Industry minister nominee pushes Korean take on US Inflation Reduction Act
Kim Jung-kwan, the first nominee for industry minister under the Lee Jae Myung administration, has pledged to introduce a production-linked tax incentive system for key industries such as semiconductors and batteries, modeled after the US Inflation Reduction Act.
In a written response submitted to the National Assembly ahead of his confirmation hearing this week, Kim emphasized the need for aggressive government support that matches policies implemented by competing nations.
'It is time for strategic and proactive government-led industrial policies, including incentives that do not fall behind those of competing nations, in order to minimize trade risks,' Kim stated.
He noted that while semiconductors remain a core pillar of Korea's industrial and economic security, the country's leadership in memory chips is being challenged by Chinese and US firms, and its capabilities in logic chips remain relatively weak.
'We need bold semiconductor policies to strengthen our global leadership and stabilize our domestic manufacturing base,' Kim said, adding that tax and fiscal support for the sector will be expanded.
Addressing the battery sector, Kim acknowledged current difficulties stemming from a temporary slowdown in electric vehicle demand and the rapid rise of Chinese competitors. He said the government will consider introducing production tax credits for key minerals and materials to expand incentives for domestic manufacturing and strengthen the battery supply chain.
Kim's vision for production tax credits involves a system that offers tax deductions based on production volume, effectively functioning as subsidies linked to output. The US has implemented similar 'Advanced Manufacturing Production Credits' under the IRA to support strategic industries such as batteries, solar panels and clean fuels.
In Korea, companies operating in sectors designated as national strategic technologies, such as semiconductors and batteries, are currently eligible for one-time tax credits of up to 25 percent for facility and research and development investments. Unlike these investment-based incentives, Kim's proposed scheme would serve as a more direct benefit by offering tax credits on a portion of production costs.
If implemented, leading chipmakers Samsung Electronics and SK hynix are projected to receive annual tax reductions of between 4 trillion won and 5 trillion won ($2.9 billion and $3.6 billion).
President Lee had also pledged during his campaign to push for production tax credits of up to 10 percent for semiconductors. After taking office, he reportedly expanded the plan to include the battery sector, initiating internal reviews.
In his statement, Kim also vowed to expand the government budget for renewable energy.
'Expanding renewable energy is an urgent task for achieving carbon neutrality, enhancing energy security and creating new growth drivers,' he said, pledging to improve the overall environment for renewable energy deployment including identifying new project sites, securing grid connectivity and increasing public acceptance.
At the same time, Kim expressed support for nuclear energy, stressing the importance of a balanced energy mix of carbon-free sources to ensure a stable power supply and meet South Korea's greenhouse gas reduction targets under the Nationally Determined Contribution framework.
He also pledged to boost Korea's long-term technological competitiveness by developing Korean-style small modular reactors and next-generation nuclear fuels, while expanding exports of nuclear equipment and supporting small and mid-sized exporters in the sector.
On the issue of extended tariff negotiations with the US, set to conclude by Aug. 1, Kim said he would work toward a mutually beneficial outcome and use the talks as an opportunity to develop a bilateral manufacturing cooperation roadmap.
'In the face of US tariff measures and global supply chain shifts, I will do my utmost as Korea's 'export frontrunner' to strengthen our export competitiveness in key industries and open up new markets,' he said.
Kim, a former official at the Ministry of Economy and Finance, most recently served as head of marketing at Doosan Enerbility, a major power equipment builder. Since his nomination, he has divested all holdings in companies that could present potential conflicts of interest, including shares in Doosan.
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The pathetic scene of violence evoked a sense of deja vu. Rewind to July 1931, when Japan hyped a minor dispute between local Chinese farmers and Korean settlers in Manchuria to justify its aggression. The dispute began when a group of Koreans subleased land outside of Wanpaoshan village, north of Changchun, Jilin province, and began digging an irrigation ditch in an area not included in the sublease. Some 400 Chinese farmers, armed with farming tools, confronted the Koreans, and the Japanese consulate in Changchun dispatched police under the pretext of protecting subjects of their empire. The Chinese security authorities also sent police. The clash ended with several Chinese wounded, but Japanese police officers and Korean farmers unharmed. To ignite anti-Chinese sentiment, the Japanese colonial authorities had Korean newspapers publish fabricated reports claiming that hundreds of Koreans were killed during the so-called 'Wanpaoshan Incident.' Anti-Chinese riots erupted across Korea, causing hundreds of Chinese casualties and major property damage. Meanwhile, anti-Korean riots in China continued under Japan's wartime propaganda. Months later, a New York Times dispatch from Changchun dated Nov. 4 said: 'Fully 10,000 Korean farmers have been massacred by Chinese or slain while defending their homesteads during the last six weeks in Jilin Province alone, according to an estimate given out here today by a Japanese General commanding a division of 5,500 troops.' The media manipulation thus turned a minor skirmish between farming groups into a major conflict, devastating an ethnic community and eventually dealing a fatal blow to Korean independence movements in the broader Manchurian region. Fast forward to chaotic post-liberation Korea in 1945. Freed at last from four decades of harsh foreign rule, Koreans failed to achieve national unity and fell victim to great power politics. 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On Christmas Day, before the announcement of the final decision, the United Press reported from Washington that 'Secretary of State Byrns went to Russia reportedly with instructions to urge immediate independence as opposed to the Russian thesis of trusteeship.' Korean media carried the story on Dec. 27, each editing and compiling it as they saw fit. The news bombarded the already polarized political scene. The idea of 'trusteeship' itself was unacceptable; anti-trusteeship became a strong rallying point for the right. The rightist Dong-A Ilbo had an inflammatory headline: 'Soviet Union Asserts Trusteeship; United States Asserts Immediate Independence.' The rightists seized upon the opportunity to denounce communists as 'country-selling Soviet stooges.' The US Military Government in Korea added to the confusion by deliberately implying that trusteeship was solely a Soviet policy. Amid extreme confrontation between the right and the left, leading politicians from both camps were assassinated. The turmoil ever deepened. The North-South division perpetuated. Much about the controversial newspaper reports on the Moscow conference, regarded as among the worst Korean press performances to date, remains a mystery. None of the newspapers offered an apology for false reporting, disregarding the basic principles of fact-checking and verification, nor did they elucidate the background of their reporting. Most recently, the press coverage of the visit by Morse Tan, a Korean American law professor and former US ambassador-at-large for global criminal justice, raises questions about his identity as well as evidence of his claims about election fraud in South Korea and President Lee Jae-myung's childhood. The press should focus more on fact-finding to enhance accountability and win back the public's trust, which has been lost to social media. 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