Corporations Lukewarm toward Localization Plan
The South Korean government’s plan to increase the domestic procurement of materials and components based on closer ties between large corporations and small firms against Japan’s export restrictions is showing signs of failure from the beginning. This is because the government is unilaterally pushing ahead with the plan without listening to the companies.
The government sent a letter on Aug. 9 to large corporations in the industries including petrochemical and steel, asking them to select items to be included in the plan and recommend corporations to constitute a council for the purpose. The corporations, however, sent a reply that there are no selectable items and they would not join the council. “We are dependent on a number of items from Japan and no immediate import ban has been implemented,” one of them explained, adding, “We cannot invest billions of won in order to replace the import that costs hundreds of millions of won a year at most.”
The government’s plan is to help small firms develop and produce certain items that large corporations think should be produced inside South Korea. The purpose of the council is to increase the number of such items by 20 or so based on a demand survey.
The lukewarm response from large corporations is because the import replacement plan guarantees no economic advantages. “It cannot be said for sure that the plan is feasible and the time required for actual replacement cannot be estimated,” one of them mentioned.
“Japanese companies have refined their technology for decades and it is impossible for South Korean companies to catch up with them within years,” another one said, adding, “When it comes to a small number of items that are required to be replaced, procurement from companies in third countries comparable to those in Japan is more feasible and productive.”