The following is the second (Chapter 1 summary) in a series of articles on the book, titled “Corporate Korea’.—Ed.
By Kim Kwang-sooh
Since its Independence in 1945 and establishment of its government in 1948, Korea (Republic of Korea) achieved a miraculous economic growth despite numerous obstacles and challenges. For more than two decades since then, the country underwent political and social turmoil. It severely suffered from the devastating Korean War in the early 1950s, April Student Revolution in 1960 and military coup d’Etat in the following year. During the Korean War, most of industrial facilities including communication infrastructures were destroyed.
Notwithstanding the ruin of the War, Korea began to reconstruct these facilities and infrastructures in the middle of the 1950s, while manufacturing industry began to form its modern shape. In those days, Korean companies began to build textile, sugar and flour milling factories, but still the primary industry, merchandising and service business constituted mainstream industries, while manufacturing industry remained trivial. Major export products were textile, plywood and wigs. And the electronics industry emerged in 1958 when the first electronics company, LG Electronics (formerly Gold Star), was founded. The company produced the Korea’s first electronic device, a radio, in November 1959. Another electronics company, Samsung Electronics, was established in January 1969, 10 years thereafter.
In an effort to build the foundation for economic growth by improving social overhead capital (SOC) facilities and promoting basic industries, the government designed the first five-year economic development plan in 1962. Subsequently, the five-year economic development plans were continued for the 6th phase for 30 years. And it adopted the policy of aggressively attracting foreign investments in mid-1960s. Then multinational electronic companies, mainly the United States and Japan-based ones, began to invest in Korea either directly or jointly with Korean counterparts.
motive forces of the phenomenal economic growth are evaluated to be commitment of government leaders, outstanding capabilities of policy makers, devotion of business leaders, enthusiasm of workers, strong zeal for education of the people, excellent human resources, and generalization of information technology. Among others, the primary motive power was the national consensus for growth and enhancement of living standards. Of these factors, the role of top policy and decision makers of the government and leading entrepreneurs is noteworthy in driving the economic development. Most of all, President (former) Pak Jeong-hi (Park Chung-hee) undoubtedly played principal role in designing and implementing economic development plans assisted by a number of competent bureaucrats in early stages. In the private sector, several entrepreneurs including Gu In-hoi, Lee Byeong-cheol, Jeong Ju-yeong and Kim U-jung immensely contributed to the national economic and industrial development. In the science community, Kim Wan-hi, a prominent scientist, brought expertise to that end.
Attributing to strong export drive and technology development efforts of the government, the electronics industry set up foundation for growth in the 1960s. A number of export-oriented industrial complexes were constructed across the country and attracted investments from foreign companies. In the 1970s, technology companies in Korea accelerated development of proprietary new technologies and products. Building on accumulated technologies, large enterprises heavily invested in consumer electronics, semiconductors and video cassette recorders (VCRs) in the 1980s.
Until the 1980s, economic growth of the country was led mainly by manufacturing and construction industries, but electronics and information technology (IT) industries had driven economic growth since the 1990s. In this decade, the structure of electronics industry was changed to high value-added products. For two years between 1999 and 2000, the IT industry grew by as high as over 30%, and semiconductor increased by 40%, driving the economic growth. During this period, electronics industry increased by 30% in export. Samsung Electronics ranked first in the world liquid crystal displays (LCDs) and code division multiple access (CDMA) devices markets while LG Electronics topped in the world optical disk drive market. Since 2000, these two companies positioned as most competitive leaders in the world mobile phone, semiconductor and LCD TV markets. In 2005, Korea marked the milestone of $100 billion in export of electronics and IT products. Moreover, as of 2005, it rose to the top in digital opportunity index in the world with 26 million users of PCs and 10 million subscribers to broadband Internet.
The electronics and IT industries made conspicuous contribution to increasing the gross national income per capita from mere $60 in the early 1960s to over $20,000 in 50 years, helping Korea rise to the 12th largest economic power in the world. After the first oil shock in October 1973, the government selected electronics and shipbuilding businesses as strategic industries as they consume relatively less energy. Encouraged by this policy, the electronics industry strived to improve quality of products. And the communication industry steadily expanded facilities, while deploying long-distance and international networks to increase the number of subscribers from around 277,000 in 1966 to over 563,000 in 1971. In 1970, major export items in electronics and IT industries included integrated circuits (ICs), discrete semiconductors, tape recorders, TVs (both black/white and color TVs), cathode ray tubes, condensers, radios and resistors.
rapid increase in export in these segments invited new trade protectionism of industrially advanced countries, including the United States, the United Kingdom and France, in the middle of the 1970s. Unlike the traditional method of imposing protective tariffs on imported products, these countries began in 1976 to adopt non-tariff methods of controlling imported commodities, such as import quota system, voluntary export restraints, and orderly marketing agreement. Targets of the new trade protectionism of these nations in those days were color TVs, black/white TVs and radios. In result, Korea’s export of color TVs to the United States decreased from $93.7 million in 1978 to $72 million in 1980 in value. Export of Korea-made black/white TVs to the United Kingdom was restricted to 190,000 units in volume for three years between 1977 and 1979. Annual export volume of Korea-made radios to France was limited to 200,000 units in 1978. While restricting import of Korea-made electronics products, industrially advanced countries constantly demanded Korea to open its market. Eventually, Korea liberalized import of 19 product items in 1978. y included black/white TVs, refrigerators, electric fans, radios, batteries, electric razors, coffee pots, dial telephones and permanent magnet as a component of refrigerators.
The writer Kim Kwang-sooh is a veteran journalist in economy and technology who served at the International Cultural Society of Korea (predecessor of Korea Foundation) as director for international cultural exchange, and joined The Electronic Times, a leading daily in electronics and technology industries in Korea, where he worked for over two decades holding senior editorial positions. Kim is currently serving as a member of the editorial board at The Korea Post, a leading news and business English monthly in Korea. –Ed.