Corporate Korea (1)
The following is the first (preface) in a series of articles on the book, titled “Corporate Korea’.—Ed.
By Kim Kwang-sooh
The Korean economy has achieved a miraculous growth during the past 70 years or so since its Independence in 1945, effectively adapting to ever-changing security, political, economic and social environments. Despite numerous obstacles and challenges, the corporate Korea, in particular, has successfully carried out 4 major tasks of democratization, digitalization, innovation of conventional industries, and opening of the market during the past decades.
The politico-social changes triggered by the democratization movement (The June 10th Resistance against the then military dictatorship) in 1987 and fundamental changes in economic structure forced by the currency crisis in 1997 inevitably resulted in a dramatic change in paradigm of business management in Korea.
By the end of 2011, it achieved $1 trillion in trade, including $515 billion in export and $485 billion in import, recording growth by as much as 2,000 times since 1962. Ranking 9th in trade in the world, it is now a member of the Organization for Economic Cooperation and Development (OECD) and the G20. Its status has been changed from a foreign aid-recipient to an aid-donor.
In the course of addressing these changes in environments during past several decades, the manufacturing industry in the country has recorded phenomenal growth driven by leading enterprises. Having made concentrated investments in the 1990s and undergoing painstaking restructuring, companies in semiconductor, liquid crystal display (LCD), mobile handset, automobile, iron and steel, and shipbuilding sectors have accomplished competitiveness in world markets. Consequently, 14 companies, including Samsung Electronics, LG Electronics, Hyundai Motor, and POSCO, were included in the Fortune Global 500 companies in 2007, while 3 companies were listed by Interbrand as world’s top 100 enterprises in brand values. Achieving double-digit growth in export for the fifth consecutive year since 2003, Korean manufacturing industry’s export competitiveness was also significantly improved. The rapid growth in export amidst adverse situation of hiking oil prices and strong Korean Won value demonstrates sharpened competitive edge in technology, quality and design of Korean industrial products. It is also true in electronics, information technology (IT), automobile and other advanced technology industries.
As most of material heritages of companies were destroyed during chaotic period after the Independence and the Korean War in 1950, the Korean manufacturing industry actually began to form its modern shape in the 1950s. A research shows that 9 in 10 top conglomerates, or jaebeol, as of 1984 were founded or expanded their market presence in 1955. 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 industry, while manufacturing industry remained trivial.
By 1965, the manufacturing industry accounted for around 10% of the gross national products (GNPs) and it rose to 17.9% in 1970. The percentage of heavy industry in terms of value in the total manufacturing industry increased from 35% in 1965 to 43% in 1970 and then to more than 50% after 1975. Most enterprises that are playing the role of locomotives of the Korean economy today began to expand their business after 1970. Korea’s electronics industry, including semiconductor, began to develop in the 1980s. And this period saw the appearance of diversified industrial structures and family-controlled conglomerates with converged ownership and management.
the past several decades, two outstanding trends of democratization and market opening drastically changed industrial environment. Further, the introduction of information technology (IT) totally shifted the way how to manage business and economy of the nation. Globally, new industries such as wireless communications and software surged during the two decades. After the currency crisis, in particular, Korean economy introduced the shareholder capitalism, and business management focused on improving profitability and competitive edge in quality. A part of large companies now advanced into the club of global leading businesses.
The past several decades are indeed the period of a gigantic change. In fact, globalization did not begin in 1990, but it can be dated further back. The new world economic order was established based on open market after the end of the World War II. The General Agreement on Tariffs and Trade (GATT) system in those days pursued free trade through multilateral negotiations, and after years-long negotiations since then, the world could work out the considerably feasible global free trade system in early 1990s, including the Uruguay Round settled in 1993. Based on the liberalization trend after the World War II that came to an end in 1945, the world was rapidly globalized in the 1990s through additional ease of regulations and phenomenal development of information and computing technologies.
As the development of railway and marine transport shortened geographical distance expediting the first globalization a century ago, the development of computers and IT in the 1990s, the second globalization period, reduced the time and costs of distributing information and knowledge to nearly zero. While globalization in late 19th century liberalized markets mainly in the West Europe and North America, almost all countries of the world were globalized after the 1990s. At the turn of the 21st century, developing countries are achieving conspicuous growth, led by emerging markets, including Brazil, Russia, India and China, or BRICs.
Riding on the globalization tide, Korea began opening its market in 1989. In line with expansion of the free market economic system in the old socialist bloc, Korea aggressively participated in these regions, successfully securing new markets. Particularly, Korean businesses could partially outpace competitors in advanced countries, which traditionally took overwhelmingly superior position in analogue technologies, by spearheading in adopting information technology ahead of others. Consequently, Korea has achieved remarkable accomplishments during the past several decades in all aspects, including democratization, industrialization, digitalization and globalization as well as upgrading of traditional industries. But the bitter currency crisis in 1997 can be pointed as a setback in the market opening policy. Korea suffered from the currency crisis as it hastily joined the OECD in 1996 without taking proper regulatory measures in opening the capital market. However, businesses that succeeded in surviving the adverse financial situation could sharpen competitive edge in the market, leveraging the crisis as a chance of restructuring operations.
This book reviews overall economic and industrial development Korea achieved in some 70 years, focusing on electronics, information and communication technology (ICT), and other advanced technology industries that have been driving the nation’s economic growth since the 1990s. It also examines major driving forces of transforming Korea into a dynamic industrialized country.
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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.