INTERVIEW 'Green New Deal not a political initiative'

Korea Institute for International Economic Policy (KIEP) President Kim Heung-chong said in an interview with The Korea Times at the institute in Sejong, July 29. Korea Times photo by Choi Won-suk

Gov't should help firms have a greater say in setting global green standards

By Lee Kyung-min

The much-anticipated “Green New Deal,” a policy initiative of the Moon Jae-in administration, should not be reduced to a topic for a political wrangling but treated as a rare crucial drive to strengthen the competitiveness of the country's businesses to underpin long-term, sustainable economic growth, a noted economist said.

The government needs to increase funding for research and development (R&D) concerning eco-friendly projects and provide clear-cut related regulations, in a dual objective to help local firms flourish on the global stage where corporate profit can no longer neglect environmental consequences.

A prompt yet thorough review is required to maintain policy consistency needed for full execution of corporate business plans, a critical step in a wider virtuous growth cycle that will help local firms have a greater say in setting global green standards while facilitating global expansion and domestic technology advancement.

The most expected role of the government therefore is to buy time for local firms to sharpen their competitive edge after learning advanced technologies in Europe and mastering them for further application.

“It is no longer about emulating something better,” Korea Institute for International Economic Policy (KIEP) President Kim Heung-chong said in an interview with The Korea Times at the institute in Sejong, July 29.

European countries have long set global green standards in ways that best reflect their own interests including safety in manufacturing, disposal and hazardous material management to name a few.

They are, he said, a rule setter, followed by Australia and Canada. Their initial draft later becomes an international standard. That's how the past 50 years have been with cases in point including rules governing the World Trade Organization (WTO), International Monetary Fund (IMF) and Bank for International Settlements (BIS).

Kim believes that businesses should promptly develop technologies, industries should advance their corporate activities and the government should provide all the help needed along the way. This will in turn lead to Korea-developed standards being adopted as part of large-scale business deals among top global players, and increased participation of the country in multilateral-operated green platforms.

“Korea needs to speak up. It's about time. If we fall behind, the loss will be immense,” said the top Korean expert on European affairs.

Notwithstanding the business goal-oriented nature of the initiative, the idea of green associated somehow more closely to liberal political leanings can easily become a subject for drawn-out partisan bickering, a reason why he strongly believes the issue requires a broader perspective to see “above and beyond.”

The idea of renewable, green energy took shape as part of energy independency, a concern shared by European countries at large. The far-right force dominated the political forum over the past decade. But apart from the frequent left-right public sentiment swings, political voices representing the green energy initiative has been on a continued rise.

“This goes to show the issue will not lose steam just because of a change in the leadership of a country. Neither should it in Korea,” he said.

In particular, intensive joint research efforts should be undertaken with global top institutes in material science, he stressed. Included among the highest-tech research bodies are Fraunhofer in Germany, the Netherlands Organization for Applied Scientific Research (TNO), and the Royal Danish Academy of Sciences and Letters (Kongelige Danske Videnskabernes Selskab) in Denmark.

Reshoring won't be easy

The COVID-19 pandemic has laid bare the vulnerability of the current China-centered global value chain (GVC), the dependence of which has disrupted many key industries in countries around the world, leading to a plunge in their GDP.

Many hard-hit nations have since sought ways to have their firms operating overseas reshore, as part of a “reshoring initative” to limit uncertainty triggered by unexpected external shocks, Korea included.

Yet full reshoring is unlikely, a reason why he says government policy should be more tailored to best meet the specific, varying needs of individual firms that have left and are staying where they are.

“Having their manufacturing plants back in a country known for high labor costs backed by militant labor is not a viable option for many firms. Leaving China is practically impossible for labor-intensive businesses. This is true not only for Korea but major developed countries around the world.”

The seemingly deadlocked situation therefore begs the question of how best to improve stability over efficiency, strengthening the case for “near-shoring,” a highly viable alternative to Korea given its proximity to “new southern countries,” mostly in Southeast Asia.

“We have learned not to put all our eggs in one basket. Now that's established, it should be about how much of a balance should be struck in diversification efforts.”

A part of the function served by plants in China can be moved to one or two countries in Southeast Asia. If profit margins are met, dependence on China can be reduced and this will in turn lead to the expansion of the new alternative countries, a scenario he considers a “productive win-win,” backed by government's official development assistance (ODA).

The government role in his view is to identify why local firms are reluctant to expand in certain countries and help resolve the situation.

If it is due to a lack of infrastructure, the government can build this there. If overall administrative inefficiency or corruption is the problem, the government can arrange sit-down negotiations. Kim said such need-specific government assistance will be much appreciated by small- and medium-sized firms (SMEs) which unlike their large conglomerate counterparts have limited resources and negotiating capabilities.

“A rise in value of Southeast Asian countries to Korea as an alternative to China will certainly come at a cost, which can be managed by thorough preplanning that bolsters mutual growth and cooperation,” he noted.

Korea can better help with anti-virus ODA

Also needs a strategic approach to advancing the ODA program, Kim said, is “K-public health crisis management,” a much-touted method of pandemic response of Korea defined by testing, tracing and treating.

Korea's response measure needs high-skilled medical and health professionals, high-tech information technology tracking system and testing facilities, a rather costly option to most developing countries.

Yet Kim views a need-based response measure could help induce the desired outcome, mostly by judging the scale of lockdowns in degrees when organizing an ODA program.

The Korean method works best for cities with large populations and robust economic activity. In densely populated areas with little economic activity, giving physical aid items is better. These are examples of how the government can offer different solutions to virus-hit countries with varying needs, he said.

“Promoting the Korean method is only as good as the applicability recognized by other countries in dire straits to weather the crisis. The cheapest way is a lockdown but it comes at an immense cost to the people, borne out by plummeting GDP. Korea can and should need to offer a tailored method to better help countries in need.”