select strategic materials affecting the entire national economy, listen to industry issues and difficulties, and prepare mid- to long-term development plans. Previously, in July 2019, the government selected and monitored items mainly in advanced materials, parts, and equipment industries in response to Japan's export restrictions.
The FKI stated, "With the prolonged COVID-19 pandemic and escalating US-China conflicts, uncertainty in the domestic global value chain is increasing, requiring a reorganization toward managing essential economic and industrial material supply chains," proposing to expand and reorganize the National Strategic Materials Management Committee, which selects and monitors strategic materials and serves as a policy decision control tower.
In the United States, the Biden administration first investigated supply chains and established the Innovation Competition Act, while Japan has expanded its budget to support supply chain diversification and strengthened ties with allied countries, focusing efforts on supply chain reconstruction.
The FKI also added that measures should be prepared to compensate companies that decide to produce strategic materials domestically, and that joint responses to supply chain crises through alliances with allied countries should be explored.
Additionally, the FKI emphasized the enactment of the National Economic Strategic Industry Promotion Act to establish a public-private joint roadmap and fully support advanced industries. Given that major countries such as the US and China are significantly expanding related investments and support policies, the proposal calls for the government and private sector to jointly identify strategic industries, discuss financial support and mid- to long-term technology blueprints, establish a roadmap, and enact a law including expanded investment tax incentives with a maximum tax credit rate of 50%.
To support the service industry, which suffered significant damage from COVID-19, the FKI proposed enacting the Service Industry Development Basic Act. The FKI noted, "The Service Industry Development Basic Act, which serves as a support foundation for creating an innovative service ecosystem, has been stalled in the National Assembly for nearly 10 years, and the lack of a legal support foundation limits systematic and fundamental responses," adding, "The bill should include the service industry basic plan, establishment of committees, activation of research and development, workforce training measures, continuous identification and resolution of discriminatory factors compared to other industries, and systematic support for high value-added industries in the post-COVID era."
Furthermore, the FKI proposed establishing a tourism industry control tower to manage tourism administrative functions dispersed across more than 10 ministries and to foster the tourism industry as a strategic industry in the post-COVID era. Other proposals to the next government include fostering the silver industry, revitalizing business restructuring, expanding support for returnee companies, preparing policies for Distribution Industry 4.0, establishing a remote medical system, enacting the Fourth Industrial Revolution Special Act, creating a foundation for utilizing bio big data, preparing an environment for R&D commercialization, revitalizing the venture ecosystem, designating carbon reduction-related technologies as national strategic technologies, and strengthening support for innovative small modular reactor (i-SMR) development.
Yoo Hwan-ik, Director of Corporate Policy at the FKI, stated, "In addition to strengthening the competitiveness of key industries, we prioritized industrial sector tasks to mitigate global supply chain uncertainties, foster new and service industries, and respond to energy policies," adding that they plan to continuously gather industry opinions and present them to the next government.
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