Concerns are growing that the Korean economy may be drawn into a long-term downturn -- perhaps irreversible -- if it fails to make a swift shift to next generation industries that can prop up its future growth.

In a recent survey of 800 adult Koreans, conducted by the Federation of Korean Industries, more than 84 percent of the respondents said the country’s economy was now facing a slump caused by the lack of new growth engines and other fundamental problems.

The country’s 10 major export items, including steel, cars and semiconductors, have remained unchanged for decades. By adhering to what it has done so far, Korea can hardly expect to see a rebound in its exports, which declined on-year in April for 16 consecutive months.

Economic policymakers here say they will match nurturing new industries with restructuring loss-making sectors in order to sophisticate the country’s industrial structure.

Days after announcing corporate restructuring plans mainly targeting shipping lines, shipbuilders and steelmakers, the government last week unveiled a package of measures designed to encourage companies to increase investment in future growth sectors such as Internet of Things, smart car and biomedical technologies.

High tax credits will be offered for research and development and facilities investment in new industries. Funds will be created to share or reduce risks of pouring massive money into pioneering technologies.

“The government is trying to encourage companies to seek their future business on their own and make investment in advance,” said Deputy Finance Minister Lee Chan-woo.

A 2015 study by the Korea Institute for Industrial Economics & Trade showed the country was far less competitive than other advanced economies in new manufacturing industries.

With the U.S. competitiveness at 100, Korea stood at 77.0 in IoT, 72.3 in convergence materials, 60.7 in smart car and 62.2 in bioconvergence. As a whole, Korea’s competitiveness remained at 68.3, compared with 81.5 for Japan and 55.9 for China.

Experts note that the gap between Korea and China will be narrowed at a fast pace, as China is pushing to secure advanced technologies through active mergers and acquisitions of foreign high-tech firms, including those in Korea. The proportion of information and technology, pharmaceuticals and biotechnology sectors in overseas M&As by Chinese companies jumped from a mere 1.2 percent in 2010 to 32.7 percent in 2015.

The index of China’s competitiveness in new industries is expected to rise to 79.1 in a decade, close to 81.2 for Korea, according to the KIET study.

Experts note Korean corporations need to more aggressively seek M&As abroad to secure advanced technologies rather than insisting on developing all technologies on their own.

The belated and costly restructuring of shipping and shipbuilding companies, which are saddled with combined debts of 78 trillion won ($67.5 billion), should give lessons to other Korean corporations.

“It is necessary to find new growth fields before core businesses begin losing steam,” said Kim Yoon-kyung, a researcher at the Korea Economic Research Institute. Kim said companies need to pursue restructuring of businesses inconsistent with the direction of future growth on a permanent basis.

A law enacted in February to help companies overhaul their business lines to enhance productivity and financial statement needs more fine-tuning, experts say.

The package announced by the government last week has drawn largely positive response from economists as giving a necessary encouragement to companies that have hesitated to increase investment amid growing uncertainties over future business conditions. The country’s 30 largest conglomerates sat on 710 trillion won of cash reserves at the end of last year.

Calls are also mounting on the government to eradicate regulations on new industries along with pledges to strengthen support for them.

Deputy Finance Minister Lee said the government was limiting its role to making companies go into untouched areas through tax and other benefits.

But business circles have complained about rules that require companies to get prior approval on starting a new business and ban them from going beyond the government-set boundaries. The lack of accreditation standards for new convergence products has prevented companies from putting them on the market on time.

Experts say government officials should mean what they say about their approach to nurturing new industries.

“What is most important for bolstering future growth is to remove regulations to ensure free corporate activities,” said Cho Seong-hoon, professor of economics at Yonsei University in Seoul.

By Kim Kyung-ho (khkim@heraldcorp.com)