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What a capable government looks like

Published: 08 Apr. 2025, 00:04

Park Su-ryon

The author is the industry news desk at the JoongAng Ilbo.

It is telling that Donald Trump — never one for deference — once looked to Korea for help in shipbuilding. That appeal was not a fluke, but a result of decades of ambition and foresight.

In the 1960s, still reeling from war and colonial rule, Korea committed to building ships and selling them abroad. It was a risky idea. Yet many scientists and engineers returned home from overseas, determined to shape the nation’s industrial future. Shipbuilding, along with steel, petrochemicals and engineering, became the foundation of Korea’s rapid growth.

Donald Trump, second from left, tours Daewoo Shipbuilding & Marine Engineering's Geoje shipyard in South Gyeongsang in June 1998. Daewoo is now known as Hanwha Ocean. [DAEWOO SHIPBUILDING & MARINE ENGINEERING/YONHAP]

Back then, the government acted not just as regulator, but as designer — planning, guiding and executing an industrial strategy. Washington had urged Seoul to focus on agriculture and leave manufacturing to others. Instead, the Korean government helped secure foreign currency, pursued technical independence and built the capacity to compete. This was not the work of bold entrepreneurs alone. It was the result of deliberate statecraft.

Today, the challenge of industrial policy is more complex. As Korea heads into another presidential election — its second in just over three years — candidates are likely preparing sweeping economic pledges. But the conditions they face are far less forgiving. China has become a persistent rival in nearly every sector. The era of free trade is fraying. Any serious economic strategy must plant seeds for future growth and also address industries in decline.

Across the world, governments are stepping into the industrial arena once again — and competing to do it well. Just as Korea once bet on shipbuilding, Taiwan built a semiconductor powerhouse by bringing Morris Chang back from the United States to lead TSMC. Japan, after decades of stagnation, is investing in a new chipmaker, Rapidus, backed by eight major firms. Trump's own trade wars, for all their chaos, were rooted in the goal of reviving American manufacturing. Europe, by contrast, focused inward and hesitated to intervene. It has been left on the sidelines.

While others acted, Korea was stalled. In late 2024, amid political turmoil and martial law declarations, four months were lost. Urgent problems went unaddressed. One of them was petrochemicals.

Since the 1970s, petrochemicals have been a mainstay of the Korean economy — producing materials that feed into everything from electronics to automobiles. Today, they remain one of Korea’s core industries. But the outlook has turned grim. In the 2010s, drawn by booming demand from China, Korean firms expanded production of general-purpose facilities like naphtha cracking centers. That bet has backfired. China has since ramped up its own production and begun exporting, undercutting Korean manufacturers.

It’s not just about last year’s losses. The sector, in its current form, has no future. Rationally, some firms must shrink or exit. But no company wants to be the first to fail. All are holding out, waiting for the government to step in — not with cash, but with a scalpel.

So far, that scalpel has remained sheathed. In December, the government unveiled a plan for strengthening petrochemical competitiveness, but emphasized voluntary restructuring. No direct intervention. By then, the administration had been weakened by a string of high-level impeachments, including the prime minister and finance minister.

LG Chem's Yeosu Naphtha Cracking Center facility in South Jeolla [LG CHEM]

This isn’t new. In 2016, the Park Geun-hye administration introduced a similar plan. Within a month, it was overtaken by scandal. Restructuring faded from the agenda.

But timing is everything. Industrial restructuring demands speed and political resolve — decisions about public support, about which companies to save or let fail, must be made quickly. No firm will take the first blow alone. Governments must be willing to absorb the blame, navigate conflicting interests and push decisions through.

That doesn’t mean acting recklessly. Restructuring affects jobs and communities. A responsible government must balance boldness with sensitivity, anticipating the fallout and planning for recovery. It also needs to understand the industries it touches. When the state-run Korea Development Bank pushed Hanjin Shipping into bankruptcy in 2016, it underestimated the global consequences. Korea’s largest shipping line disappeared. China gained ground in maritime trade.

So as candidates promise growth and renewal, voters should focus on something more difficult: how they will handle decline. Will they face hard truths, or paper them over with slogans? The measure of leadership is not in lofty promises, but in how one approaches the hardest tasks. That is where real competence lies.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.