The Ministry of Trade, Industry and Energy (MOTIE) has set a target of US$700 billion for South Korea’s exports next year, with a plan to attract US$35 billion in foreign direct investment in Korea and US$150 trillion in private investment.
MOTIE Minister Ahn Duk-geun said in a briefing at the Sejong Government Complex on Jan. 30 that the ministry will support customized exports in response to four global trends -- supply chains, digital technology, carbon neutrality, and demographics.
The export target exceeds the previous high of US$683.6 billion in 2022. Semiconductor exports are expected to lead Korean exports. After bottoming out in the middle of last year due to a global economic slowdown, Korea’s semiconductor exports have continued to rise since the beginning of this year. In particular, as demand for high bandwidth memory (HBM) has increased due to the growth of the AI industry, Korea’s semiconductor exports are expected to inflate by more than 20 percent this year.
Through the establishment of a system semiconductor verification center and the designation of a new specialized complex for the advanced strategic biotech industry, the MOTIE will support national high-tech strategic industries’ speedy acquisition of super-wide gap capabilities and consider designating future vehicles, defense products, and robots as items of strategic national high-tech industries. What’s more, the government will provide 14.7 trillion won in policy financing to ensure smooth private investment of 150 trillion won in high-tech industries, and extend national strategic technology investment tax credits and support packages such as the removal of unnecessary regulations on high-tech industries.
A general consensus among experts is that demand for IT devices will grow as the economy improves with the expected easing of high interest rates in the United States. Based on this trend alone, Korea’s semiconductor exports are likely to increase, which is favorable for Korea. But there have been many supply chain-related surprises such as the urea crisis from China at the end of last year and the recent Red Sea crisis. Korea uses the Red Sea as a major export route for IT devices and batteries to Europe, and there are concerns that logistics costs may more than double if ships are diverted around the Cape of Good Hope if the conflict is prolonged.
The Korean government announced the Industrial Supply Chain 3050 Strategy in December 2022 in the wake of the urea crisis in China. It outlined a plan to reduce dependence on a single country for supply chain staples from 70 percent to 50 percent or less by 2030. This year, the government will launch a preemptive and multi-layered response system for its own prioritized measures while strengthening cooperation on advanced industries, standards, and supply chains with major developed countries.
As the Basic Supply Chain Act will be implemented in earnest beginning from this June, the government will support Korean companies in strengthening their supply chains by utilizing a supply chain stabilization fund of about 10 trillion won. Some have raised the possibility of the support violating World Trade Organization (WTO) regulations due to an export subsidy controversy. “I know about such claims but supply chains are an issue directly related to national security,” Minister Ahn said in response. “I know of no WTO violations in the case of paying logistics costs to resolve supply chain issues.”
The MOTIE will also accelerate its policy of fostering nuclear power plants amid a global carbon neutralization trend. Ahn said that Korea’s energy system will be transformed into carbon-free energy to achieve carbon neutrality by 2050. The ministry seems inclined to expand the supply of carbon-free energy sources such as nuclear power plants, renewable energy, and hydrogen which is a national priority of the current government.
To attain this year’s export goal, the MOTIE will provide the highest-ever trade insurance of 250 trillion won and double the size of export vouchers, and extend a cut of up to 20 percent in domestic testing and certification fees to the end of this year.