Again, a portion of my analysis is only posted.
The Korean government recognized the economic advantages of export-oriented manufacturing based on cheap, well-educate labor force in the 1960s. In this context, the government promoted labor-intensive Light Industries and pursued a “catch-up” strategy to manufacture low-technology assembly-type products. In order to enhance the process technology capacity, the Korean government started to launch the technology development initiatives and build a technology infrastructure…
By the late 1970s, the economic setback due to overinvestment in the HCI sector and low capacity utilization forced the government to upgrade the industrial structure and deepen technological competence…
In the 1980s, the Korean government transformed the industrial structure into more technology-intensive industries. Foreign companies got reluctant to transfer their technologies to Korea, afraid of the growing technological competence of Korean firms…
The real high-tech progress took off after the mid-1990s. The share of high-tech products in total exports increased from 14.4% in 1985 to 32.9% in 1995 and then to 38.4% in 2000.
Friday, November 6, 2009
Thursday, November 5, 2009
The Characteristics of Korea’s Technology Policy
Korea, once a developing country and now a newly industrialized one, has achieved remarkable economic growth and technological progress since the 1960s. As a result of accumulating technological capability and developing competitive products, Korea is now the world leader in a few high-tech fields such as LCD panels and memory chips.
Consequently, probing into how the Korean government has fostered technological advancement and how it could have done better in terms of its technology policy framework can offer some valuable lessons for both advanced and economies.
I would share some of my analysis on Korea’s Technology Policy in the next few postings: the characteristics of Korea’s technology policy, its trajectory, its efficacy, and so on.
A part of my analysis would be only posted.
The Korean government has seen technological innovation as the engine for economic growth. Hence, it has committed to enhancing innovative technological capabilities. In this context, an array of policies has been designed and implemented to establish infrastructure, facilitate technological innovation at firms, and promote specific high-tech industries.
Korean technology policy has the following characteristics, among others:
-The government had built a technology infrastructure in the early days of industrialization.
-The government used various incentives (e.g., accelerated depreciation allowances) to encourage private enterprises to expand their R&D investment.
-The Korean government’s R&D policy has mostly been centered on chaebols.
-Industrial policy is closely intertwined with technology policy. Human resource development policy is also related to technology policy.
-The reverse brain drain of R&D manpower had been an effective tool to source advance technological knowledge until the later stage of industrialization.
-The Korean government was directly involved in business development and even played a market shaping role, along with assistance in technological development in key technology-intensive industry.
-The contribution of GRIs to the National Innovation System has been questionable with the exception of a few cases.
Consequently, probing into how the Korean government has fostered technological advancement and how it could have done better in terms of its technology policy framework can offer some valuable lessons for both advanced and economies.
I would share some of my analysis on Korea’s Technology Policy in the next few postings: the characteristics of Korea’s technology policy, its trajectory, its efficacy, and so on.
A part of my analysis would be only posted.
The Korean government has seen technological innovation as the engine for economic growth. Hence, it has committed to enhancing innovative technological capabilities. In this context, an array of policies has been designed and implemented to establish infrastructure, facilitate technological innovation at firms, and promote specific high-tech industries.
Korean technology policy has the following characteristics, among others:
-The government had built a technology infrastructure in the early days of industrialization.
-The government used various incentives (e.g., accelerated depreciation allowances) to encourage private enterprises to expand their R&D investment.
-The Korean government’s R&D policy has mostly been centered on chaebols.
-Industrial policy is closely intertwined with technology policy. Human resource development policy is also related to technology policy.
-The reverse brain drain of R&D manpower had been an effective tool to source advance technological knowledge until the later stage of industrialization.
-The Korean government was directly involved in business development and even played a market shaping role, along with assistance in technological development in key technology-intensive industry.
-The contribution of GRIs to the National Innovation System has been questionable with the exception of a few cases.
Wednesday, November 4, 2009
Small Government Desirable, But If Not Feasible, What To Do?
We may all agree that big government is a problem: it has caused all sorts of intended and unintended consequences around the world including a dubious collusion between big government and big business.
