 the ranks of the world’s top-tier businesses.
Manufacturing is the mainstay of our economy. It accounts for 30 percent of our GDP and is responsible for 90 percent of our exports. Some 4.5 million quality jobs come from manufacturing. More than 80 percent of research and development as well as patents, the centerpiece of innovative growth, are tied to manufacturing. Region-based traditional manufacturing is shoring up local economies.
However, the environment surrounding manufacturing is changing rapidly now. With the rise of the Fourth Industrial Revolution and emerging manufacturing powerhouses, there’s increasing concern that the past strategy of being a fast follower has reached its limit. Manufacturers are also complaining of difficulties stemming from various environmental restrictions, the spread of protectionism and rising production costs.
In reality, there has been no change in the country’s top 10 flagship industries over the past decade because we have been unable to create a new industry since memory semiconductors. During this period, China, the factory of the world, has risen as an “overtaker,” stepping beyond “fast follower.” Such structural problems as a decrease in the working age population and flagship industry stagnation, coupled with a reduction in exports due to the recent sluggish global economy and other cyclical economic factors around the world, have sapped manufacturing’s vitality across the board.
Our manufacturing now stands at a crossroads that will determine whether it takes off or stagnates. The past fast-follower type industrial strategy no longer offers our economy solutions. It’s time for us to urgently transition to an innovative, pace-setting industrial structure.
Other manufacturing powers have also begun to revisit the importance of manufacturing as a buttress to their national economies. They’re scrambling to carry out strategies of their own: “Industry 4.0” in Germany, the "Report on Ensuring American Leadership in Advanced Manufacturing” in the United States, Japan’s “New Industrial Structure Vision” and “Made in China 2025” in China.
Even in the Fourth Industrial Revolution, manufacturing will still occupy the center of our economy. Manufacturing is the foundation for innovative growth. When a country loses manufacturing capabilities, it also loses innovative capacity. Without the know-how and technological foundations that have accumulated under the “Made in Korea” banner, a seed for new innovation could not even sprout.
Today, I’d like to join you in presenting a “Manufacturing Renaissance Vision.” It is designed to revitalize the Republic of Korea’s economy once more, starting with manufacturing.
My Administration intends to strongly push the “Manufacturing Renaissance Vision” with the goal of making Korea one of the four largest manufacturing powerhouses by 2030. The revitalization of manufacturing is the revival of the economy. I will help usher in an era of per capita income of US$40,000 together with Korea’s emergence as one of the four biggest manufacturers in the world.
We will raise the nation's current 6th place ranking in terms of the total value of exports to 4th place in 2030. By 2030, we will also increase the manufacturing value-added ratio from the current 25 percent to 30 percent and the proportion of new industries and new products from 16 percent to 30 percent. Continued efforts will be made to increase the number of world-class businesses more than twofold, from the current 573 to 1,200.
We will pursue drastic changes in our industrial paradigm. The industrial structure will be transformed from the fast-follower to the pace-setting model; the industrial ecosystem into one that encourages taking on challenges and building up related experiences rather than avoiding risks; and the investment strategy into one that prioritizes people and technologies more than the input of capital.
A key element that enables these transformations is none other than innovation. We have to foster pace-setting new industries and help existing industries generate higher added value through innovation. Besides the efforts to innovate the manufacturing process itself – for instance, through "smartization" – the overall industrial ecosystem related to manufacturing – people, technology, finance and procurement – has to be changed in a way that facilitates innovation.
In this context, the Government has come up with four strategies to implement a manufacturing renaissance.
First, we will accelerate manufacturing innovations with a focus on making things smart, eco-friendly and convergent.
We will, as planned, build 30,000 smart factories by 2022 while concentrating intensively on smart factories optimized for the textile and other “root industries” as well as for small- and medium-sized shipbuilders. A national artificial intelligence strategy will be formulated this year, and we will earnestly push ahead with smart manufacturing innovation by newly establishing 2,000 AI-based smart factories by 2030.
