The government on Monday announced a plan to support the domestic production of 100 key manufacturing materials, seeking to boost the competitiveness of the local industries in the wake of Japan’s recent economic retaliation.

It also vowed to inject 7.8 trillion won ($6.4 billion) into research and development as part of its mid and long-term road map to reduce the industrial dependence on Japan and create a stable supply chain by 2024.

“(The government) will select and invest in 100 strategic materials that have critical impact upon key industries, including the three materials that were subject to (Japan’s) export curbs, and stabilize their supplies within five years,” said Deputy Prime Minister and Finance Minister Hong Nam-ki in a ministerial meeting.

State support will include fiscal spending, tax benefits, financial support, and deregulations to sectors that have the potential to make swift technology development, as well as help in mergers and acquisitions and venture capital funding when it comes to sectors that require overseas technology.

Hong said Seoul’s ultimate goal was to fundamentally upgrade the competitiveness of local materials, parts, and equipment industries in order to alleviate the economy’s longtime dependence on external trade and reduce future risks.

Diplomatic and economic tensions have been mounting between South Korea and Japan, especially since last Friday when Tokyo decided to remove Seoul from its whitelist of preferential trade partners. The hostile action on the economic front apparently came in backlash against the Korean court’s ruling last year which ordered Japanese firms to compensate Korean victims of forced labor during the colonial rule in early 20th century.

“The core purpose and intention (of the Japanese government’s export curbs and whitelist removal) is to trigger uncertainties in the (Korean) market and boost anxiety among companies and consumers,” said a senior official of the presidential office Cheong Wa Dae.

“What (the Korean government is trying to do) is to make necessary responsive measures (to such market impacts). ... It would be inappropriate to call (our actions) reciprocal steps.”

The Ministry of Trade, Industry and Energy also contributed to the government road map, classifying the 100 key materials according to their trade dependency and domestic demand.

“The 100 key materials were selected in six critical industrial sectors such as semiconductors, displays, automobiles, electronics, machines and chemicals,” said Minister Sung Yun-mo.

Of them, 20 more urgent items will given priority, with the goal of stabilizing supplies within a year, while the remaining 80 will be dealt with on a five-year basis, according to the minister.

When it comes to the three materials that became subjects of Japan’s export curbs starting July -- resist, etching gas and fluorinated polyimide -- Seoul’s policymakers will make all efforts to diversify overseas suppliers to Europe and other regions.

South Korea marked $24.1 billion in trade deficit with Japan in 2018, of which around $22.4 billion was made in industrial materials, parts and equipment, according to ministry data.

By Bae Hyun-jung (tellme@heraldcorp.com)