However, in reality, a global economy has run on big government. Consequently, in order to survive and prosper on the global stage, one can’t undermine the powerful nature of the government apparatus.
When government intervention becomes a source of corruption, pursues the benefit of special interests, and chases short term gains to the detriment of the long term economic health, then irrespective of what government system a country has, it would run into deep trouble.
Public policies matter, but only when they are crafted for the benefit of the general public and future generations.
However, in reality, a global economy has run on big government. Consequently, in order to survive and prosper on the global stage, one can’t undermine the powerful nature of the government apparatus.
When government intervention becomes a source of corruption, pursues the benefit of special interests, and chases short term gains to the detriment of the long term economic health, then irrespective of what government system a country has, it would run into deep trouble.
Public policies matter, but only when they are crafted for the benefit of the general public and future generations.
Tuesday, November 3, 2009
More Offshoring Continues in Korean Car Industry
I’ve recently discussed a ramification of Samsung’s increasing overseas production of mobile phones, while decreasing domestic production. This offshoring trend has not been limited to the electronics industry.
Hyundai and its affiliate Kia produced and sold over 1.5 million cars overseas this year, which is quite impressive. The production figure in October, nearly 180,000 was more than 40% increase from a year earlier.
What’s intriguing about this number is that the number of cars produced and exported from domestic plants fell by 12.5 percent in October also from a year earlier.
Like Samsung, Hyundai has intentionally moved its production offshore. It has five overseas factories including locations in the U.S., China and India, while Kia has two plants in China and Slovakia and is expected to operate another plant in the U.S. this month.
Amid dwindling worldwide car market, Hyundai has aggressively expanded in booming markets: China and India in particular. Hyundai has focused on increasing its local production using overseas plants rather than exporting domestically produced cars.
Again, Korea has to be mindful of the eroding manufacturing base, as I noted in the case of Samsung.
IT products and automobiles have been the two major export items of Korea.
Hyundai and its affiliate Kia produced and sold over 1.5 million cars overseas this year, which is quite impressive. The production figure in October, nearly 180,000 was more than 40% increase from a year earlier.
What’s intriguing about this number is that the number of cars produced and exported from domestic plants fell by 12.5 percent in October also from a year earlier.
Like Samsung, Hyundai has intentionally moved its production offshore. It has five overseas factories including locations in the U.S., China and India, while Kia has two plants in China and Slovakia and is expected to operate another plant in the U.S. this month.
Amid dwindling worldwide car market, Hyundai has aggressively expanded in booming markets: China and India in particular. Hyundai has focused on increasing its local production using overseas plants rather than exporting domestically produced cars.
Again, Korea has to be mindful of the eroding manufacturing base, as I noted in the case of Samsung.
IT products and automobiles have been the two major export items of Korea.
Gold Hit a New All-Time High
The price of gold has hit a new all-time high.
Gold is rising in all major fiat currencies.
Although one would assume there wouldn’t be a currency collapse, amid printing, debasing, and inflating, the surge in gold is worrisome.
Gold is rising in all major fiat currencies.
Although one would assume there wouldn’t be a currency collapse, amid printing, debasing, and inflating, the surge in gold is worrisome.
Monday, November 2, 2009
Hot money flowing into Asia
According to Marc Faber, the Fed’s easy money policies have flooded emerging economies with liquidity.
As hot money has flown into the Asian countries, they have every reason to be concerned about, given the opportunistic nature of that capital and its potential detriment to the overall health of their economies. Speculative capital has flown into Korea, China and India, and some in Southeast Asia, causing asset bubbles. What would happen when those bubbles burst?
It is interesting to see how different economies have employed different monetary policies in terms of controlling inflation, their financial system, and asset prices amid hot money influx
I’m also concerned about how the Asian stock markets would react when the next leg down of the U.S. stock market takes place. It might be safe to say that if the Asian markets remain strong after the U.S. market falls, then they have decoupled from the U.S. Time will tell.
