Korea, Japan to put supply chain cooperation into action

Economy

Published: 24 Mar. 2023, 18:04 Updated: 24 Mar. 2023, 18:07

Korea, Japan to put supply chain cooperation into action

Finance Minister Choo Kyung-ho speaks in a meeting with economic ministers held at the government complex in central Seoul on Friday. [YONHAP]

Korea will materialize supply chain cooperation with Japan for chips and seek joint investment as part of the country's plans to restore bilateral relations hurt by export restrictions and the domestic market.

Finance Minister Choo Kyung-ho pledged Friday to activate a consultative group aimed at fleshing out the details on the supply chain cooperation with Japan at the envisioned semiconductor cluster in Yongin, Gyeonggi.

The cluster will be one of the biggest semiconductor production sites in the world, with more than 300 trillion won ($230 billion) in investment for construction, scheduled for completion by 2042.

The two countries "will actively push for and support cooperation in fields including new industries, joint investment and supply chain that can benefit both countries," said Choo in a meeting with economic ministers at the government complex in central Seoul.

The Friday announcement follows the recent Korea-Japan summit on March 16.

Relations between Korea and Japan tightened in 2019 after Tokyo curbed exports on three key products critical for semiconductor production. The move arose from a Korean supreme court decision in late 2018 which called for compensation for Koreans forced into labor by Japan during World War II.

Korea retaliated by strengthening its export regulations to Japan and declined to extend the General Security of Military Information Agreement (Gsomia), a bilateral military intelligence-sharing pact.

"The deteriorated Korea-Japan relationship was another overseas factor that raised uncertainty in our economy, along with the worsening U.S.-China dispute and the reorganization of the global supply chain," Choo said. "Trade with Japan, the third-largest economy in the world, decreased while our trade amount increased globally, and the number of Japanese travelers to Korea — the second highest — dropped due to bilateral relations going sour in 2019."

He went on to say that he looks forward to positive spillovers on Korea's economy stemming from the summit that laid the foundation for revitalizing Korea-Japan ties.

Economic implications will multiply if the supply chain of key items, such as semiconductors, is normalized on top of the bilateral cooperation in state-of-the-art technologies, according to Choo.

The minister said the two countries will restore human resource exchanges to previous levels, aiming to exchange 10,000 young people and 10 million people each year by increasing the number of Korea-Japan flights.

The exchange programs will include programs for students and academics and cultural exchanges. Also, more than 30 cooperation channels between government agencies and business groups will be open.

Korea and Japan will join forces this year to tackle global issues, including the U.S. Inflation Reduction Act, EU Carbon Border Adjustment Act, low birth rate, aging society and climate challenges. They will establish a network among contractors that builds overseas infrastructures and a joint fund for start-ups and research and development.

Choo said the government will construct 15 industrial complexes across the nation as early as possible, aiming to break ground in 2026.

In addition, the government will develop new markets in the Middle East and Asean countries and diversify export products including streaming services and semiconductors for artificial intelligence to restore the information technology industry export.

BY CHUN IN-SUNG [sohn.dongjoo@joongang.co.kr]