Gov't to introduce supply shock prevention measures

First Vice Finance Minister Lee Eog-weon / Yonhap

By Lee Kyung-min

The government will set up an early warning system for an acute shortage of 4,000 key import items, as part of a long-term plan to limit supply chain disruptions brought on by geopolitical volatility.

The move follows a fiasco concerning the shortage of diesel exhaust fluid (DEF), a solution critical in operation of diesel engines, with Korea's vulnerability laid bare, as illustrated by the near-miss of the country's transport, logistics and emergency public services almost grinding to a halt.

Also prompting the need for the critical measure ― albeit belated ― are drawn-out yet heightened concerns about the U.S.-China hegemonic war recently developing into a global supply chain feud.

Chief among the measures will involve ways to reduce Korea's heavy dependence on China. Data from the Korea International Trade Association (KITA) showed Korea relied on China for over 80 percent of imports of each of the 1,850 items in the first nine months of this year. That number represents about half of the 3,941 import items that Korea relies on at a level of over 80 percent. The total number of import items stood at 12,586.

The finance ministry recently said that a taskforce set up jointly by 11 ministries will convene a meeting every week, adding the number of meetings will be increased as need be.

Headed by First Vice Finance Minister Lee Eog-weon, officials from the trade, foreign, agriculture, culture, health and oceans ministries will discuss ways to strengthen the legal and institutional framework to better navigate supply chain complications, followed by more scrupulous management regarding procurement of resources critical to national security.

“The recent shortage of DEF served as a valuable opportunity for us to treat the supply chain disruption issue as a priority, as reminded previously by Japan's export curbs two years ago,” Lee said.

The early warning system will monitor the real-time supply of 4,000 import items, more than half of which are imported for domestic supply needs.

Korea will lay the groundwork for introducing legislating whereby budget increases and greater tax incentives will be granted to government and corporate activities bolstering supply chain efficiency and high-tech research and development.

The government should closely examine fields that can be benchmarked for improvement in supply chain efficiency, according to Korea Institute for International Economic Policy senior researcher Kim Gyu-pan.

“Domestic supply chains management and government assistance for R&D in technological advancement are among areas that can benefit from review and partial or full implementation of similar cases in Japan,” he said.