Korea Aims to Raise Per Capita
GDP to $35,000 by 2015

Establishes 2015 Industry Development Vision and Strategies

The government seeks to raise Korea's potential growth rate by 1 percentage point by taking a lead in the global division of labor with a view to join the ranks of advanced countries.
"If Korea seizes opportunities from the circumstances that surround its industries and implement seven global divisions of labor strategies based on the economic development stage of each country ― advanced, developing and underdeveloped, the Korean economy could join the ranks of the global top 10 economies in terms of the scale with the goal of raising the per capita GDP to the $35,000 advanced country level and contributing to complementing and supplementing deficiencies facing each country's industries as a 'Global Industry Integrator,' "Heo Beom-do, deputy minister of the Ministry of Commerce, Industry and Energy, said in an interview with NewsWorld.
"To this end, companies have to create new markets through innovative and creative activities designed to bring about changes, while the government needs to help companies make innovative efforts by creating an environment conducive to sustainable industrial development,"MOCIE Deputy Minister Heo said.
The vision and strategies calls for, among others, raising Korea? potential growth rate by 1 percentage point, he said. The following are excerpts of the interview.
Question: The importance of quality management cannot be overemphasized to enhance national competitiveness. Would you explain the significance of the National Management Convention marking the 31st anniversary on Dec. 7, 2005?
Answer: The purpose of the 31st anniversary of the National Management Convention is to give encouragement and praise to firms and their executives and employees who have played a part in enhancing Korea's global competitive edge by ensuring quality management in a passionate and continuous manner.
The convention also brings together businessmen and employees across the nation to review quality innovation practices and renew their determination to ensure quality innovation in the future.
The concept "Quality"started with process-oriented checks and field quality management activities in an initial stage some 30 to 40 years ago, but it has evolved as a means to help corporations raise their performance through companywide quality and defect-free activities to cope with changes in the industry environment.
In accordance with innovation-driven government policies, quality management has now been recognized as reform tools. It is encouraging a graft of the scientific methodology of quality management even to business activities of service and public sectors.
We have to secure our industrial competitive edge through a strategy to attach priority on quality in a bid to survive an endless competition regardless boundary in the 21st century. In this regard, it is significant to support and appraise quality management activities through the National Quality Convention marking more than 30 years.
Q: What steps does the government take to realize a vision of making a "Second Take-off"through quality innovations?
A: Since 2000, many policies like the operation of quality management certification, and the development and dissemination of quality management techniques have been delegated from the government to the private sector.
As a result, the private sector has greater discretion, whereas the government's concern and support for corporate quality innovation practices have weakened.
The demand for more active government support for corporate quality management activities has mounted, as economic slump and sluggish domestic demand are prolonged. The government announced the Quality Management Master Plan last March 4 responding to the demand and with an eye to realizing a vision of making a "Second Take-off"through quality innovation.
The blueprint enumerates such tasks as raising Korea's quality competitive edge to the levels of advanced countries, the insemination of awareness toward quality across the industry, administration and social walks, and the establishment of a government policy vision of creating the value of the brand "Quality-oriented Korea"while making arrangements for the five-year implementation actions such as expansion of infrastructure for quality management, cultivation of specialized manpower, overhaul of certification system and support for SME's quality innovations.
Pilot projects for establishing quality innovation clusters have been pushed in Gumi and Ansan areas from this year. The successful outcomes of the projects will be made available to implement tasks specified by the master plan during the period between 2006 and 2009 so that a second take-off can be attained through quality innovation.
Q: What is the current status of exports Korea have posted so far this year and the export prospects for the year 2006?
A: Korea exported $259.2 billion worth of goods in the first 11 months of the year, a 12.4 percent surge from a year earlier. The figure accounts for 91 percent of a target of exports worth $285 billion set for this year.
Despite such external unfavorable conditions as crude oil hikes and a strong won, Korea registered a double-digit increase in exports following the previous growth rate of 32.5 percent, indicating that the nation maintained a higher growth rate compared to competing countries, except China. Korea is forecast to achieve the target of exports set at the beginning of the year - $285 billion exports, a 12.3 percent soar from a year earlier.
Take a look into the reasons behind the robust exports. First, with the United States and China taking a lead, the global economy has kept stable growth. Secondly, Korea's mainstay exports, including semiconductors, ships and automobiles, have achieved more than a double-digit growth rate. Thirdly, parts and raw material exports from countries where Korean companies'overseas operations are located have increased dramatically.
By item, such value-added exports with a higher non-price competitive edge as semiconductors, automobiles, shipbuilding and general machineries are constantly on an upbeat mode, but such items as computers and textiles where production facilities are relocated abroad or whose competitiveness is affected by prices are showing signs of a decline.