In addition, we will provide support for the technological development of eco-friendly cars and vessels, including electric cars, hydrogen-powered vehicles and LNG-powered ships, and help generate demand, thereby enabling our country to take the lead in green industries. The Government will transform 20 national industrial complexes into "clean manufacturing complexes" and increase tax credits for green investments. We will – on par with the efforts to build smart factories – also extensively expand the "clean factory" project, which provides assistance for the installation of pollutant reduction facilities.
Convergence, rather than individual goods, will determine success or failure in future manufacturing. My Administration will resolutely eliminate regulations standing in the way of convergence through a regulatory sandbox system and special regulation-free districts. On top of this, a grand industrial complex transformation scheme will be devised before the end of this year for the sake of smart, eco-friendly and convergent innovations.
Second, we will foster new future industries through innovation and ensure that the existing flagship industries generate higher added value.
The Government will invest 8.4 trillion won into such new industries as system semiconductors, biohealth and future cars by 2030, and the private sector will make a total investment of 180 trillion won in those areas. As part of the effort to make them the Republic of Korea's future growth engines, the Government will put forth a roadmap for sector-specific, new industry technologies and deregulation to enable systematic assistance and regulatory reforms.
Without fail, we have to safeguard the existing flagship industries that are facing difficulties. I don’t see any industry that needs be eliminated; there are only industries that must be innovated. We must endeavor to transform these industries into ones with higher added-value through innovation. We will revise the Special Act on Corporate Revitalization to provide active support to help conventional flagship industries expand and transition into new industries. By creating a 5 trillion won corporate structure innovation fund, we will provide support to help distressed businesses regain their competitive edge through restructuring.
Third, we will transform the overall industrial ecosystem – the people, technology, finance and procurement related to manufacturing – to make it more focused on innovation.
Investments in people will be increased to provide the large number of innovative, talented individuals needed in manufacturing. Based on the mid- to long-term industrial development vision and the outcome of demand forecasts, we will devise a pan-government roadmap for fostering industrial human resources this year. We will also work out an engineering education innovation scheme to cultivate creative individuals in engineering, including school-to-work program under future-employment agreements and R&D professionals.
The R&D system will be reorganized so that new challenges can be taken on and related experiences built up. Departing from current R&D project assessments that mainly consider the chance of success, we will introduce an "alchemist program" this year, which will still allow the accumulation of innovative technologies and experience even if the probability of success for certain R&D projects appears low at the present time.
The program will start with 10 billion won, and its size will be expanded to 700 billion won by 2030. Moreover, the Government will establish technology accumulation hubs at specialized public institutions and universities to allow research experiences and technology to be amassed for social benefit. It will also come up with a national intellectual property innovation strategy in August.
In addition, the Government will establish a financial system to help innovative manufacturing companies take on challenges. It will also create a bank lending system that mainly reviews borrowers’ technological prowess and future growth potential. This will be done by upgrading the credit review system in order to appraise various assets as a “package” instead of only focusing on real estate as collateral. It will also provide a maximum of 12.5 trillion won in government-backed financing through state-owned banks to SMEs and mid-market companies over the next three years.
The procurement field will be transformed in a way that promotes innovation. The Government will become the first buyer of innovative products and proactively create demand for them. It will also lay out comprehensive measures for innovation-oriented public procurement in July. These include the creation of a fast-track system for purchasing innovative products that will allow more buyers to sign exclusive contracts when innovative products are involved.
Fourth, the Government will drastically strengthen support for domestic investments that contribute to invigorating new innovative industries and regional economies as well as creating jobs.
We have to make sure that domestic investment appears more attractive than overseas investment. The Government will offer the maximum assistance possible to businesses returning from abroad and creating new jobs in the country and those that expand their domestic factories instead of moving overseas.
We will significantly expand tax incentives for advanced technology and new industry fields as well as regional investments in areas that are at risk or lagging behind. We will also boost tax incentives to new industry-related R&D and facility investment. The Foreign Investment Promotion Act, the act on assistance to enterprises returning from overseas and other laws to promote domestic investment will be overhauled, thereby establishing a systematic and attractive support structure.
The Government will strengthen assistance for exporters undergoing hardships. It will gradually expand – to a total of 500 billion won – a fund for export-contract based special guarantees for SMEs and mid