"South Korea More Vulnerable to Resource Crisis... Overseas Resource Development Acquisition Committee as a National Task"

Korea Industrial Federation, Overseas Resource Development Online Seminar
"High-Risk Overseas Resource Development Requires Active National Role"

Trend of Self-Development Rate by Year for Strategic Light Vehicle

[Asia Economy Reporter Choi Dae-yeol] Given that South Korea has an industrial structure vulnerable to resource crises compared to neighboring countries such as China and Japan, there is a growing argument that the government should take a more proactive approach to overseas resource development at a whole-of-government level. Although supply chain management has emerged as the biggest issue in the global economy, domestic resource development itself has been taboo, resulting in a continuous decline in public support. It is said that consistent efforts are needed regardless of changes in administration or policy. The industrial sector plans to propose to the Presidential Transition Committee to systematically support overseas resource development.

On the 23rd, Jeong Manki, Chairman of the Korea Industrial Federation Forum, said at an online seminar on overseas resource development, "As industries advance and the intensity of climate change response increases, competition among countries to acquire raw materials such as rare earth elements and battery materials has become fierce," adding, "We have repeatedly experienced ups and downs in overseas resource development depending on changes in administration, putting us in a crisis where the acquisition of certain raw materials significantly influences the survival of industries."

According to data presented by Jeong Gwangha, Director of the Future Industry Research Institute of the forum, South Korea's self-development rate for six strategic minerals (thermal coal, uranium, iron, zinc, copper, nickel) stands at about 28%, which is lower compared to Japan (76%) and China (65%). Director Jeong pointed out, "Except for thermal coal, we are the world's fifth-largest importer of the six strategic minerals, yet the self-development rate is declining. Among 35 rare metals, 14 minerals have over 50% of imports coming from China and Japan," emphasizing that "we have a structure vulnerable to resource crises compared to competing countries."

According to the International Energy Agency (IEA) forecast, demand for minerals used in energy transition will increase about fourfold by 2040 compared to 2020. Lithium, an essential material for secondary batteries expected to see increased usage, is projected to increase 40 times, while cobalt and nickel are expected to increase 25 times. For rare metals, mining and processing are concentrated in specific countries such as China, causing frequent price volatility.

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Although the need for strategic development is greater than any other country due to being resource-poor, public support for overseas resource development is actually decreasing. According to Director Jeong, public enterprises' investment in overseas resource development dropped from $7 billion in 2011 to $700 million in 2020, a tenth of the previous level. Private sector financing for resource development shrank from about 309.3 billion KRW in 2010 to 34.9 billion KRW last year. This contrasts with Japan’s large resource development companies, which actively invested even while incurring significant losses.

Lee Cheol-gyu, Executive Director of the Overseas Resource Development Association, pointed out, "New overseas resource development projects decreased from 71 in 2008 to 2 in 2020 due to factors such as falling mineral prices, and investment costs also sharply declined," adding, "Government financial support is mainly directed toward loan projects, and support for domestic infrastructure such as technology, workforce training, and information systems is absolutely insufficient." He continued, "Of the seven existing tax support provisions, four have expired, and the remaining three only prevent double taxation. Currently, the only substantial tax incentive is the integrated investment tax credit established last year," adding, "Negative perceptions of overseas resource development have become widespread, leading to the current situation."

Considering the recent trend where securing resources is directly linked to industrial competitiveness and national security, participants agreed on the need to strengthen resource security capabilities. Kim Dae-hyung, Research Fellow at the Korea Institute of Geoscience and Mineral Resources, said, "Considering changes in the international resource market environment such as COVID-19 and the spread of geopolitical crises, policy priorities should focus on corporate rehabilitation and restoring investment functions rather than restructuring."

Chairman Jeong Manki emphasized, "Overseas resource development should not be subject to the policies of a particular administration," and added, "The government, National Assembly, and both ruling and opposition parties must unite to restore systematic and consistent systems and support measures for overseas resource development." Director Jeong Gwangha argued, "The Presidential Transition Committee should select overseas resource development as one of the national agenda items and establish a whole-of-government resource development support council to increase the self-development rate of strategic minerals and reduce dependence on imports from specific countries."

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