Korea's top economic policymaker has expressed determination to localize essential materials, parts and equipment as soon as possible.
“To cope with Japan's export restrictions, the government will work out measures to strengthen the competitiveness of key materials, parts and equipment this month, and give speed to their localization,” Minister of Economy and Finance Hong Nam-ki said Thursday.
Successive Korean governments have pushed for localizing such core items since the 1980s, but failed to produce satisfactory results. Such failures were not just because the nation was lacking in technology and R&D investment, but because Korean businesses found it more economical to buy these products from foreign suppliers rather than struggling to develop them.
But these businesses can no longer rely on this international division of the production system with Japan's export controls. The ongoing trade dispute should serve as an opportunity for Korean companies to wake up to the harsh reality. If Japan excludes Korea from its “white list” of countries with preferential treatment concerning exports of up to 1,100 core materials and parts, Korean businesses will find it hard to procure them.
All this shows this country must use this occasion to establish a domestic supply system of raw materials and components by all means.
At stake is whether Korean companies can make ongoing R&D investments and commercialize the developed technologies with speed. This goal will be difficult to accomplish if left to individual companies. The government, large businesses and their small and midsize suppliers will have to make concerted efforts. The government made the mistake of curtailing R&D spending for semiconductors from 136 billion won ($115.4 million) in 2009 to little more than 10 billion won in 2016.
That was a foolish, shortsighted move.
Had the nation kept expanding its investment, Korean businesses might have reduced their reliance considerably on Japanese suppliers. The government can ill afford to repeat such a trial and error.
This time around, policymakers should push for the localization drive with perseverance. When it comes to localizing materials and parts, an ounce of practice is worth a pound of theory.