Rethinking industry

Six coastal cities, home to shipbuilding and other mainstay manufacturing sites, have become crisis zones in need of government aid as they rapidly shed jobs due to lack of work.

Amid chain bankruptcies, the government is injecting public funds to prevent damage spilling over to the broader economy.

In a cabinet meeting on Thursday the government proposed a 3.9 trillion won ($3.7 billion) supplementary budget package and reserved 449.9 billion won to fund the six crisis-hit areas. Targets for the rescue are Gunsan in North Jeolla, Jinhae district in Changwon, Geoje, Tongyeong and Goseong of South Gyeongsang, and Dong District in Ulsan.

They had been the industrial and job-creating belt responsible for Korean mainstay exports of motor vehicles and vessels. But the companies failed to keep up competitiveness and restructure in the face of hard-line unions.

Still any fiscal spending plan requires scrupulous review by the National Assembly. The fresh funds must serve to help the regional economies instead of extending the life of zombie companies.

But the government’s proposal of giving up 10,350,000 won per new hire at small and mid-sized companies which make up the bulk of the supplementary budget is not a lasting solution to strengthen fundamentals.

The money would be wasted if it lands in the hands of zombie employers that sustain business on debt instead of earnings. The extra budget therefore must be spent to overhaul industrial fundamentals.

Countries around the world are rebuilding regional identities. Malmö, Sweden, which faced a similar dockyard downfall has transformed itself into a hotbed for start-ups. Finland, which shook on the retreat of Nokia, today is a nest for new ventures.

To rebuild Korea’s Rust Belt as a hub of new industrial activities, a painful restructuring process is unavoidable. The extra fiscal spending therefore should be designed to help retraining and promote new ventures.

The same prescription should go to the big troubled names STX Offshore and Shipbuilding and GM Korea.

JoongAng Ilbo, April 6, Page 30