Korea's New Industry Competitiveness Remains Low in 5 Years...Institution, Infrastructure, and Workforce Also Rank Last

[Asia Economy Reporter Kim Hyewon] A negative outlook has emerged that South Korea's competitiveness in new industries will remain in the lower ranks compared to the United States, China, and Japan even five years from now.

The Federation of Korean Industries (FKI) announced on the 1st the results of a survey conducted among policy officials from major new industry-related associations selected by the Ministry of Trade, Industry and Energy, titled "Current and 5-Year Future Competitiveness of Korea, the US, China, and Japan."

When investigating the global market shares of representative products in seven major new industry sectors, including electric vehicles, hydrogen electric vehicles, industrial robots, and civilian unmanned aerial vehicles, China led with the most number of first-place industries (3) five years ago, currently, and projected five years from now. It was followed by the US (2), Japan (1), and South Korea (1).

By industry product, China is expected to maintain the top position in electric vehicles and hydrogen electric vehicles, civilian unmanned aerial vehicles, and solar cells (energy). The US held the number one market share in carbon fiber (advanced new materials) and next-generation semiconductors. Japan is projected to maintain a dominant position with a 50% market share in industrial robots. South Korea is expected to reach a 95% market share in LNG carriers within the smart and eco-friendly ship industry five years from now.

When dividing the new industry competitiveness of Korea, the US, China, and Japan into six areas?securing professional manpower, securing core source technologies, research and development investment, ease of new industry startups, government support, and stable legal foundations?the US showed overwhelming superiority in four areas centered on manpower and technology. China stood out in institutional and infrastructure areas such as government support and stable legal foundations.

However, the FKI predicted that five years from now, the US will rank first in competitiveness across all areas, indicating that the competitiveness gap between the US and Korea, China, and Japan in new industries will persist.

South Korea currently ranks near the bottom in institutional and infrastructure areas such as ease of new industry startups, government support, and stable legal foundations. Its research and development investment competitiveness is also the lowest among the four countries. According to OECD statistics, the total national research and development expenditure in 2018 was ranked as follows: the US ($551.5 billion), China ($462.6 billion), Japan ($173.3 billion), and South Korea ($95.4 billion).

In the category of securing professional manpower, South Korea (100) is slightly ahead of China (97.6) but lower than Japan (106.4), and there is a significant competitiveness gap compared to the US (134.5). In securing core source technologies, South Korea (100) currently shows an advantage over China (87.6), but remains lower than technology-advanced countries Japan (122.3) and the US (132.8).

Five years from now, South Korea is expected to be overtaken by China in securing professional manpower (South Korea 110 vs. China 121.4), and the gap with China in securing core source technologies will narrow (from 12.4 to 2.8), indicating that China will strongly pursue South Korea in technology and manpower competitiveness.

Additionally, five years from now, South Korea is expected to rank last among the four countries in government support and stable legal foundation categories. Particularly, competitiveness in stable legal foundations is projected to decline from the current level (100) to about 96.4. Regarding this, the FKI stated, "There is concern about the weakening of South Korea's future competitiveness in securing professional manpower and building an ecosystem for new industries in terms of institutional and infrastructure capabilities."

However, South Korea's competitiveness in research and development investment and ease of new industry startups is expected to improve five years from now. Research and development investment is projected to rise from 100 to 123.6, surpassing Japan (110 → 114.3), and the ease of new industry startups is also expected to exceed Japan (South Korea 100 → 105 vs. Japan 102.5 → 104.2). The competitiveness gap between South Korea and Japan in securing core source technologies is currently 22.3 but is expected to narrow to 10.8 in five years, suggesting South Korea will catch up to Japan's new industry competitiveness.

Policy officials from industry associations identified the biggest challenges faced by companies in South Korea's seven major new industries as ▲lack of professional manpower (28.6%) ▲excessive regulations and unreasonable practices in new industry sectors (23.8%) ▲technology gap with advanced countries (19.1%). To secure competitiveness, they pointed to ▲improving rigid regulatory systems (21.4%) ▲training manpower to meet industrial demand (19.1%) ▲activating market-friendly technology transfer and commercialization (16.7%) ▲strengthening government support for research and development (14.3%).

Kim Bongman, Director of International Cooperation at the FKI, pointed out, "Although the speed of technological innovation such as artificial intelligence (AI) and 5G is accelerating, a lack of professional manpower to support this and rigid systems and excessive regulations that prevent reflecting rapid market changes in business models are major obstacles. It is urgent to establish effective support systems that can enhance South Korea's competitiveness in response to these challenges."

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