Giving Manufacturing Industries a Leg Up

Government looks to nurture the industries into global powerhouses

Korea has built a solid foundation for shipbuilding, automobile and other manufacturing industries. The Korean government and the private sector now join forces to further develop the manufacturing industries by securing core technologies and coping with changes in the global business environment. The following are excerpts of an interview between NewsWorld and Woo Tae-hee, director general of manufacturing industries at the Ministry of Knowledge Economy (MKE), who spoke about government policies and future plans to evolve the local manufacturing industries into world-class powerhouses.
Question: Will you tell our readers about the current status of the Korean parts and materials industry and the government’s plan to nurture the industry and its strategies to boost exports?
Answer: The domestic parts and materials industry has seen a trade surplus post a 19-fold surge in the past decade and its competitive edge has made steady improvement with a firm rise in the industry competitiveness index based on technological power.
The nation’s dependence on Japan for key materials and parts has worsened and Korea is getting ever more threatened by China’s chase.
With that background in mind, in 2009 the government established a package of steps to boost the competitive edge of the industry, and it is upgrading the industry’s competitiveness with a seamless execution of those steps. As part of its efforts to nourish the materials industry, the source of added values, it is putting its heart and soul into the development of the top-10 world premier materials (WPM) that will lead the global markets by investing an aggregate of 1 trillion won by 2018. The government is striving to develop core technologies and upgrade the reliability of developed parts and materials by investing 200 billion won by 2012 in order to achieve technological self-sufficiency of key parts in a choice and concentrated manner. It is also seeking to step up parts and materials firms’ capabilities by supporting in making the companies bigger and developing expert manpower while assisting them in making their entry into overseas markets based on differentiated marking strategies tailored according to each sphere’s characteristics.
Q: What is the current status of the local machinery industry and what’re the mainstay exports?
A: The global export market, which remained sagging due to the global economic crisis in 2009, has shown signs of an apparent recovery in the first half of this year. The local general machinery industry posted $17 billion worth of exports in the first six months of the year, up 39.3 percent over the same period of last year. A trade balance in the general machinery sector is turning around with $3.5 billion, accounting for 19.4 percent of the nation’s total trade balance.
By item, construction and optical machineries were growing at a steep clip to lead export growth in the machinery industry while textile and chemical machineries as well as heating, refrigerating and air-conditioning machineries have recovered to levels seen prior to the financial crisis.
By area, the machinery industry is expanding exports to China, which continues to post steady economic growth and continues to make fixed capital investments. In particular, the construction machinery sector has seen exports to China surge 115 percent to $1.11 billion, a 70 percent surge compared to 2008 prior to the financial crisis.
In the second half of the year, the machinery industry is predicted to see exports rise due to the expansion of investments in the emerging markets and a recovery of advanced economies. The industry is forecast to see exports climb 25 percent over the previous year to $33.5 billion for the whole of 2010.
Q: Will you elaborate on plans to nurture the aviation industry and its progress?
A: The aviation industry, a value-added, knowledge-based industry for advanced countries with a high potential for creating jobs, is an industry for realizing each country’s technological levels and industrial capabilities. Given the capabilities the nation has accumulated in the aviation industry so far and the government and private sector’s joint efforts to create next-generation mainstay industries, now is believed to be an optimal time for the nation to develop the local aviation industry into a world-class one.
To this end, on Jan. 21, the government unveiled a master plan on the development of the aviation industry during the period between 2010 and 2019 and established a blueprint for developing Korea into a global top-seven aviation powerhouse by 2019. The master plan calls for the implementation of such mid- and long-term policies for the development of the local aviation industry as the building of a stable industrial infrastructure through the strengthening of the civilian sector, the construction of an infrastructure for exporting parts and ways of securing key technologies of the aviation industry.
The MKE has formed a task force on the development of the aviation industry designed to monitor major tasks of the master plan during the first half of this year so that these policies can be pushed ahead without a hitch. The ministry plans to come up with such follow-up steps as the establishment of a strategic technology roadmap designating the top 10 core aviation technologies, policies designed to specialize the aviation industry according to the characteristics of each region and ways of facilitating the financing of the aviation industry in the second half of the year.
Q: Will you tell us about strategies to step up the competitiveness of the plant export industry overseas?
A: The Korean plant industry, which won $46.3 billion worth of orders from foreign countries in 2009, is landing orders at a brisk clip. The government plans to carry out diverse support policies designed to maintain such growth momentum.
As the local plant industry has so far achieved external growth, the government is striving to focus on substantive growth from now on. First of all, it plans to establish and announce a package of steps to beef up the competitiveness of the plant equipment and materials industry in order to raise the localization rate of key plant equipment and materials. It plans to support plant EPC (engineering, procurement and construction) firms and plant equipment and materials makers’ joint entry in foreign markets by vigorously operating the Plant Equipment and Materials Industry Consultation Committee, inaugurated this past January.
In an effort to help Korean companies win more orders, the government is aggressively supporting their entry into emerging markets by opening a plant order support center in Moscow like it opened in Dubai, New Delhi and Sao Paulo this past May. It is also planning to conduct aggressive marking activities, including the dispatching of delegations for winning orders to such emerging markets as Central America, Africa and Southeast Asia and hosting meetings for foreign procurement companies.
Q: Will you specify strategies to globalize the Korean automobile industry and the current status of developing futuristic automobiles?