By area, exports to the so-called BRICs (Brazil, Russia, India and China) countries and EU registered a robust rally, but those to the United States suffered a setback. The launch of Korea automobile and IT companies'operations in China has brought about a surge in related parts and material exports.
The global economy is predicted to remain unchanged next year, and Korea is likely to enjoy a robust export trend due to a continued improvement of the Korean industry's competitive edge, as many organizations forecast.
Q: Would you introduce plans to establish e-Trade and ubiquitous business infrastructures?
A: First, take a look into the ongoing e-Trade platform build-up project. The project, one of the 31 tasks being carried out by the roadmap of the e-Government initiative, will cost about 30 billion won during the four-year period between 2004 and 2007. The objective of the project is linking the existing networks related to trade procedures so that all trade-related duties ranging from marketing to settlement are seamlessly handled through the Internet.
The ministry successfully completed a trade process innovation project conducted by Samsung SDS between December 2003 and June 2004 and the First Phase of the e-Trade platform build-up project on establishing e-Trade document depository and the pilot e-L/C (letter of credit) circulation and management system between December 2004 and June 2005 at a cost of 1.8 billion won. They achieved a feat of launching e-L/C services for the first time in the world last September.
The Second Phase being pushed between November 2005 and September 2006 at a cost of 9.6 billion won, calls for building up such advanced key trade infrastructures as security consulting, an e-Trade portal for trade companies and the Business Process Management, a step-by-step trade processing system. The ministry plans to complete the national e-Trade hub system by 2007 without a hitch to dramatically simplify trade procedures and reduce costs.
Next, take a look into u-Business. u-Business has evolved into an advanced business form of raising corporate competitiveness and creating new revenues by grafting such fast-growing ubiquitous infrastructures as radio frequency identification (RFID), wireless LAN and micro-censor onto corporate business activities and the existing industries.
The ministry is carrying out a diverse package of steps, including technology development, manpower cultivation, standardization and support for startup businesses as part of its efforts to beef up the domestic industry's competitive edge through across-the-board u-Transformation.
Currently, the RFID Industry Support Center and Intelligent Home Industry Support Center are taking the initiative in technological development, standardization, and commercialization as well as the cultivation of the telematics industry using global positioning system.
The government plans to form consultative committees on u-Business areas to establish their own Korean Standards. An inter-ministry standardization integration committee will be established to develop Korean Standards into international standards.
The Small and Medium Industry Promotion Corporation Electronic Commerce Resource Center is offering consulting and educational services for SMEs. The ministry is considering introducing IT-Skill standards of advanced countries to cultivate u-Business experts.
Also logistics and distribution services using RFID, now under way with a pilot program in the public sector, will be expanded to cover the private sector. As part of the efforts to support u-Learning in the education and health industries, u-Business and u-Healthcare industrial clusters will be built up to serve as a springboard for expanding u-Business arenas.
Q: Could you elaborate on the progress of plans to expand futuristic growth engines with the goal of developing Korea into a global top four industrial powerhouse?
A: With the realization of Korea's leap into a global top four industrial powerhouse in mind, the government is working on such implementation tasks as the strengthening of the global competitiveness of growth engine industries, development of a global parts and material supplier hub and cultivation of knowledge-based industries.
First, the Participatory Government listed 10 next-generation growth engines designed to serve as "future breadwinners"since its inauguration under the initiative to beef up the global competitive edge of growth engine industries and went into high gear to implement the initiative. It is pushing ahead with the strategy to raise national competitiveness so that the futuristic growth engine industries and the existing mainstay industries could play as a driving force behind sustained growth.
This year, the government has worked out 74 detailed tasks on such areas as futuristic automobiles, robots and next-generation batteries that Korea has a long way to go before narrowing technological differences. Such a few new products as hybrid cars and robots for household cleaning are to be unveiled next year. Afterward, it will seek to raise Korea's industrial technology power to the levels of advanced countries by continuing to graft new technologies.
Secondly, the government plans to focus on helping midsize core companies secure original technologies with a view to realizing the vision of developing the nation into a global parts and material supplier center. It will implement the strategy on the development of the parts and material industry, established last January 17 without a hitch in a bid to proactively cope with the industrial restructuring of the Northeast Asian economy. This year, it is concentrating on readjusting its support regime to primarily target midsize core parts and materials companies. The government will put more energy into developing strategic parts and materials starting next year with the goal of raising the number of global leading parts and materials to up to 70.
Thirdly, the government is exerting itself in fostering the knowledge-based industry, a key infrastructure essentially for Korea's entry into an advanced economy. Restrictions and discriminating systems have been overhauled, and a focus is now putting on creating demand and fostering specialized companies.
