"Shortage of Research Personnel to Increase 60-Fold in 5 Years... Need to Expand Tax Credits for R&D and More"

Report on "Implications of Technological Hegemony Competition and Science and Technology Workforce"

[Asia Economy Reporter Park Sun-mi] To gain an advantage in the global technology hegemony competition, securing scientific and technological personnel is crucial for domestic companies. To this end, there is a call for expanding departments related to advanced industries and increasing support for national strategic industries.

On the 14th, the Korea Economic Research Institute pointed out in its report titled 'Implications of Technology Hegemony Competition and Scientific and Technological Personnel' that although the Korean government is promoting the Korean version of the Digital New Deal and Green New Deal to overcome COVID-19 and leap toward a leading economy, the urgent need is to nurture scientific and technological personnel to support these initiatives. Due to digital transformation and population decline, there is a qualitative and quantitative shortage of scientific and technological personnel, making it necessary to establish strategies to secure such personnel.

According to the Ministry of Science and ICT, due to the decrease in the school-age population caused by low birth rates, the influx of new science and engineering personnel in Korea is expected to sharply decline over the next 10 years. The shortage of scientific research personnel is projected to increase from 800 people during 2019?2023 to 47,000 people during 2024?2028, an approximately 60-fold increase.

According to OECD data, Korea ranks 5th globally in the number of research and development personnel and holds the 2nd highest average annual growth rate. However, China ranks highest in both the number of research personnel and average annual growth rate. In 2020, the number of R&D personnel in major countries was approximately 2.28 million in China, 1.59 million in the United States (2019), 690,000 in Japan, 450,000 in Germany, and 450,000 in Korea. From 2015 to 2020, the average annual growth rates were 7.1% in China, 4.6% in Korea, 3.7% in the United States (2015?2019), and 3.1% in Germany.

The report pointed out that leading companies representing various industries, such as Samsung Electronics, Hyundai Motor Company, and LG Energy Solution, have opened contract departments in cooperation with universities, but this cannot be a fundamental solution. Companies created contract departments to avoid enrollment restrictions at universities in the Seoul metropolitan area, but the number of graduates each year is only in the dozens.

To resolve this, the report suggested amending the 'Capital Region Readjustment Planning Act,' which currently classifies universities located in the Seoul metropolitan area as 'population concentration inducement facilities' and prohibits arbitrary increases in enrollment, to abolish enrollment limits at universities in the metropolitan area. It further explained that regulations should be eased to grant universities autonomy by applying exceptions to departments directly linked to national industrial competitiveness.

The report also emphasized the need to expand tax credits and support for investments in high industrial technology personnel, research and development, and facilities. Although the Korean government's corporate R&D support ratio is high relative to GDP (0.29%), the scale of R&D support (1.85 billion USD) is insufficient compared to the United States (22.1 billion USD), Japan (4.28 billion USD), and others, necessitating an increase in support scale. Additionally, while Korea has raised the R&D tax credit rate for national strategic technology industries under the Restriction of Special Taxation Act, the report pointed out the need to further increase the credit rate for facility investments in device industries such as semiconductors.

For example, in the semiconductor industry, the U.S. Semiconductor Promotion Act is promoting a 25% tax credit for semiconductor equipment and facility investments, and the CHIPS Act offers up to a 40% tax credit on semiconductor facility investments. Korea also needs to raise the tax credit rate for facility investments to a comparable level, the report added.

The report noted that most OECD countries do not operate differentiated R&D support systems based on company size, such as large enterprises and SMEs, and Korea needs to eliminate the differences in support levels by company size. According to 2021 data on countries with differentiated support by company size, the R&D tax support differential is 1.2 times for Japanese SMEs compared to large companies, 2.3 times in the UK, 2.4 times in Canada, 2.6 times in the Netherlands, while Korea has a high differential of 13.0 times.

Lee Gyu-seok, a senior researcher at the Korea Economic Research Institute, said, "To respond to the technology hegemony competition and supply chain restructuring, domestic companies must resolve the imbalance in the supply and demand of scientific and technological personnel." He added, "To this end, regulatory relaxation necessary for nurturing scientific and technological personnel, such as easing the Capital Region Readjustment Act, should be pursued, and the government should expand investments in scientific and technological personnel, R&D, and facilities."

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