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A Study on Ways to Create Higher Added Value in the Engineering Industry

Author Lee SangHyun , Lee Soon-Hak Date 2014.12.29 Page 205
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As a Technology and Knowledge intensive high valued industry, Engineering industry enhances the competitiveness and productivity of related industries. Moreover, recent economic circumstances continue to raise the significance of the engineering industry along with the spread of inter-industry convergence and also with the extension of the industry scope requiring cutting-edge technologies. However, the engineering industry in Korea has been overlooked and just regarded as a part of Construction and Plant industries. This misconception is partly responsible for the lack of comprehensive policy studies on engineering industry. The main purpose of this research is to suggest possible policy plans for transforming current domestic engineering industry to high valued one by raising technological competitiveness of domestic engineering firms. Additional purpose is to identify the engineering industry in a way of meeting current economic trend.

Chapter 2 examines current states of Korean engineering industry to uncovers drawbacks facing domestic engineering firms and industry. Shortcomings mainly result from inferior competitiveness in high value added business processes such as Feasibility Study, FEED, and Process Management Consultant (PMC). This inferior competitiveness is found to be originated from the lack of technology competitiveness. The domestic firms’ insufficient incentives for enhancing their technology competitiveness is observed to make matters worse. We employ world and domestic industry data without distinguishing Construction & Plant
Engineering from Product Engineering up to here.

In chapter 3, we conduct survey research for domestic firms in the Construction & Plant Engineering Industry. The survey research reveals that firms put subjectively high credits in their capabilities of Conceptual Design and Basic Design. From this aspect, we find some clues that domestic firms have started creating high value in such areas. Even the firms recognize the obtaining of distinctive technologies as the core of the competitiveness, they still put much emphasis on the immediate outcomes such as profit and the rate of return. This adherence to shortrun outcomes not only restraints them from long-run investment but also prevents them from creating high value added. Moreover, existing supporting systems and policies are reported not to be successful enough to meet the firms’ needs. Hence it is necessary to revise those systems in a firm-friendly way. Especially, the establishment of control tower is the most frequently observed requests from the firms. This control tower is expected to conduct comprehensive management of various legal systems and policy institutions.

Chapter 4 inquires into Product Engineering(PE). Since domestic PE has never been recognized and identified before in an official way, we utilize World Input-Out Data(WIOD) to secure the objectivity of the analysis. This analysis reveals that the use rate of the PE among
domestic manufacturing firms is relatively lower than that of advanced foreign countries. Moreover, domestic manufacturing firms depends more on foreign PE than foreign manufacturing firms do. We can take various approach to address the issues but our main policy concern at this point should be the official identification of PE.

Based on the analyses conducted in the previous chapters, chapter 5 suggests policy ideas for generating high value in the engineering industry. The policy priority should fall on the establishment of industry classification for Construction & Plant and PE in a way of reflecting current economic trend. This will make contributions to enhance efficiency and effectiveness of the industrial policy since it clarifies policy targets. In addition, we need to take separate policy
stance depending on the size of firms in Construction & Plant area.To lay a foundation for industrial symbiotic system, fair procurement or subcontract scheme should be contrived. Moreover, Track-Record system should be revised for the mid-sized firms to be benefited in a
practical way. When it comes to PE, we need to construct PE complex, switch current Product-Based R&D supporting system to Project-Based one, and adjust current link between industry and academia by assigning Research to the Academia and Development to the PE firms.Lastly, we need to construct Engineering Control Tower which can address complicated engineering industry issues.