"National Industrial Complex Production and Operation Rates Show 'V-Shaped Recovery' After COVID-19... Employment Declines"

[Asia Economy Reporter Jeong Hyunjin] Although production, exports, and operating rates in national industrial complexes have increased compared to before the COVID-19 outbreak, employment has decreased. Additionally, since national industrial complexes have a high proportion of greenhouse gas-intensive industries such as petrochemicals and steel, the number of resident companies is small but greenhouse gas emissions are large, highlighting the urgent need for support to achieve carbon neutrality.

On the 13th, the Federation of Korean Industries (FKI) analyzed data from the 'National Industrial Complex Industry Trend Survey' and found that the production value of national industrial complexes in the first half of this year was 258 trillion won, a 6.6% increase compared to the first half of 2019, before the COVID-19 outbreak. Exports from national industrial complexes also increased by 10.7% compared to the first half of 2019, reaching $86.04 billion (approximately 103.15 trillion won) in the first half of this year. Both production and exports are showing a 'V-shaped' recovery.

(Data provided by the Federation of Korean Industries)

The FKI attributed this recovery in production value to the rebound in demand for industries that account for half of the production value, such as petrochemicals (33.7%) and machinery (14.8%). The petrochemical and machinery sectors saw a decline in demand due to the economic impact of COVID-19, resulting in reduced production in the first half of last year. However, demand for plastic packaging containers increased, and infrastructure investments by countries worldwide led to a rebound in production value for petrochemicals (13.7 trillion won) and machinery (6.9 trillion won) in the first half of this year.

The operating rate of resident companies within national industrial complexes also increased. After hitting a low of 72.3% in the second quarter of this year, it quickly recovered to reach 82.2% in the second quarter, the highest since the first quarter of 2017.

However, job creation remained sluggish. Employment decreased by approximately 27,000 people in the first quarter of this year compared to the first quarter of 2019. By sector, the largest decreases were in electrical and electronics (16,169 people), transportation equipment (5,489 people), and machinery (4,685 people). Despite an increase in resident companies and operating rates, employment has been declining since the first quarter of 2019.

(Data provided by the Federation of Korean Industries)

The FKI evaluated that national industrial complexes are centered around companies in high greenhouse gas emission industries such as petrochemicals, transportation equipment, and steel, making production and exports vulnerable to contraction due to global institutional changes aimed at achieving carbon neutrality. The production value of these industries accounted for 65% of the total national industrial complex production in the first half of this year.

In fact, major countries such as the United States and the European Union (EU) are increasing pressure to reduce greenhouse gas emissions in the industrial sector. The Bank of Korea estimated that the introduction of carbon border taxes by the EU and the U.S. would reduce exports by 1.1% annually (about 8.4 trillion won), with significant damage expected in the transportation equipment, steel, and chemical sectors.

To achieve carbon neutrality, it is necessary to introduce carbon reduction technologies such as CCUS (Carbon Capture, Utilization, and Storage), which captures and stores carbon emitted from factories or power plants or uses it as raw materials for chemical and plastic products, and hydrogen-based steelmaking, which separates oxygen from iron ore and uses hydrogen instead of coal during smelting to emit steam instead of carbon dioxide. However, the current level of technology development is insufficient.

Yoo Hwan-ik, Director of Corporate Policy at the FKI, said, "Due to carbon neutrality policies in major countries, our companies may suffer damage," adding, "It is impossible for companies to drastically reduce carbon emissions without adopting carbon reduction technologies, so government support for technology development is urgently needed."

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