Strategies and Tasks for the Advancement of Korean Industry, Volume I: The Structure and Challenges of Korean Industry Today

Jaehan Cho, Danbee Song, Sangwon Lee, Mincheol Choi and Song-hong Min
Additional contact information
Jaehan Cho: Korea Institute for Industrial Economics and Trade
Danbee Song: Korea Institute for Industrial Economics and Trad
Sangwon Lee: Korea Institute for Industrial Economics and Trad
Mincheol Choi: Korea Institute for Industrial Economics and Trad
Song-hong Min: Korea Institute for Industrial Economics and Trad

i-KIET Issues and Analysis from Korea Institute for Industrial Economics and Trade

Abstract: Amid rapid changes in the domestic and global industrial environment, there is a pressing need to assess the current state of the South Korean economy and to formulate industrial policies that strengthen its responsiveness. Korean industry is confronting three simultaneous crises: declining industrial competitiveness and a weakened growth foundation, declining innovation capacity across the economy, and a rapidly changing external environment. Korea’s declining industrial competitiveness is evident in structural low growth and slowing productivity, weakening global market competitiveness, the maturation of flagship industries alongside stagnation in the creation of new ones, and a decline in dynamism across the broader industrial landscape.

At the same time, inherent structural problems are eroding innovation capacity in each industrial sector. These include an increase in marginal firms (i.e., zombie firms) and inefficient resource allocation, intensifying regulatory burdens, insufficient adoption of new technologies such as artificial intelligence and a lack of tangible market outcomes from such adoption, and a persistent quantitative and qualitative decline in the overall labor supply. External conditions are also becoming more challenging, as Korea faces a global industrial paradigm shift accompanied by intensifying industrial policy competition among major countries, as well as growing challenges and uncertainties associated with the green transition. Based on an objective assessment of these intertwined challenges, it is vital to establish strategic directions for future industrial policy, supported by the detailed formulation and systematic implementation of concrete policy tasks.

This report is the first in a series of KIET studies that seek to determine the best course of Korean industrial policy going forward.

Keywords: industrial policy; South Korea; industrial crisis; innovation; global trade; protectionism; zombie firms; marginal enterprises; green transition; climate change (search for similar items in EconPapers)
JEL-codes: L52 (search for similar items in EconPapers)
Pages: 16
Date: 2025-08-07
New Economics Papers: this item is included in nep-cse
References: Add references at CitEc
Citations:

Published as i-KIET Issues & Analysis, No. 189

Downloads: (external link)
https://www.kiet.re.kr/en/pub/issueView?issue_no=827&skey=&sval=&pg=1&pp=10

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:kietia:021812

Access Statistics for this paper

More papers in i-KIET Issues and Analysis from Korea Institute for Industrial Economics and Trade Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea. Contact information at EDIRC.
Bibliographic data for series maintained by Aaron Crossen ().