[Insight & Opinion] Exports and Growth Rate: Competing Through New Industrial Policies

Focusing on Training and Supporting Talent in Advanced Fields
Enhancing Export Competitiveness and Creating Jobs

[Asia Economy] Exports are significantly declining. In October and November, exports consecutively decreased by 5.7% and 14.0%. Due to the high export ratio characteristic of our economy, the export outlook darkening has greatly lowered next year's growth rate forecast. The Bank of Korea projects 1.7%, but global credit rating agencies expect it to be in the low 1% range. The government also plans to expand support for export companies in next year's economic policy direction to increase exports.

The cause of the decline in exports is, of course, the global economic recession triggered by the US interest rate hikes. However, looking more closely, our exports have stagnated since the 2008 global financial crisis as the growth trend slowed. The trade surplus so far was due more to a decrease in imports than an increase in exports, representing a recession-type surplus caused by slowing growth.

The fundamental reason why exports and jobs are not increasing significantly as in the past is that competition from China has weakened the competitiveness of our key industries such as shipbuilding, steel, electronics, and petrochemicals. Just as Japan experienced a 30-year economic recession after relocating its key industries due to Korea's pursuit, there were many concerns that Korea would follow Japan's footsteps due to China's pursuit. However, recently, new industries such as bio, electric vehicles, batteries, semiconductors, and defense industries have emerged as visible growth engines, providing a breakthrough for exports and jobs.

It is urgent for the government to prepare measures to increase exports. First, it is necessary to train personnel required for new industries. Specialized personnel are needed in new industries including semiconductors, but currently universities are training personnel according to the existing industrial structure. As a result, there is a shortage of personnel needed by the industry while the number of unemployed youth is increasing. This is because restructuring universities is difficult due to opposition from interest groups. Recently, the Korea Advanced Institute of Science and Technology (KAIST) operating short-term courses in semiconductor design and software fields clearly illustrates this problem. However, this method alone has limitations in training the necessary personnel. The government must reform the university education system, which is built according to the existing industrial structure, to fit the new industrial structure. Emphasizing the training of scientific and technological personnel in advanced fields will enhance export competitiveness and create jobs.

Structural reform of government-funded science and technology research institutes is also important. Since the 1970s, we have established many government-funded research institutes under the banner of becoming a science and technology powerhouse. Most of these institutes were created and operate according to the existing industrial structure. Consequently, the expansion of specialized research personnel for new industries is insufficient, and they do not fully play the role of increasing corporate support through advanced technologies. The government should reorganize government research institutes to match the transitioning industrial structure and enhance their role in technology support.

Support for export companies must also be increased. Taiwan, centered on small and medium-sized enterprises, is producing semiconductors while expanding company size to become large corporations. Additionally, the Taiwanese government is increasing various supports, including corporate tax benefits, to enhance export competitiveness. As a result, Taiwan's growth rate is rising, and exports are significantly increasing. In contrast, we have raised corporate taxes on large companies responsible for exports and jobs, and various regulations have reduced corporate investment. During periods of industrial structural transition, strengthening government regulations compared to competing countries should be avoided. It can weaken export competitiveness and lower long-term growth rates. Policy authorities and the National Assembly should recognize that this is a period of industrial structural transition and reduce regulations on export companies while increasing support.

We have trauma regarding industrial policy due to the side effects of overlapping investments in heavy and chemical industries in the past. However, during periods of industrial structural transition, government roles in new industrial policies, such as specialized personnel training and technology development, are crucial. The United States and China also recognize this and are implementing new industrial policies. To increase export competitiveness, growth rates, and jobs, now is a critical time for government export support policies.

Kim Jeong-sik, Professor Emeritus, Department of Economics, Yonsei University

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