Plan Aims to Localize 100 Items within 5 Years
The South Korean government has come up with a plan to achieve independence from Japan for 100 key items within five years.
To this end, the government will provide 7.80 trillion won (US$6.42 billion) in research and development (R&D) funds and 37.50 trillion won (US$30.85 billion) in financial support to localize or diversify import sources of 100 key strategic materials, parts and equipment items which are vulnerable to Japan’s export curbs.
South Korea imported US$38 billion (46 trillion won) worth of Japanese products last year, recording a trade deficit of U$22.40 billion (27 trillion won).
During a press briefing held at the Government Complex Seoul on Aug. 5, Trade, Industry and Energy Minister Sung Yoon-mo said, “The government will implement special measures to secure a stable supply of 100 key strategic items. We will use all means within our reach, including budget, finance, tax support and regulatory exemption. We will secure stable supplies of 20 such items within a year and the remaining 80 within five years.”
The 100 items were selected from the six industries which are vulnerable to Japan’s export regulations. They include semiconductors, displays, cars, electronics, machines and chemicals.
For the 20 items whose stable supply is under immediate threat, the government will pursue localization and import source diversification. The 20 items include five each in the semiconductor, car, machine and metal sectors, three in the electrical and electronic sector and two in the display sector. The three materials whose imports were restricted by Japan last month – high-purity hydrogen fluoride, also known as etching gas, fluorine polyimide and photoresists – are also included in the initial 20 items.
Of the 100 key strategic items, the ministry said it plans to secure supplies of 20 items within a year by reaching out to suppliers in other countries, including the United States, China and the European Union, and pursue their localization by injecting 273.20 billion won (US$224.32 million) from the revised supplementary budget.
The government will also spend 7.80 trillion won (US$6.42 billion) and more in R&D for localization of the remaining 80 items over the next seven years. The 80 items include seven in the semiconductor sector, nine in the display sector, eight in the car sector, 16 in the electrical and electronic sector, 34 in the machine and metal sector and five in the basic chemistry sector.
In particular, South Korea will also help local firms seek acquisitions of foreign rivals that hold high-level technologies, introduce overseas technologies and attract foreign companies to South Korea, if it is impossible to secure a certain type of technology in a short period. To this end, the government will offer 2.50 trillion won (US$2.05 billion) through state-run banks to support mergers and acquisitions of overseas companies specializing in the affected materials, raise the cash grant from the current 30 percent to 40 percent to attract investment from foreign companies and provide income tax incentives to foreign specialists and experts.
In addition, the government will revise the Chemicals Control Act by significantly reducing the licensing period and procedures and ease various regulations, including labor rules, to help local industries speed up the development of key technologies.
It also plans to quickly execute policy finance of 29 trillion won (US$23.85 billion) in the second half of this year and provide up to 6 trillion won (US$4.93 billion) worth of special operational fund additionally.
Some critics pointed out that while the government has been seeking to localize materials, components and equipment over the last 20 years, the localization rate has not improved due to the fact that conglomerates are reluctant to use domestic products. Accordingly, the government is planning to encourage large corporations, such as Samsung, SK and Hyundai Motor groups, to actually use domestic products in their production lines based on strong cooperation with supply companies.