[In-Depth Review] To Boost National Competitiveness, Strengthen Manufacturing... 'September is a Month to Remember'

Kim Young-woo, Senior Expert at the Win-Win Growth Committee.

"You will remember September, once love is now a memory." This is a line from Paul Simon's classic song "April Come She Will." Among the many masterpieces of the legendary duo Simon & Garfunkel, this song, with its sweet vocals and lyrical accompaniment, makes us regard September as a month to remember.

The global community has endured difficult times from early spring until now due to the COVID-19 pandemic. As we begin September, there are two things our economy must remember. First, countries with strong manufacturing sectors tend to have higher economic resilience. Germany has already shown signs of recovery since May. Second, with the disruption of the global value chain (GVC), the value chains within individual countries (LVC) have become increasingly important.

Germany, regarded as a model country for pandemic control in Europe, is currently facing concerns over a resurgence due to cluster infections. Nevertheless, why is the outlook for Germany's post-COVID economy positive? The clue can be found in the "National Industrial Strategy 2030" announced by the German government last February. This strategy was drafted to maintain Germany's manufacturing competitiveness and technological superiority, setting a goal to increase the manufacturing sector's share to 25% of GDP.

Despite Germany's strong manufacturing competitiveness, its information and communication technology (ICT) industry had been relatively weak, leading to challenges such as a fragile platform economy, delayed commercialization of artificial intelligence, and the integration of core industries with digital technologies. To overcome these, Germany has promoted "Industry 4.0," which combines manufacturing with ICT. The National Industrial Strategy 2030 is a new version of Industry 4.0, highlighting digitalization, artificial intelligence, and battery cell manufacturing as key growth areas.

Today, disruptive technologies that create markets fundamentally different from existing ones are fields where it is difficult to catch up without a leading position for a considerable period. All German companies recognize the need for "breakthrough innovation" to cultivate disruptive technologies and are pursuing strengthening manufacturing SMEs, securing venture capital, improving access to technology, national support, and legislative measures.

To this end, Germany clearly presents three practical measures.

First, it is important to secure global competitiveness in core technology fields while maintaining domestic value chains. Since 2003, Germany has pursued high-quality, closed value chains through reshoring. When all parts of the value chain?from research and development to production and distribution?exist within national borders, the value chain becomes more robust, making it easier to achieve competitive advantages and expand in the global market.

Second, the competitiveness of SMEs, the source of industrial competitiveness, must be strengthened. Many global corporations and hidden champions have been recognized in the world market through highly specialized products and applications. This was possible because of numerous SMEs with technological capabilities. Therefore, continuously enhancing SME competitiveness is the key for Germany to maintain its industrial competitiveness.

Third, fostering companies that change the market landscape through breakthrough innovation. With the introduction of smart factories, machines in the production process are connected to other machines or people via the internet. Manufacturing without ICT technology has become unimaginable from the perspective of economic efficiency.

The National Industrial Strategy 2030 incorporated opinions from the business and academic sectors as of this February and is scheduled to be published as a final report in the first half of next year. Although progress stalled for several months due to the COVID-19 pandemic, the draft strategy will resume public consultation starting this month. Like Paul Simon's song, this September may not be sweet, but there is something we must remember: to enhance national competitiveness, we must build domestic value chains, strengthen SME capabilities, and foster innovative companies.

Kim Young-woo, Senior Fellow, Win-Win Growth Committee

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