Gov't to double spending on industrial materials, parts in 2020

By Kwak Yeon-soo

The government will double its 2020 budget for the materials, parts and equipment industries, in a bid to localize production to cope with Japan's export curbs against Korea, the Ministry of Trade, Industry and Energy said Wednesday.

According to the budget plan approved by the National Assembly on Tuesday, industry spending for 2020 was set at 9.4 trillion won ($7.9 billion), up 23 percent from this year's 7.7 trillion won.

Of the total, the government will spend about 1.3 trillion won on industrial materials and equipment research and development (R&D) next year to accelerate localization, almost double the figure of 670 billion won in 2019.

The approved amount is quite the same as what the government earlier proposed, though some details were modified during parliamentary review.

The budget increase comes at a time when the country has been facing external challenges such as the ongoing trade tensions with Japan, the U.S.-China trade war and faltering exports.

In July, Tokyo implemented measures to curb exports of high-tech materials to Seoul, which are crucial for the production of chips and displays, saying that some of the materials have been handled inappropriately.

Korea condemned the measure as politically motivated retaliation against Korean Supreme Court rulings last year ordering Japanese firms to compensate surviving forced labor victims during the 1910-45 colonial rule.

The two countries removed each other from their whitelist of favored trading partners.

Korean companies in the semiconductor and display sectors, which have been one of the major clients of Japanese firms specializing in materials and parts, have since been accelerating efforts to diversify procurement channels and apply measures to keep the supply chain stable.

“The budget increase in industrial materials, parts and equipment comes in response to Japan's export curbs and heightened trade tensions,” a ministry official said in a statement.

In order to secure future growth engines, the ministry will spend around 700 billion won, putting focus on maximizing the latest technologies in the fields of bio-health, robotics and hydrogen economy.

The government will also increase the budget to boost its exports in a bid to revive economic growth.

The value of Korean exports is expected to plunge 10.2 percent in 2019 from a year ago, according to Bank of Korea, its worst drop since 2009 when the country suffered a 13.9 percent decline.

The budget increase also includes additional spending on clean energy transformation and reinvigorating local economies.