Aucun titre de diapositive

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New Challenges for Koreas Innovation System
March 2004
Joonghae Suh
Ministry of Finance Economy Korea Development
Institute
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Contents
? Dynamic Korea A Nation on the Move ? Koreas
Innovation System - Challenges ahead
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Socio-economic Vision and Policy Initiatives of
the Roh Administration
Dynamic Korea - A Nation on the Move -
4
5. Perception on the Effectiveness of the Policy
Positive
Negative
(Unit )
(Unit )
Abolished
Not Abolished
Improved
Not Improved
Authoritarianism1) (General Public)
Corporate Transparency (Foreign Investor)
48.0
52.0
56.4
43.6
Expanded
Not Expanded
Improved
Not Improved
Citizens Participation in Politics1) (General
Public)
Government Services (General Public)
62.9
37.1
35.3
64.7
Resolved
Not Resolved
Effective
Ineffective
Labor Disputes (Foreign Investor)
Real Estate Policies2) (Expert)
13.0
87.0
63.4
36.6
Effective
Ineffective
Improved
Not Improved
Income Distribution (General Public)
IT-related Policies3) (General Public)
78.3
21.7
7.5
92.5
Source 1) TNS (Aug. 2003) 2)
KDI-Gallup (Dec. 2003) 3) Union
Research (Dec. 2003)
Source KDI-Gallup (Dec. 2003)
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6. Challenges to the Korean Economy

• Current problems are structural in nature and
  due to continuing challenges

Slowdown in growth momentum

• Reduction in labor and capital inputs
• Inadequate technological and institutional
  capabilities

Increased social tension

• Intensified conflicts across regions, genders,
  generations and income groups
• Insufficient social safety net for the
  unemployed, and worsening income distribution

Rapid globalization

• Financial and corporate sectors under-prepared
  to meet global standards
• Increased pressure to liberalize agricultural
  and service sectors (DDA, FTA)

Emergence of China

• Fast growth of China in both traditional and
  hi-tech sectors
• Chinas increasing share of foreign investment
  into East Asia

Tensions on the Korean Peninsula

• Increased systemic risk due to political
  uncertainty in the Korean peninsula
• Intensified geo-political complexity in
  Northeast Asia

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7. Responses to Challenges
? Challenges demand proactive responses and
decisive actions
Big Challenges, New Opportunities
Preparation for Change Completed
A leading nation in the 21st century
Implementation
Dynamic Response
Road Map
Rapidly Changing Global Economic
Environment (no clear global forerunner)
Failed Response
A second-tier nation
? Following the efforts of the past year, now is
the time to accelerate change

• Need to step up changes in the face of
  intensifying global competition for innovation
  and change

Integrate capacity of the society
Understand the direction of responses and
changes
Implement counter-measures and changes swiftly
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1. Comprehensive Plan of the Vision
Dynamic Korea
Vision
Two pillars forachieving vision
Innovation
Integration
Upgrading Technology Manpower
Enhancing Social Well-being
BalancedNational Development
Northeast Asian Economic Hub
SevenStrategic Initiatives
Stable Labor Relations
Market Reform
Political, Administrative and Social Reform
Regain economic vitality and improve the welfare
of the needy
Short-termAction
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2. Core Concepts Dynamism Opportunities

• Why Dynamism?

• New and unpredictable changes in internal and
  external environment require dynamic responses

Vested interests
Creation of new opportunities
Re-igniting Dynamism
Political Leadership
Impediments to Dynamism

• What opportunities?

Individual

• Participation Participating in major political
  and social decision-making processes
• Competition Demonstrating talents and
  capabilities in a fair and competitive
  environment
• Innovation Fostering ideas and creativeness in
  an open environment

Region

• Balanced territorial development through
  productive competition among regions

Nation

• Stable growth of about 5
• An economic hub in Northeast Asia and a G-10
  status

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3. Two Pillars for Achieving the Vision
Innovation Integration
? For Dynamic Korea, upgrading innovation
integration capabilities is critical
Interaction between Innovation and Integration

• Innovation
• Refers to individual and organizational changes
  to increase productivity
• Refers to changes in institutions and policies
  affecting incentives and capabilities to
  innovate
• Integration
• Refers to efforts to lessen potential social
  tensionarising from innovation
• Refers to efforts to remove factors of
  socio-economicinequality, unleashing innovative
  potential of all
• ? Through proper policy measures,
  innovation and integration can be harmonized,
  creating synergy

• Enhancing productivity
• Reducing social conflicts
• Increasing economic stability

Accelerating Innovation
Innovation
Integration

• Synergetic Interaction

Inducing Integration

• Creating jobs
• Developing human capital
• Securing welfare resources

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4. Short-Term Tasks

• Need to revitalize the economy and enhance
  public welfare to achieve the Vision

