China Can Help Or Hinder South Korea’s Green Progress

If spending alone were enough to save the planet, South Korea would be among its chief defenders. Funding committed under the country’s national ‘green growth’ plans, unveiled last year, includes total government and private-sector investment of 107 trillion won (S$124 billion) – about 2 per cent of annual gross domestic product – in environment-related industries and 40 trillion won in renewable energy sources. But questions still loom about whether South Korea can pull off a green revolution. With China breathing down its neck.

In Straits Times. New York Times 12 November 2010

SEOUL: If spending alone were enough to save the planet, South Korea would be among its chief defenders.

Funding committed under the country’s national ‘green growth’ plans, unveiled last year, includes total government and private-sector investment of 107 trillion won (S$124 billion) – about 2 per cent of annual gross domestic product – in environment-related industries and 40 trillion won in renewable energy sources.

But questions still loom about whether South Korea can pull off a green revolution.

The country faces stiff competition from China, shortage of skilled labour and the risk that the investment could create a green bubble that might pop.

South Korean companies looking to muscle into green sectors need to adopt a global outlook ‘rather than just pumping in money’, especially given the limited size of the domestic market, said Mr Cha Chungha, managing partner at Susterra Partners.

His Seoul-based firm advises companies on clean-technology investments.

The planned cash injection is aimed at speeding the country towards a number of lofty targets by 2020, including a 30 per cent reduction in greenhouse gas emissions, a doubling of renewable energy supplies and the expansion of nature reserves nationwide from 100,000 to 150,000 hectares, according to the government.

But arguably, the most ambitious goals are saved for the business realm.

South Korean companies are gearing up to increase their share of the global ‘green tech’ market – which includes products such as solar cells and energy-saving electricity grids – to 10 per cent over the next decade from about 2 per cent currently, and are also set to double investment in environmental industry research and development, and production facilities.

The country’s corporate titans – such as Samsung, Posco, Hyundai, LG Chem, and Doosan Heavy Industry & Construction – have jumped on the green bandwagon.

But as with any sizeable, ambitious initiative, there are questions about whether South Korea’s green drive will achieve the desired results, and even worries that it could produce a few adverse ones.

Mr Randall Jones, head of the Japan/Korea desk at the Organisation for Economic Cooperation and Development in Paris, has voiced concerns that over-investment ‘might result in a bubble’, especially if money is channelled towards certain companies or projects.

He pointed to South Korea’s venture capital industry in the late 1990s which underwent a government benefit-driven boom, but had an equally spectacular crash when the authorities tightened funding criteria.

In a report earlier this year, the Samsung Economic Research Institute highlighted a series of major potential hurdles to green growth.

They included a tight labour supply – the result of a shortage of educational institutions that offer programmes relevant to the environmental industry – and domestic corporations’ relative lack of competitiveness in the green arena.

With lower-cost producers, particularly from neighbouring China, already highly competitive in areas such as solar cell production, Mr Cha said South Korean companies were better off carving out niches in industries like the construction of energy-efficient buildings.

‘The targets are ambitious; now I’m asking how they’re going to be achieved,’ he said of the government plan. ‘I think some of the goals are wishful – or at least hopeful – thinking.’

NEW YORK TIMES

Source: www.admpreview.straitstimes.com