Seoul: The Presidential Committee on National Policy Planning recently unveiled the new administration's policy vision, outlining a broad range of priorities. However, the plan failed to address a critical component of Korea's economy: the manufacturing sector. Amid shifting global industry conditions and oversupply, key manufacturing sectors in Korea are facing significant crises.
According to Yonhap News Agency, the petrochemical industry is currently experiencing severe strain. Yeochun NCC narrowly avoided bankruptcy due to a low-price offensive from China, with major shareholders Hanwha Group and DL Group injecting 150 billion won ($108 million) in emergency funding. Despite this temporary relief, structural reforms are essential for a long-term recovery in competitiveness.
The steel industry is similarly challenged by intensifying export competition from China, India, Japan, the United States, and the European Union, exacerbated by Washington's 50 percent itemized tariffs. Meanwhile, Korea's domestic auto industry, which ranked fifth globally in production during the 2010s, has slipped to seventh place due to emerging markets like India and Mexico expanding their output. Concerns over industrial hollowing out are heightening, as manufacturing jobs have been declining for 13 consecutive months. Even the semiconductor sector is under pressure from industry giants such as Nvidia and TSMC, which are eroding Korea's technology lead.
A significant external challenge arises from U.S. President Donald Trump's "Make America Great Again" policy, which emphasizes the revival of manufacturing to maintain national competitiveness. While the national agenda includes plans to expand semiconductor and automobile exports, it lacks a concrete road map for achieving these goals. Moody's recent engagement with Deputy Prime Minister for Economic Affairs Koo Yun-cheol underscored the need for structural reform to raise Korea's potential growth rate.
The government's plan, although commendable in its goal to make Korea one of the top three AI powers and establish a 100 trillion won National Growth Fund, lacks the necessary focus on manufacturing. The importance of a robust industrial base is highlighted by China's efforts to integrate AI into physical products like robots. Without strengthening manufacturing, the potential impact of AI will remain limited.
Korean manufacturers are already struggling to counter China's technological advancements and U.S. tariffs. Legislative constraints, such as the "Yellow Envelope Law" and stricter industrial accident regulations, are perceived by companies as excessive. To overcome sub-1 percent growth, the government needs to adjust regulatory measures and implement policies that encourage corporate investment. For the national agenda to succeed, it requires the necessary tools and environment. Korea's strategic value, particularly in the eyes of the United States, is heavily dependent on its manufacturing strength.