"Supply Chain Management Is Important, but Korean Companies Retreat from Overseas Resource Development Projects"

FKI Surveys Capabilities of Major Overseas Resource Development Companies
3 out of 4 Leading Companies Say Overseas Resource Development Ecosystem Has Deteriorated Over 10 Years

[Asia Economy Reporter Park Sun-mi] As supply chain management becomes crucial in the era of economic security, the importance of overseas resource development is gradually increasing; however, it has been revealed that domestic companies' overseas resource development projects are retreating.

On the 25th, the Federation of Korean Industries (hereinafter FKI) conducted a 'Major Overseas Resource Development Companies Capability Survey' targeting 29 major companies with experience in overseas resource development projects over the past 10 years (2011?2021, based on performance). As a result, 76.5% of the respondent companies answered that the size of their internal organizations and workforce has decreased compared to 10 years ago.

Three out of four companies responded that the overall conditions of the overseas resource development ecosystem have deteriorated (severely deteriorated 35.0%, somewhat deteriorated 40.0%), indicating a decline in the vitality of the industry.

Additionally, compared to 10 years ago, two out of three companies reported that their overseas business development policies have contracted (severely contracted 47.4%, somewhat contracted 21.1%). Regarding the main causes of the contraction in business policies, external factors included ‘frequent changes in national policy direction’ at 46.2%, followed by ‘increased volatility in resource prices’ at 23.0%. Internal factors cited were ‘difficulties in financing’ (30.8%) and ‘negative outlook on overseas resource development’ (30.8%), followed by ‘deterioration in profitability’ (23.0%).

The competitiveness of South Korean overseas resource development companies was also found to have a significant gap compared to advanced global companies. Assuming advanced global companies score 100, South Korean companies rated their overall overseas resource development capabilities at 52.8 (average response). Regarding the overall competitiveness level in technology, systems, and infrastructure in the overseas resource development industry, 95.0% of companies responded that they are vulnerable (very vulnerable 35.0%, somewhat vulnerable 60.0%) compared to major countries within the Indo-Pacific Economic Framework (IPEF) such as the United States, Japan, and Australia.

The most urgent policy to revitalize overseas resource development was ‘pursuing a consistent policy direction’ at 32.5%, followed by ‘financial support’ at 27.5%, and ‘tax support’ at 17.5%. Except for policy consistency, support is mainly needed in financial areas such as loans, subsidies, and tax benefits. An industry insider stated, “Due to the long period required for investment recovery, the need for financial support is very urgent.”

Yoo Hwan-ik, head of the FKI Industry Division, said, “At a time when countries around the world are securing supply chains, it is an urgent moment for us to accelerate overseas resource development,” adding, “It is important to reduce risks so that companies can invest stably through consistent policy implementation, loan support, and tax benefits.”

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