Struggling flagship industries

Government should not miss golden time to rescue key sectors

Korea's traditional flagship industries are being pushed to the limit due to plunging sales caused by the new coronavirus pandemic. These key industrial sectors, such as aviation, shipping, shipbuilding, steel production, auto manufacturing and oil refining constitute the backbone of the national economy. Their troubles have a domino effect to connected industries, leading to financial turmoil and eroding not just jobs and investment but also consumption.

The government has recently announced relief measures for small businesses and the self-employed amounting to 150 trillion won ($123 billion). However, policymakers appear to be cautious about taking similar steps for large enterprises reeling from extremely sluggish sales, perhaps conscious of possible controversy over giving favors to big businesses. Yet this is no ordinary time, and there is no time for hesitancy as Korea Inc. is sailing into a perfect storm. The government may not be able to inject unlimited liquidity. However, the faster the relief, the smaller the cost, and the bigger its effect will be.

According to the Korea Customs Service, the nation's average daily exports in the first 10 days of April dropped 18.6 percent from a year ago. Few companies will be able to endure if the current export slump continues for five or six months. For instance, the four major oil refiners' combined losses in the first quarter are estimated to reach an aggregate 2.5 trillion won. Automakers have suspended the operation of their overseas plants, and shipbuilders' order receipts have plummeted 71 percent.

The government, of course, is not sitting on its hands. Compared with major economies, however, the administration's actions have been too slow and limited. The U.S., German and French governments have decided to provide 600 trillion won, 530 trillion won, and 400 trillion won, respectively, to rescue their flagship sectors and big businesses. The government may not have to bail out all troubled companies, especially those reeling from poor performances even before the COVID-19 pandemic. Still, it should save strategic industries and sound, promising companies hit hardest by COVID-19, by all means necessary. At least until the pandemic is over, it ought to help them stay afloat and compete with foreign rivals through swift and bold financial support.