Overcoming Crisis and Creating New Growth Engines Through Proactive Industrial Technology, R&D Policies

"A decade in Korea means a millennium in the world." This saying underscores the phenomenal pace of economic growth and technology development in Korea over the past half century. In a word, a nation based on plywood, footwear and wig exports has transformed itself into one of the world's top sources of semiconductors, automobiles and handsets.
Korea's national economy and its industries remained underdeveloped until the 1960s. But in the 1970s, the nation began a period of explosive economic growth thanks to an export-oriented national development strategy. However, at that time Korea simply imported capital goods, technology and capital from advanced countries and assembled the finished products for foreign markets.
It was only in the 1980s that Korea began to show an interest in technology, which has since become the driving force behind its national competitiveness. In 1987, the Korean government took an active role in supporting high-tech R&D, and in the 1990s the private sector shifted its focus in earnest to technology innovation. During this time, technology accounted for approximately 80 percent of total national R&D outlays.
Now, in the 21st century, the paradigm is shifting. Korea is departing from its former "catch-up" strategy and focusing on new, creative approaches to technology innovation as part of its transition to a knowledge-based economy. Already the Korean IT, automobile and shipbuilding industries have achieved world-class levels of technology. Past growth strategies relied on the quantitative input of labor and capital, but the economy of the future will stress technological innovation and "green growth." Look at one of the representative technological changes we have seen in recent years: the convergence of IT-based industries with traditional industries. Biotechnology and nanotechnology are expected to be among the prime movers of the nation. Individual companies are recognizing that sources of added value, such as technological power, intellectual property and brand power, are becoming more important than material factors such as production equipment and land.
The same holds true for nations. To respond effectively to environmental challenges and secure long-term national competitiveness, we need to change the perception that capital and labor are the main sources of wealth. In the future, knowledge, information and technology will be far more significant assets. Government organizations as well as the business and research communities should therefore have a broad, open innovation regime in place.
Korea's recent developments in technology innovation indicate that we have reached the same level as advanced countries in terms of quantity, but are still a far cry from where we need to be in terms of quality. Korea pours about 3.5 percent of its GDP into R&D investment to nurture its high-tech industries. We also fare well with regard to number of research institutions, published papers, patents, and college graduates with engineering degrees. Yet the level of technology in Korea's high-tech and parts and materials industries is only about two-thirds of that seen in advanced countries. In addition, Korea faces obstacles such as unbalanced R&D investment between large companies and SMEs, a weak foundation of knowledge based service, and the need to extend research outcomes. The beginning of this year, the government established a five-year industrial technology innovation plan to reinvigorate the economy and overcome the economic crisis. The plan sets forth a holistic vision that is creative, market driven and performance oriented, with a focus on open innovation.
Korea needs to brace for the realities of a new global economy in the post-crisis era. The plan, therefore, is intended not only to induce the private sector to invest actively in R&D, but also to make more strategic distribution of national R&D investment that strengthen its R&D outlay on the basis of market- oriented planning and management.
The government plans to expand its tax incentives for R&D investment and its support for the exploration of new markets. We will promote national competitiveness by securing core and source technologies in 14 highly promising areas, where investment will be concentrated; these encompass Korea's key industries, new industries, the IT industry and the green energy industry. R&D institutions will be consolidated or eliminated, electronic contracts will be introduced to simplify financing procedures, and R&D projects will be evaluated according to stricter standards.
Under this plan, large companies, SMEs, venture firms, universities and research institutions will form part of an industrial technology innovation ecosystem; together they will create a virtuous cycle of value chains. Industry, academia and research entities will reinforce their capabilities while ramping up international and domestic open innovation and building a stronger technology infrastructure. In particular, it is necessary to devise a detailed plan to promote the technology transfer and diffusion, an essential phase of the whole R&D cycle. Technology financing systems―for example, a new growth engine investment fund and a private-sector joint corporate venture capital―will vitalize R&D efforts to ensure that these goals are met.
The government expects its proactive policy measures to enhance Korea's growth potential by attracting forward-looking investments targeting future markets for innovative industrial technologies. In particular, the recent expansion of public support for R&D and incentives for private-sector R&D investment will give Korea a competitive edge through more thorough exploration of its new growth engines.
Korea succeeded in overcoming the Asian financial crisis by adopting proactive policies to invigorate the IT industry. In line with the changing global paradigm of the future, we expect the nation to withstand the current economic crisis and evolve into an advanced country through a virtuous cycle of investment in green growth and knowledge-based service industries. nw

By Lee Chang-han, Dir.- Gen. for Technology Policy at the Ministry of Knowledge Economy.