This study examines the current conditions and concerns of Korea’s petrochemical industry, with the goal of identifying its long-term potentials.
Over the past decade, Korea’s petrochemical industry has been growing at approximately 26 percent per year. The dramatic increase in the amount of light-manufactured goods has, in turn, stimulated the demand for petrochemical products, prompting the growth of the petrochemical industry. However, the oil shock of 1973 has dramatically increased the price of oil worldwide, causing the Korean petrochemical industry to raise the prices of its goods. This has caused a deceleration of the industry, raising concerns.
As the consumption of petrochemical goods is closely related to the level of individual income, the expansion of the national economy will ultimately increase the consumption of petrochemical goods and help the domestic market grow. The increase in the exports of light-manufactured goods—such as shoes and textile products, which also accompany high demand for petrochemical products—will drive growth in the petrochemical industry due to rising worldwide demand. However, as China and other developing countries have begun to foster their petrochemical industries, the Korean petrochemical businesses need to brace themselves against an increase in international competition.
The demand for ethylene, a leading petrochemical product, is expected to grow at 13.5 percent per year from 1978 to 1991, but the petrochemical industry at present appears incapable of meeting such demand. The level of self-sufficiency of the Korean petrochemical industry still falls short of 60 percent, and the industry imports significant amounts of raw materials and other products from overseas. As for naphtha, the Korean petrochemical industry has kept its price low and increased output so as to maintain appeal on the international market. Nevertheless, the Korean petrochemical industry is far from being suitably equipped, in terms of both technology and facilities, to compete with their international counterparts. Policymakers not only need to provide increasing support to protect this industry, but also help it expand its production facilities so as to increase its level of self-sufficiency.
The term of the Petrochemical Industry Fostering Act is about to expire. The Korean government needs to extend or renew the deadline for the legislation so as to keep attracting new investment in the expansion of petrochemical production facilities. In addition, the Korean government should take a more proactive approach to protecting and supporting the petrochemical industry by developing the land and other methods of generating social overhead capital, enhancing the private-sector input in factory operations, and providing greater financial and tax benefits. As the industry imports 50 percent or more of the goods it needs from abroad, it should be given preferential tariff rates. The government may also consider supporting this industry with public funds or by establishing new public investment funds. The long-term success of Korea’s petrochemical industry will require the introduction of advanced technologies from abroad, development of new products, improvement of the domestic capability for research and development, the diversification of product lines, the prevention of excessive investment in certain products and excessive competition among Korean businesses, and also the improvement of oil refinery facilities.
석유화학공업의 장기전망(Long-term prospects of the petrochemical industry)
|Series Title; No||연구보고서 / 제79-04권|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Manufacturing|
|Holding||KDI; KDI School|