Within a generation, South Korea managed to transform its economy from one of the poorest to one of the richest in the world. At the heart of this change lies innovation. But can the country keep up with the competition?Korea has invested heavily in higher education and ranks third in the world in terms of the share of GDP spent on higher education (Panel 1s). However, the Korean education system has mixed results. Over the past years innovation and technology has been the backbone in boosting the export compititveness and has fuelled the economy of the country in the most remarkable way. The country has invested much more in research and development (R&D) as a share of GDP than other advanced economies.
In the bloomerg report of 2016, under the list of most innovative countries South Korea stood first. The report was a calculated analysis based on several qualitative and quantitative factors which include: R&D, high-tech companies, manufacturing, research personnel, patents and education. South Korea notched top scores worldwide for manufacturing value-added as well as for tertiary efficiency – a measure that includes enrollment in higher education and the concentration of science and engineering graduates. They came up with a breakthrough to the stiffness caused by the neigh bouring countries. Korea has had to make its own path in a region where it competes with China’s low labor costs, and Japan’s high-tech, capital-intensive industries. Spending more on R&D than any other economy not only reflects a domestic consumer base with a high demand for new technological developments, but also the government’s objective to build a creative economy
Chaebols playing the keyrole:
The main strategy of the government was to catalyze the development of low-cost manufacturing exports. But it was the emergence of the Korean conglomerates, known as “chaebols,” as strong multinational corporations which became essential to the economic transformation of the country. Companies including Hyundai and Samsung not only enabled a massive pooling of resources, but also resulted in Korean manufacturing moving into a new phase of growth driven by technological leadership and innovation, with a reputation for high-quality and leading-edge products.
According to analyst Biswas, one of the chaebols’ strategies to become global technology leaders was to invest heavily in R&D and develop a global footprint through mergers and acquisitions in the US and Europe, which, in turn, allowed them to enhance their technological capabilities. The government also focussed on creating world-class physical infrastructure as well as high-quality education systems in the country.
The future of the country depends on how the domestic challenges of low productivity and an aging population are addressed as well as how international demand responds to new developments in the global economy. Korea should be a pioneer in the field of Innovation and technology to maintain the global compitetitve advantage. The priority of the country is to to diversify its economy, including through high-value innovation and measures to increase global competitiveness, and create new growth industries for the future, particularly in the service sector.