[Column] US Resolves Industry Complaints with a Single Call... The Path Korea Must Take

"A single phone call to the governor can solve it."

Paul LaBoy, Chief Manufacturing Officer (CMO) of Connecticut, USA, expressed his role this way during a meeting with reporters at Hanwha Aerospace's U.S. branch. He said, "There needs to be a high-ranking government official who can immediately represent manufacturing," adding, "No other state has someone fulfilling this role."

Connecticut is home to the largest U.S. aerospace engine industry cluster known as the "Aerospace Alley." Including Pratt & Whitney (P&W), one of the three global aerospace engine giants, aerospace engine and parts manufacturers located here experienced rapid growth around World War II and sustained the state government economically. There were ups and downs. Since the 1980s, U.S. manufacturing has been on a decline for decades, with factories closing and relocating to East Asia?Korea, Japan, China?where labor costs are lower. Connecticut’s aerospace engine industry was also hit hard. Orders plummeted and workers left. Liz Linehan, a Connecticut state representative whom we met the same day, said, "Fifteen years ago, talent drain was the state government’s biggest concern."

The state government revived the local economy. By implementing bold tax incentives one after another, they retained companies, and currently, the aerospace engine industry generates about 10% of Connecticut’s Gross Domestic Product (GDP). In 2014, Connecticut enacted the Aerospace Reinvestment Act, offering large tax credits for reinvestments exceeding $100 million (approximately 130 billion KRW). In 2019, the unprecedented position of "Chief Manufacturing Officer" was created as part of the state government’s efforts to revive manufacturing. Additionally, the state refunds up to 50% of payroll taxes for job creation and offers a 6.35% tax reduction on capital investments. Up to $100,000 is provided for new manufacturing facility introductions, and up to $800,000 for power efficiency equipment installations.

LaBoy, the CMO, said, "These are grants to promote manufacturing growth and innovation," emphasizing, "There is no need to repay the state government." Representative Linehan also praised Hanwha Aerospace, calling it "a lighthouse for other companies in Connecticut."

There seems to be much we can learn from Connecticut’s attitude and approach toward aerospace engine companies as we develop our national aerospace industrial complex. Our government dreams of becoming a space and aerospace powerhouse and is investing trillions of won to strengthen the related industrial ecosystem. Hanwha Aerospace, the only domestic aerospace engine specialist company, has established a mid-to-long-term strategy to develop advanced independent engines by creating an aerospace engine ecosystem with dozens of domestic companies, and based on this, plans to develop additional engines for unmanned aerial vehicles and commercial aircraft.

P&W plays a central role in the regional economy as an aerospace engine manufacturer in Connecticut. If Hanwha Aerospace succeeds in developing an independent engine and joins the ranks of the Big 4, it could play a similar role in Changwon, Gyeongnam, where Hanwha’s facilities are located. This would lead to economic benefits and job creation, creating a virtuous cycle that ultimately benefits the nation and local communities.

Aerospace engines are an industry heavily reliant on technology development and design, requiring significant time and money. It is overwhelming for companies to handle alone. Bold government support must back them. Some criticize support for large corporations as stingy. However, support for securing future growth engines should not be viewed as preferential treatment. The Defense Acquisition Program Administration (DAPA) has just begun the advanced aerospace engine conceptual design project, with Hanwha and Doosan entering competitive bidding. Investment is all about timing. Hopefully, it will not be too late.