SEOUL – South Korea said Monday it plans to spend 7.8 trillion won (¥679 billion) over the next seven years to develop technologies for industrial materials and parts in hopes of reducing dependence on Japan amid the escalating trade row.
Trade minister Sung Yun-mo said the government would also financially support South Korean companies in mergers and acquisitions of foreign companies and expand tax benefits to lure more international investment, while easing labor and environmental regulations so local companies can boost production.
South Korea plans to raise “self-sufficiency” for 100 key components, materials and equipment items used to make chips, displays, batteries, automobiles and other products, with a goal to stabilize supply over the next five years.
“We want to turn the crisis into an opportunity for the materials, parts and equipment industry,” Sung said.
The government said in a statement it wants to “address structural weakness in South Korea’s materials, parts and equipment sector, which heavily depends on a particular country.”
South Korean President Moon Jae-in stressed the need to promote economic growth to counter Japan’s trade controls.
He said the “peace economy” is a way for South Korea to catch up with Japan economically.
“Japan can never block the leap of our economy,” he said, adding that Tokyo’s new clamp on exports will instead serve as a “catalyst” for South Koreans’ resolve to build economic power.
Moon noted that Japan’s economy is larger than South Korea’s, but he said economic growth resulting from cooperation between Seoul and Pyongyang could see South Korea overtake Japan.
In a 51-page statement, the government laid out a number of measures, including financial support worth more than 2.5 trillion won for overseas acquisitions.
The announcement came after the Abe Cabinet on Friday approved the removal of South Korea from a list of countries with preferential trade status, which will require Japanese companies to apply for case-by-case approval for exports to South Korea involving hundreds of items deemed sensitive.
The decision followed a move by Japan in July to strengthen controls on certain technology exports to South Korean firms that rely on Japanese materials to produce computer chips and displays used in smartphones and TVs, which are key South Korean exports.
“Our industries for materials, parts and equipment have been compared to a cormorant,” said Sung, referring to how fishermen exploit the bird’s behavior of spitting out the fish it snatches out from rivers, highlighting how South Korea’s imports from Japan have grown whenever its own exports increased.
He said those South Korean industries should become more like a pelican, which “raises its own chicks inside its bill, where it also keeps the food.”
Japanese officials have cited unspecified security reasons for the export curbs to South Korea. But they have also pointed to an erosion of trust after South Korean court rulings last year ordered Japanese firms to compensate wartime forced laborers, a matter Tokyo says was settled by a 1965 treaty normalizing bilateral ties.
South Korean officials have vowed to retaliate, including removing Japan from their own list of nations receiving preferential treatment in trade. South Korea’s presidential office said it will also consider ending its military intelligence-sharing pact with Japan as part of its countermeasures, saying it could be difficult to share sensitive information considering the deterioration of trust between the countries.