Korea over decades have proved itself incredible in terms of economic growth and global integration to become a high-tech industrialized economy.
In the 1960s, the country’s GDP per capita was invariably low, as compared to 2004, where then it joined the trillion-dollar club of world economies. Battling its long-term challenges, including factors like population, power of large conglomerates (chaebols) and reliance on exports, today the country knows best how to play smart to prioritize structural reforms accordingly, which has helped it to lead as the world’s fastest growing economies of the world.
South Korea (commonly referred as Korea) stands out because of its economic and human-development achievements. Ranked as world’s fastest growing economy since 1960s and popular as a Smart City, the country has excelled in fields of education, quality of healthcare, ease of doing business, government transparency and job security.
Korea's standard of living, in comparison with America, has barely missed a beat. If the Korean economy goes on growing at 4.5% a year and America's at 2.5%, Korea would overtake America (in PPP terms) only a few years later (refer to the graph below).
The South Korean government aims to transform the country into one of the top 10 business friendly economies in the world. It’s keen to encourage foreign investors and has been making efforts to ease excessive regulations and provide incentives for Foreign Direct Investment (FDI).
The incentives include:
- tax support
- cash grants
- site location support
The other key reasons to look at South Korea as an economy are:
The sovereign state is popularly referred as the “start-up powerhouse”. Simultaneously, it also houses multinational conglomerate corporations like LG and Samsung.
The country ranks number one when it comes to highest broadband speed of 100 megabytes. It also leads the world in 4G mobile usage, with plans to invest USD1.7 billion in 5G by 2020.
It’s one of the world leaders in fields of patent activity, manufacturing, oil & gas, information technology and productivity. Tops the chart of having the highest average wage income in Asia.
It ranks 8th when it comes to International Trade and is World’s 7th largest Exporter. 15 Free Trade Agreements (FTA) currently in place and 11 more under negotiation.
74% of South Koreans undertake postgraduate-level education, with 7% of Gross Domestic Product (GDP) spent on education.
INDIA and KOREA
Despite having similar backgrounds to start with, South Korea has a lot in store for us to learn from in fields of Business, Culture and Knowledge. Both South Korea and India, officially the hottest major economy as per the new GDP computation methodology, makes for a good round of comparison as follows:
- Both countries were roughly the same size in 1990 (about $300 billion in GDP)
- Historically suffered from extensive poverty and have hostile neighbours
- Both began to assert their economic might from the late ’80s
- Suffered endemic corruption and rent-seeking behaviour
- Both have a key common factor- the population size
Names like Samsung, Hyundai, Posco, LG and Kia have asserted themselves globally. Conversely, India’s largest companies have grown either on domestic strengths or as service providers to the developed world.
But interestingly, all these Korean companies have a significant Indian presence but corporate India’s presence in South Korea is marginal. However, this calls for us to tap South Korea next as our key area. Have a look below:
1. Korea’s per capita wealth is more than India. The per capita GDP grew 20-fold from 1963 to 2013.
2. It has one of the world’s highest post-graduation rates.
3. It has developed export capabilities in automobiles, ships and steel while India’s export is dominated by gems, textiles and food items.
4. India’s largest automobile exporter is also a Korean company – Hyundai.
5. South Korea has reduced the number of days it takes to start a new business, from 17 days in 1990 to 4 days, while in India it takes 26 days.
EXPORTS AND IMPORTS
Major Exports are automobile, wireless communication devices, semiconductor, petroleum products, ship structure and parts, liquid crystal displays (LCDs).
Major imports are oil, semiconductor, petroleum products, steel, and semiconductor manufacture equipment.
Electronics – South Korea is a global leader in electronics manufacturing, including semiconductors and televisions. South Korean companies, Samsung and LG, is a global leader in smartphone sales.
Shipbuilding – The world’s three top shipbuilding companies are all from South Korea: Hyundai Heavy Industries (HHI), Samsung Heavy, and Daewoo Shipbuilding and Marine Engineering (DSME).
Automotive – Korea is world’s fifth largest automobile producer by units produced and is home to the Hyundai Motor Company – the world’s fastest growing automaker by brand. Global car demand is expected to continue rising.
Petrochemicals – South Korea’s Ministry of Trade, Industry and Energy (MOTIE) is forecasting strong growth for the South Korean petrochemicals industry due to increased demand from key markets, in particular China.
Metal and Machinery products - About 600 South Korea companies’ are registered in Metals, Machinery & Engineering category, marking a rank in global map, primarily into basic metal product business.
Biotechnology – The South Korean Government funds the Korea Institute of Bioscience and Biotechnology (KRIBB) that’s exploring potential solutions to problems facing humanity. Areas of research that may lead to commercialisation include medical treatment, food, energy, and the environment. Privately owned South Korean companies are making inroads in the biopharmaceutical field.
Internet software and services – Koreans are avid consumers of digital media and apply the lion’s share of their bandwidth resources to online gaming. Google has taken an active role in nurturing South Korean Internet software and services companies, introducing their favourites to the US to help them build a global profile.
In 2013, South Korean President Park Geun-Hye announced the desire for a more ‘creative economy’ and launched the new Ministry of Science, ICT and Future Planning.
High-tech communication – South Korea has transformed into a high-tech economic heavyweight, having applied substantial resources to research and development. As a result, the country is now the world leader in patent activity, along with information and communication technology.
Tourism – The contribution of the tourism industry to the South Korean economy is expected to grow more than double the average. Growing smart city, it has built smart infrastructure over time enabling citizens to have easy access to public services, life information and leisure activities using smart phones and tablet PCs.
Sports infrastructure - South Korea has a proven track record of delivering large scale sporting and entertainment events, and will be hosting the Winter Olympics in Pyeongchang 2018. This will bring huge opportunities for companies in marketing and ticketing, hospitality and catering, advanced IT, green building and design, including stadium and accommodation build and low carbon solutions.