Creating Jobs

• Reach compromise between labor management
• Provide employment opportunities for the young
  the disadvantaged
• Enhance the role of the public sector in job
  creation

Improving the Public Welfare of the Needy
Restoring Economic Vitality

• Lower private educational costs
• Reduce credit delinquencies
• Continue to contain inflation
• Curb speculation in the real estate market
• Expand the social safety net

• Encourage active investments
• Promote foreign direct investment and SOC
  investment
• Ease investment-related regulations, and expand
  tax/
• financial incentives
• Reduce financial market uncertainties
• Resolve the insolvency issue of the
  financially-vulnerable institutions
• Maintain flexible fiscal policy stance

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5. Medium and Long-Term Strategic Initiatives (I)
Effects of 7 Major Strategic Initiatives

• Each initiative serves to overcome more than
  one challenge. For example
• - Northeast Asian Economic Hub effective in
  overcoming globalization, rise of China,
  Relation with North Korea, and growth momentum
• - Balanced National Development Effective in
  coping with social tension and growth
  momentum problems
• - Market Reform Effective in overcoming growth
  momentum, globalization, and social tension
  
• Strong synergies are expected among 7
  initiatives to cope with challenges For
  example,
• - Political, Administrative and Social Reform
  serves as the driving force for all other
  initiatives and guarantees policies effectiveness
  
• - Cultivating manpower enables all initiatives
  by providing adequately skilled workforce
• - Northeast Asian Economic Hub reinforces
  market reform, while drawing on successful
  market reform for its own

North Korean Issues
Social Tension
Globalization
Breaking through 5 Major Challenges
Rise of China
Slowdown in Growth
Reform and Integration
Technology Manpower
PublicWelfare
Northeast Asian Hub
Implementing 7 Major Initiatives
Political,Administrative,and SocialReform
Balanced National Development
LaborManagementRelations
MarketReform
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5. Medium and Long-Term Strategic Initiatives (II)
7 Major Initiatives
Preparation Phase
Implementation Phase

• Establish educational reform plan
• Prepare comprehensive plan for the service
  sector

Technology, Personnel

• Designated 10 strategic businesses increased
  RD budget
• Established a comprehensive plan for HRD
  and a plan for upgrading higher education

• Open-up educational and health-related
  businesses in the economic free zone
• Enact special law for Free Trade Agreements

Northeast Asian Hub

• Enacted the Free Economic Zone law designated
  3 zones
• Reached FTA with Chile initiated FTA talk with
  Japan
• Advanced business cooperation with North Korea
  (i.e., launch of the Kaesong Complex project)

• Establish laws and institutions meeting
  global standards

Labor Relations

• Drafted basic legal and institutional framework
  for more advanced labor-management relations

• Enact Unified Bankruptcy Law
• Revise Fair Trade Law

Market Reforms

• Established 3-year roadmap for market reform
• Enacted related laws (laws for advanced
  accounting ,
• consolidated securities exchange law, etc.)

• Introduce Specialtied Rigional Development
  Zone Act
• Implement 5-year Plan

Balanced National Development

• Established a strategy for new land development
• Enacted 3 special laws for regionalization
  decentralization
• Finalized a basic plan for regional industrial
  clustering

• Revise pension-related laws
• Amend pre-school education law

Public Welfare

• Established 5-year plan for public welfare
• Introduced 5-day work week
• Finalized a plan to construct 1.6 million rental
  houses

• Prepare a comprehensive plan to alleviate
  social conflicts

Political, Administrative, Social Reform

• Finalized roadmaps for administrative reform
  e-government
• Implemented performance-based budget system

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5. Medium and Long Term Strategic Initiatives
(III)
Upgrading Technology Manpower
Increase investment and consolidating
institutions for the advancement of science and
technology and accumulation of human capital

• Establish an advanced national system for
  technological innovation - Increase RD
  investment, - Integrate technological, human
  resources, and industrial development policies
  - Establish a new system for industry-academia
  collaboration
• Education reform Increas diversity and
  specialization through decentralization
  deregulation

Northeast Asian Economic Hub
Complete integration into the global economy for
entering a new era of peace prosperity in
Northeast Asia

• Achieve complete openness Expand FTA, Open
  agricultural market and service sectors
• Strategic inducement of foreign investment Lift
  remaining restrictions, Improve investment
  incentives
• Strengthen internal capabilitites for a
  logistical, financial, and RD hub in the region

Stable Labor Relations
Establish a cooperative system between business
and labor

• New agreement in the Tripartite Committee
  Initiate talks at national, local, and
  occupational levels
• Strengthen preventive measures for labor
  disputes, Encourage resolution through private
  channels