A: The global automobile industry is forging strategic alliances to expand into emerging markets and secure futuristic automobile technologies unlike the previous tactic of big M&As. In this regard, the government plans to expand a technical tie-up between the Korea Automotive Technology Institute and the U.S. Argonne National Laboratory to other advanced countries so as to secure technologies of futuristic cars lacking by Korean firms. Korean companies are encouraged to participate in projects to secure core technologies.
The government has a car-by-car support program in place according to the 2010 car development action plan in order to get a head start in the high-risk environmentally-friendly automobile market. Korea is the second country in the world to enter a stage of mass-production of hybrid cars following Japan. The nation plans to export the Sonata and Lotze gasoline hybrid cars by yearend.
A: Korea is to begin production of 30 electric cars considered to be more excellent than the I-Miev of Japan next month. The nation plans to localize all parts of small-size electric cars by yearend. Korea is now working on the localization of key parts of such futuristic cars as clean diesel and fuel cell cars.
Q: Will you tell us about the currents status of the local shipbuilding industry and the direction of future policies?
A: The global shipbuilding industry has seen a rise in new shipbuilding orders since late last year. Globally, new shipbuilding orders stood at 8.8 million compensated gross tons (CGT) in the first five months of this year, representing a 195 percent jump over the same period last year. In particular, Korea placed second in terms of winning shipbuilding orders last year following China, which surged by winning orders for China’s national flag-carrier ships. Korea managed to overtake China as the nation took a 40 percent share in winning new orders in the first five months of the year. There are many ships to be delivered by 2011, but chances are high that the local shipbuilding industry could return to the levels prior to 2006 in 2012 or after. The global shipbuilding industry has suffered a downturn since the late 2008 financial crisis, and there are such uncertainties as the financial crisis in the European Union and the resumption of talks to negotiate a new shipbuilding agreement via the Organization for Economic Cooperation and Development.
In a bid to maintain the competitiveness of the nation as the world’s No. 1 shipbuilding country, Korean companies are encouraged to change and diversify their business portfolios to shipbuilding repair, maritime plant, maritime leisure and new and renewable energy sectors as well as push ahead with programs to develop core technologies.
Q: Will you explain the government’s steps to ramp up the competitiveness of the root industries?
A: Root industries, which determine the quality and functions of final products in the manufacturing sector, are forces behind new growth engine industries. Despite this, root industries, recognized as the so-called 3D (dirty, difficult, dangerous) industries, may be feared to weaken the foundation of the manufacturing industry.
Recognizing the woes, on May 6, the government announced strategies to step up the competitiveness of the root industries, and it is now implementing them without a hitch. It plans to upgrade the structure of the root industries by supporting the establishment of environmentally-friendly apartment-type factories and “green process pilot plants” within industrial complexes and operating IT financing support corps. The government plans to expand “meister school” (technical high school) quotas of specific industrial areas to meet the manpower needs of the root industries and open industry-specific specialized academic courses. A performance guarantee fund has been raised to improve business conditions of firms in the root industries and step up their technological power, while support from the Korea Industrial Technology Institute (KITECH) will be reinforced and specific R&D support will be expanded.
The government is doing its best to transform the nation’s root industries into brand-new growth industries by implementing the steps without a hitch. Efforts will be made to make sure that the root industries will be developed into craftsman-oriented, new 3D (digital, dynamic, decent) industries.
Q: Will you specify the current status of the local petrochemical industry and ways to enhance its international competitiveness?
A: The Korean petrochemical industry has grown into a mainstay industry behind the nation’s economic strides and industrial development to place fourth with 64 trillion won in the value of production and $27.5 billion worth of exports in 2009.
The industry has been undergoing internal and external tremendous industrial business changes due to the construction of large-scale new plants and the expansion of plants by such latecomers as Middle Eastern countries and China and more stringent restrictions against GHG emissions. The local industry has such woes as general use-oriented production structure, a lack of original core technologies and a small-sized economy of scale.
The government and the private sector are now required to join forces to actively respond to global business changes and reposition it into a sustainable, growth industry. To this end, they will strengthen the capability to make firms bigger, specialized, differentiated and more value-added and localized globally. They plan to push ahead with such steps as ways to explore future growth engines, expand investments and transform it into a low-energy, green industry structure.
Q: Will you explain the strategies to transform the local fashion industry into a knowledge-based one as part of efforts to nurture the industry as a global brand industry?
A: The ministry is making flat-out efforts to ensure the systematic development of the fashion industry since 2008, when it established strategies to build knowledge-based infrastructure for the development of the fashion industry.
It has designated global brand candidate companies with the goal of cultivating Korean-born global top-three brands by 2015 and it has a global brand cultivation program tailored to provide support according to the stages of making inroads abroad. The program calls for accelerating Korean firms to join the ranks of global top-class fashion groups by exploring and proliferating Korean brands’ successful practices in their overseas market entry. The Global Fashion Forum has been held since 2009 for industry, academia and research circles to share policies and visions to become a global fashion powerhouse by forming a network of fashion experts and build a solid foundation. The forum will be expanded this year so that those in the fashion industry can share diverse issues and cope with global changes.
The government is seeking to establish ways of nurturing the fashion industry and expanding budgetary support so that the industry can continuously come from strength to strength to grow into global brands in the fashion sector. nw

Woo Tae-hee, director general of manufacturing industries at the Ministry of Knowledge Economy (MKE)