[One Year After Japan's Export Restrictions] One Year of SoBuJang Policy, How Far Has It Come?

Supply Chain Diversification and R&D Support
Competition Enhancement Committee Drives Public-Private Cooperation
Consistent Government Support Remains a Challenge

[Asia Economy Reporter Moon Chae-seok] Under the perception that 'the economy is security,' the government's policy on materials, parts, and equipment (SoBuJang), promoted together with the private sector, has now reached its first anniversary. The government established a comprehensive inter-ministerial plan and focused on swift implementation to break away from excessive dependence on specific countries and fundamentally strengthen the competitiveness of the SoBuJang industry, triggered by Japan's unexpected export restrictions.

According to related ministries and industries on the 29th, during the one year since Japan's export restrictions were implemented last July, the Competitiveness Enhancement Committee, which serves as the government's SoBuJang policy 'control tower,' created a new public-private cooperation model including supply chain diversification, research and development (R&D) support, and revisions to related laws and systems.

First, the government revised the Special Measures Act for Strengthening SoBuJang Competitiveness (SoBuJang Act) for the first time in 19 years to provide policy support. The core of the amended SoBuJang Act, which has been in effect since April 1, is the long-term nurturing of specialized companies. One hundred companies will be selected at each growth stage: 'startup → strong small and medium enterprise (SME) → specialized company.' In the second half of this year, 20 startups (1st round), 45 strong SMEs (2nd round), and about 20 specialized companies (1st round) will be selected.

Specialized companies will receive ▲ large-scale R&D support of 5 billion KRW annually in a flexible manner (period, method, consortium, etc.) ▲ priority low-interest loans for facility investment such as industrial structure advancement support funds for small and medium specialized companies (interest rate reductions of 0.7 percentage points for SMEs and 0.6 percentage points for mid-sized companies) ▲ full support including the introduction of a 'regulation high-pass system.' An official from the Ministry of Trade, Industry and Energy, the competent ministry, stated, "Having established the institutional framework for SoBuJang self-reliance and achieved initial results over the past year, the core going forward will be nurturing global specialized SoBuJang companies," adding, "We will include not only semiconductors but also strong SMEs in SoBuJang such as carbon fiber as specialized companies."

The Competitiveness Enhancement Committee expanded the number of supply management items from 100 to 338 last month. Of the 75 competitiveness enhancement measures, 62 (83%) have been implemented. A representative example is the revision of subordinate laws under the Restriction of Special Taxation Act (RSTA), such as expanding tax credits for R&D and facility investments.

Securing the SoBuJang budget and ensuring smooth execution are also the government's roles. The government allocated 2.1 trillion KRW for SoBuJang this year and executed about 62% of it early by the end of last month. This is more than double the 832.7 billion KRW from last year. The government plans to invest '5 trillion KRW plus alpha (α)' in the SoBuJang sector by 2022 to support technology development and expansion of testbeds.

To strengthen the competitiveness of the SoBuJang industry, which lags behind Japan, policy consistency must be guaranteed above all. Kim Yang-peng, a senior researcher at the Korea Institute for Industrial Economics and Trade, said, "The biggest achievement over the past year was creating a turning point where large companies reconsidered the role of our SMEs," adding, "Regardless of Japan's export restrictions, long-term government support is necessary for cooperation between large companies and SMEs and for the independence of small and mid-sized companies."

There is also the task of resolving trade and diplomatic conflicts with Japan. South Korea filed a complaint against Japan at the World Trade Organization (WTO) on the 2nd. On that day, the WTO Dispute Settlement Body (DSB) meeting, the first instance, is scheduled to discuss South Korea's request for panel establishment (WT/DS590/4). Generally, panel rulings take 1 to 2 years, and the final ruling takes about 2 to 3 years.

This content was produced with the assistance of AI translation services.