[Viewpoint] The Importance of the Shipping Industry in Our Economy

South Korea is a peninsula country surrounded by the sea, but due to North Korea, land transportation is extremely limited, and trade activities mainly rely on the shipping industry. 99.7% of South Korea's import and export cargo transportation is carried out through maritime transport. Essential consumer goods, as well as raw materials such as crude oil, coal, and iron ore used in the steel industry, are transported 100% by shipping. Therefore, given South Korea's national geographical characteristics, enhancing competitiveness in the shipping industry is essential.

National shipping companies are also responsible for transporting large quantities of strategic materials and troops during emergencies such as war. In an unstable international political and geopolitical environment, including North Korea's military threats and trade conflicts between the United States and China, the importance of maintaining and developing the stable functioning of shipping ports is highlighted from a national security perspective.

South Korea's maritime-dependent geographical features have also influenced its industrial ecosystem. Since the 1970s economic development five-year plans, industries such as shipping, shipbuilding, and ports have developed organically in tandem, playing a key role in job creation and national industrial competitiveness. Additionally, as part of the government's policy response to the recent COVID-19 economic downturn, shipping and shipbuilding remain designated as two of the seven major core industries.

Starting in July 2018, the US-China trade war broke out, leading to a shift toward more closed trade policies among major economic powers. In response, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), centered around Japan, came into effect at the end of 2018, and in November 2020, the Regional Comprehensive Economic Partnership (RCEP) was signed by 15 countries, mainly ASEAN nations. The economies of the RCEP participating countries account for approximately 30% of the world's gross domestic product (GDP), and despite the trade war, international trade networks are forming primarily around Asia, as forecasted by the Organisation for Economic Co-operation and Development (OECD).

Given South Korea's small domestic market size, trade conditions and scale have a significant impact on the national economy, making logistics competitiveness a priority. There is a need to strengthen the competitiveness of the shipping industry, which serves as the backbone of international trade due to geographical characteristics, and to establish an integrated logistics system centered on Asia. Under the restructured international trade environment, improved shipping competitiveness and integrated logistics infrastructure can serve as opportunities to build a more efficient global value chain.

Recognizing the importance of the shipping industry, the government has made financial and policy efforts to support it. This means that under the forthcoming international trade system, policy support invested in logistics infrastructure and the shipping industry will have a more direct connection to national competitiveness.

Government funds invested can serve as a foundation to build more efficient regional value chains. Such an environment is expected to reduce trade costs between agreement member countries and further promote trade. Considering the manufacturing-centered national economic structure, trade networks formed mainly with neighboring countries also positively impact productivity and efficiency. Therefore, industrial and policy efforts to enhance shipping industry competitiveness and establish an integrated logistics system are deemed necessary. Additionally, it is important to continuously review and identify problems arising during this process, find areas for improvement, and prepare self-help measures.

Hong Ki-hoon, Professor, Department of Business Administration, Hongik University