"The reason why the Korean economy faces difficulties is that the traditional manufacturing industry is losing growth momentum,"

Moon said in a speech at an event to unveil smart innovation strategy for smaller firms held in Changwon, South Gyeongsang Province, some 398 kilometers south of Seoul.

"It is time for South Korea to raise its competitiveness through innovation and make a new leap forward as a manufacturing powerhouse," Moon said.

Moon travelled to the area, the manufacturing hub for the South Korean auto and shipbuilding industries, in an effort to boost to regional economies, according to the presidential office Cheong Wa Dae.

He said that it is important to build smart factories using advanced technologies for higher productivity.

"Innovation in the manufacturing industry hinges on small and medium enterprises. Now is the time to expand smart factory systems to SMEs as many larger companies have already been running them," Moon said.

The government allocated 1.3 trillion won ($1.07 billion) to supporting smaller firms' "smart innovation" for next year. It plans to sharply increase the number of smart factories and industrial complexes by 2022. (Yonhap)