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5. Medium and Long-Term Strategic Initiative (IV)
Market Reform
Establish a transparent and fair corporate and
financial system meeting global standards

• Enhance corporate governance Introduce holding
  company system
• Restructure the financial industry Privatize
  financial institutions

Balanced National Development
Open an era of balanced development drvien by
regional autonomy

• Decentralization Transfer of education and law
  enforcement, Balance national and local taxes
  etc.
• Construct a new capital in Chungcheong Province
• Pursue new agricultural policy Promote
  enterprise-type farming, Modernize production and
  distribution

Enhancing Social Well-being
Ensure minimum living standard for all, and
encourage sound economic activities

• Stabilize real estate market Implement a
  comprehensive plan, Rationalize tax code, etc.
• Expand the social safety net Extend the
  coverage of welfare, Reinforce welfare delivery
  system, etc.
• Promote social equality Enhance female
  participation and representation etc.
• Lower private educational costs Encourage
  on-line learning, etc.

Political, Administrative, Social Reform
Remove barriers to ensure fair competition and
innovation

• Political and Social Reform Abolish corruption
  and cronyism, Ensure transparency of NGOs and
• 
  non-profit organizations
• Administrative Reform Fiscal and tax reform for
  accountability, equity and increased local
  autonomy

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Box 6 Perspectives of Foreign Investors

• Foreign Investors display a positive view with
  high interest to invest

Survey of Foreign Investors
Attractive Factors for Foreign Investors

• Test bed for new products and production?RD
  Center
• Recent Cases - Merck Established HQ for LCD
  liquid crystal - PG Developed new product
  in Korea (75 exported) - Thyssen Krupp
  Entered elevator industry - IBM Established
  Ubiquitous Tech. Research Lab - Pasteur
  Agreed on establishing Korea Pasteur
  Research Center

Growth Outlook of the Korean Economy for the next
five years
4.0
Very positive
55.4
51.4
Positive
Negative
39.0
Very negative
5.6
Plans to Invest in Korea for the next five years
Which of the following factors are the most
attractive?
57.1
Human Capital?Technology
8.5
Finalized
Demand for Parts Materials
Committed
28.8
68.9
19.1
31.6
Considering
14.3
Industrial Infrastructure
31.1
No plan
Source Survey by MOCIE (2003.6)
75 of FDI into Korea originates from US,
Japan and EU (2003, estimated)
Source KDI-Gallup
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New Challenges for Koreas Innovation System
? Government - Policy Coordination -
Devolution with Empowerment
? GRI - Effective Efficient Research
? University - Education Reform
? Private Enterprises - The Gap between LE
SME - Manufacturing vs. Services - Foreign
Companies
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Koreas Public RD System
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Characteristics (1) - Decentralized
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Koreas Industrial Technology Policy Scheme
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Government-funded Research Institute
Characteristics (2) - GRI System
? Chief organ of governments RD policy ? 40
of Government RD funds flow to GRI -
University 25 Business 23 ? 86 of GRI
RD funds are from government - 37 are
institutional funding, the rest are
contract-based ? Integration of GRI with
university and business ? Being criticized ?
Necessity of re-defining GRIs role
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Government-funded Research Institute
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Private Enterprises
(1) Networking among NTBFs
? NTBFs are increasing ? they tend to
geographically concentrate. - Daeduck Science
Town (Daeduck Valley) - Teheran Valley in
Seoul - TechnoParks Pohang and other areas ?
Its quite new phenomenon ? will take further
years to be in concrete forms ? But a new growth
engine in the future
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Private Enterprises
(2) Changing Relationships between LE and SME
? Chaebols, Koreas large conglomerates, had
been - Vertically integrated -
Diversified - Leader in new businesses -
Leader in investment in capital and RD
? They have changed since the financial crisis
- Vertical integration starts to dissolve -
Try to concentrate on more competitive business
- Not necessarily leading in new businesses
- Their leading role in investment is not
diminished
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Private Enterprises
Spin-off Companies from Chaebols
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Private Enterprises
(3) SMEs in transition ? Manufacturing SMEs
Venture (3.0)
Exporting (21.6)
Spending money for RD (7.6)
All manufacturing (80,636 firms)
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Private Enterprises
(4) The Role of Foreign-owned Companies
- RD Centers by Foreign-owned Companies
- Comparison
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? Clark Material Handling Asia (CMHA)
Private Enterprises

• 1998 Take over from Samsung H. I. Co.
• 30m for take-over 7m for capital
  improvement
• 2000 Relocation of production and research from
  US to Korea
• RD Center in Changwon 39 RD Personnel
• RD investment 1.8 out of sales
• Co-work with German research center
• No relations with domestic institutions

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Private Enterprises
Emerging Patterns of Innovation Networks
Clusters