South Korea should ease regulations under the Fair Trade Act and designate high value-added petrochemical technologies as national strategic technologies in order to restructure the struggling petrochemical industry, according to a proposal made on Wednesday.

“Most domestic petrochemical products are general-purpose and hard to differentiate, making them subject to high export tariffs and resulting in low profit margins,” said Kim Ji-hoon, managing director and senior partner at Boston Consulting Group (BCG).

His remarks were made during a forum held by the National Assembly Futures Institute.

How business operations are restructured at each industrial complex will be a key issue moving forward.

He explained that since the conventional “endurance strategy” based on market cycles is no longer viable, a fundamental industry restructuring must begin.

The petrochemical sector has been facing challenges due to oversupply after China pursued a self-sufficiency policy starting in the 2020s.

BCG projected that if the current downturn continues, only 50 percent of petrochemical companies will survive within three years.

If one or two companies in each industrial complex go into court receivership, related vendors could also collapse in a chain reaction.

Kim emphasized that the government should step in to ease regulations and support the development of high value-added products.

Under the current Fair Trade Act, if the combined market share of companies involved in a merger or acquisition makes them the top player in a given field, the merger is restricted.

Moreover, companies are not allowed to communicate with each other to coordinate production levels or engage in other collaborative efforts.

He also suggested that restructuring should include reducing fixed costs, and that financial and tax benefits should be offered when appropriate restructuring is achieved.

He also recommended designating major industrial complexes as preemptive response zones for industrial crises and classifying high value-added technologies as national strategic technologies.

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