Such strategies as specialized manpower cultivation and expansion of R&D investments have begun to be conducted in earnest this year to beef up competitiveness in such arenas as consulting, design, distribution and e-Business. Starting next year, efforts will be made to make service companies bigger and specialized. Thanks to these efforts, the ministry aims to raise the GDP level of the knowledge-based industry to 6 percent by 2007.
Q: Would you be more specific in the background of the establishment of the government's vision and strategies to develop industries by 2015 and its highlights?
A: Take a look at the background of the establishment of the vision and strategies. There are conflicting assessments on the present and the future of the Korean industry. Pessimists are worried about the bipolarization of the economy, caused by telescoped growth and the effects of the Asian financial crisis, such structural woes as credit delinquency and real estate speculation and the recent delayed recovery of the economy. They also raise worry about the contraction of the Korean economy, caused by the rapid rise of the Chinese economy and the slumped growth of Korea's mainstay industries.
However, foreign experts speak highly of the Korean economy, citing such factors as Korea's ranking fourth in foreign currency holdings in the world, stable export growth, stable management such macroeconomic indices such interest rates and prices as well as Korea's mainstay industries?leading roles.
In this vein, the government held the Industry Innovation Forum last September 6 and established the 2015 Industry Development Vision and Strategies, designed to share a precise assessment of the Korean economy by foreign and Korean experts and work out strategies for the development of industries in the next 10 years by analyzing challenges and opportunities of the economy.
The vision and strategies calls for, among others, raising Korea's potential growth rate by 1 percentage point. The proposal was based on a projection that the 4 percent range of potential growth rate could cause the economy to fall behind in the global ranking of GDP and fall into a "per capita GDP trap" of the $10,000 to $20,000 level, a far cry from joining the ranks of advanced countries.
If Korea seizes opportunities from the circumstances surrounding its industries and implement seven global division of labor strategies based on the economic development stage of each country ― advanced, developing and underdeveloped, the Korean economy could join the ranks of the global top 10 economies in terms of the scale with the goal of raising the per capita GDP to the $35,000 advanced country level and contributing to complementing and supplementing deficiencies facing with each country's industries as a 'Global Industry Integrator.' "To this end, companies have to create new markets through innovative and creative activities bringing about changes, while the government needs to help companies make innovative efforts by creating an environment conducive to sustainable industrial development.
Q: Will you comment on the global economy and CEO's attitude?
A: The world is undergoing a swirl of changes: globalization, development of such new technologies as IT and NT, the effects of energy and environment woes, a succession of FTAs, the rapid rise of China and India, and crude oil hikes. Amid these changes, Korean companies are facing three barriers they need to overcome for their survival ― technology, production and marketing. Analyzing many huddles SMEs complained to me during my visits to a company every day while serving as the chief of the Gyeonggi Small and Medium Business Administration, I devised the "TPM Theory."You can say that technology means a mountain at an altitude of 1,000 meter; production is a 2,000 meter-high one; and marketing, a 3,000 meter-high one. Under the global economy, corporations have to scale three mountains to reach the pinnacle of success.
Nine out of every 10 startup businessmen could surmount the technology mountain. Once they pass the first stage, they would face ahead a mountain with an altitude twice higher than the initial one ― production of finished products. If they want to scale the second mountain, they have to go through such things as designation of a factory site, plant construction, machinery purchase, manpower, raw material supplies and design.
To climb up the second mountain, businessmen face such difficulties as money, government restrictions and environmental issues that need to be addressed. My surveys indicate that three or four out of every 10 pass through the second stage, the thorniest one in which many firms go their belly up or collapse.
Even if they scale the second mountain, the last hurdle ― a 3,000 meter-high mountains ― will wait before they are on their feet. The difficulties businessmen experience in the course of scaling the third mountain include inflexibility of existing transactions, conservative attitudes, lower recognition and lower reliability. Startup businessmen need to draw up marketing strategies on top of technology and production.
Behind the most important things they do to surmount all the three mountains are CEOs'management philosophy and attitude. First, CEOs needs to have an information-oriented mindset by making use of the Internet part of their daily life to obtain information any time and any place. Secondly, they have to exert themselves to obtain knowledge-based management know-how while trying to meet consumes and clients. In particular, CEOs are required to go on overseas business trips to get well-informed and explore foreign markets. Thirdly, they need to manage time thoroughly. Many SMEs are found to divide time in technology, production and marketing areas in a ratio of 1:1:4, considered to be appropriate. In particular, CEOs have to devote more effort and time to marketing activities. Lastly, CEOs have to share their visions and goals with employees through corporate mottos as the former's activities and styles are conveyed to their subordinates, and they have to take the initiative and an example so that the latter can work with a master's sprit. nw

Heo Beom-do, deputy minister of the Ministry of Commerce, Industry and Energy