As hot money has flown into the Asian countries, they have every reason to be concerned about, given the opportunistic nature of that capital and its potential detriment to the overall health of their economies. Speculative capital has flown into Korea, China and India, and some in Southeast Asia, causing asset bubbles. What would happen when those bubbles burst?
It is interesting to see how different economies have employed different monetary policies in terms of controlling inflation, their financial system, and asset prices amid hot money influx
I’m also concerned about how the Asian stock markets would react when the next leg down of the U.S. stock market takes place. It might be safe to say that if the Asian markets remain strong after the U.S. market falls, then they have decoupled from the U.S. Time will tell.
Sunday, November 1, 2009
Despite Samsung’s Impressive Profit Report, Production of Domestic Suppliers Shrinking
According to Samsung, its mobile phone business occupied 21% share of the global mobile phone market. Its mobile phone sales rose quarterly-on-quarterly 16% in Q3. This increase is impressive in that Samsung made it while the worldwide mobile phone market has shrunken by 3 to 7% due to the global economic crisis.
Despite its outstanding profit report, a serious concern over Samsung’s stance in the overall Korean manufacturing landscape is growing.
Samsung has moved its production offshore including locations in China, India, Vietnam and Brazil mainly due to cost-competiveness.
Although Samsung claims that its core manufacturing technology and manufacturing facilities for high-end mobile phones would remain in Gumi plant of Korea, history has taught us that increased offshoring and outsourcing do more harm than good for a country’s competitiveness, as I’ve recently pointed out.
Given the fact that Samsung has received much favors and subsidies from the Korean government in the course of its growth, it is ironic to see how it is becoming more of MNCs in advanced countries that have exploited labor and resources around the globe.
While Samsung’s domestic production of mobile phone has been shrinking since 2005, its overseas production is increasing. In 2005, the domestic production in Samsung’s Gumi plant makes up 75% of Samsung’s total mobile phone production. However, it fell 29.3% in the first half of the year.
This means that many of Korean suppliers to Samsung are losing their production capacity and sales profit due to Samsung’s offshoring.
Korea has to be mindful about how the U.S. outsourcing production to China has hampered the well-being of America not just production-wise, but financially and politically. We have seen a profound impact of America’s outsourcing to China.
Perhaps to a lesser degree, but one has to be concerned about Korea’s eroding manufacturing base as Samsung is becoming more of a platform corporation in Korea while offshoring its manufacturing operations.
This trend may add fuel to the fire of Korea’s jobless recovery. Moreover, the U.S. case has demonstrated that demise of manufacturing sector can lead to the destruction of the middle class.
Despite its outstanding profit report, a serious concern over Samsung’s stance in the overall Korean manufacturing landscape is growing.
Samsung has moved its production offshore including locations in China, India, Vietnam and Brazil mainly due to cost-competiveness.
Although Samsung claims that its core manufacturing technology and manufacturing facilities for high-end mobile phones would remain in Gumi plant of Korea, history has taught us that increased offshoring and outsourcing do more harm than good for a country’s competitiveness, as I’ve recently pointed out.
Given the fact that Samsung has received much favors and subsidies from the Korean government in the course of its growth, it is ironic to see how it is becoming more of MNCs in advanced countries that have exploited labor and resources around the globe.
While Samsung’s domestic production of mobile phone has been shrinking since 2005, its overseas production is increasing. In 2005, the domestic production in Samsung’s Gumi plant makes up 75% of Samsung’s total mobile phone production. However, it fell 29.3% in the first half of the year.
This means that many of Korean suppliers to Samsung are losing their production capacity and sales profit due to Samsung’s offshoring.
Korea has to be mindful about how the U.S. outsourcing production to China has hampered the well-being of America not just production-wise, but financially and politically. We have seen a profound impact of America’s outsourcing to China.
Perhaps to a lesser degree, but one has to be concerned about Korea’s eroding manufacturing base as Samsung is becoming more of a platform corporation in Korea while offshoring its manufacturing operations.
This trend may add fuel to the fire of Korea’s jobless recovery. Moreover, the U.S. case has demonstrated that demise of manufacturing sector can lead to the destruction of the middle class.
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