Transcript 슬라이드 1 - Sogang

Understanding the Korean Miracle
E. Young Song
Sogang University
Summer, 2011
Export-oriented growth
QA
unit labor requirement
Textile
Auto
Labor
1 => 0.5
1
200
PT/PA = 2
C’
200
Both exports and imports increase.
C
QT
200
2
Import Substitution - Big Switch
QA
unit labor requirement
Textile
Auto
Labor
1
1 => 0.3
200
PT/PA = 2
Exports A and imports T
C’
200
C
Why not promote T industry?
• T industry is stagnant.
• A has a more potential for
growth
QT
200
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V. HCI drives in the 1970s
•
Promoting heavy and chemical industries
Motives
– Industrial upgrading: from labor-intensive consumer goods to capitalintensive intermediated goods
– Developing defense industry
US withdrawal of armed forces in Asia under the Nixon and Carter Administration
– Self-sufficiency in key strategic industries
•
Industrial Targeting
Export promotion in 60s
– Targeting specific industries was rare.
– General promotion of internationally competitive labor-intensive industries
through low interest rates and favors in tariffs and exchange rates
– Could be regarded as a liberalistic development strategy.
HCI drives in 70s – stronger role of the government
– Explicit targeting of specific industries
– Driven by Park, Chung Hee himself and the HCI committee of the Blue
House
EPB and Ministries played a minor role.
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– The committee selected specific industries and designated one or two
companies for each selected industry.
– Companies, in some cases, reluctantly accepted the project under
government pressure.
– The government provided infra-structure and loan guarantees and the
private sector was responsible for business.
•
Targeted industries
Iron and Steel – POSCO and Park, Tae June
Shipbuilding – Hyundai Shipbuilding and Chung, Joo Young
Automobiles – Hyundai Motors and Chung, Joo Young
Petrochemicals and Electronics – LG and Koo, Ja Kyung
Electronics – Samsung and Lee, Byung Chul
•
Major Obstacles
1. Technological level
2. Financing
3. Size of the domestic market
Many economists, including the World Bank, thought that the HCI projects are
too early and too large for the development level of the Korean economy.
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•
Export Promotion or Import Substitution?
High tariffs on automobile and consumer electronics  import substitution
Ship-building industry for exports from the start  export promotion
Economies of scale
– To be internationally competitive, the plant capacity should be bigger than
the level that satisfies domestic demand.
– To survive without protection, the selected company should be able to
export in the near future.
– Companies were under pressure to be internationally competitive in the
medium run.
•
Targeted industries
Iron and Steel – POSCO and Park, Tae June
Shipbuilding – Hyundai Shipbuilding and Chung, Joo Young
Automobiles – Hyundai Motors and Chung, Joo Young
Petrochemicals and Electronics – LG and Koo, Ja Kyung
Electronics – Samsung and Lee, Byung Chul
•
Some projects were economic and downright failures
Changwon Industrial Estate and machinery industry
Okpo shipbuilding
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•
Differences from other Asian countries.
No OEM and no part and component manufacturing
Aims to build a complete industry and an international brand name.
Compare with Taiwan, Hong Kong and China.
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Evaluations
– Success
the only Asian country except Japan that is competitive in major capital and
knowledge intensive industries.
Created the precious leads in major industries that China will be hard to
catch up for a time being.
– premature
– Created major structural problems for the future Korean economy
excessive concentration of the market power
- suppresses the development of small and medium size enterprises.
excessive leverage
excessive dependency on a few major export items
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Source: Lim (2000)
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Birth of Chaebols
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Chaebols (財閥)
Chaebol literally means “wealth clique.”
Japanese Zaibatsu (or Keiretsu) vs. Korean Chaebol
Family-controlled industrial conglomerates
Samsung – Lee
Hyundai
LG
GS
SK
•
- Chung
- Koo
- Huh
- Choi
Diversification – controls a large number of unrelated business
Samsung – Amusement park, electronics, insurance, credit cards,
construction
Hyundai - automobile, ship-building, construction, securities, electronics
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Birth of Chaebols
•
Controls a network of companies with small holdings of equity
– Pyramid investment
firm A => firm B => firm C
– Circular investment
firm A => firm B => firm C
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Corporate Culture
Confucianism – family-like control and loyalty toward ownership
Japanese Influence – life-time employment and continuous improvement
American Influence – profits and stockholder capitalism
Challenges
Can be big and quick?
Cultural clash between younger and old generations
Under social pressure to be socially responsible.
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Advantages of Chaebols
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Shortage of entrepreneurial talents
•
Inefficient legal enforcements and low level of trust
– Integration saves transactions costs
•
Diversifying heavy risks in investment in heavy industries
– Large sunk costs
– Long gestation periods
“Without chaebols, would automobile, ship-building and semiconductor
industries have been possible in Korea?”
•
wasteful labor markets
– Evaluation of employees
– Intra-firm mobility of labor
•
Coping with informational problems in banking industries
– Mutual loan guarantees
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Delayed Reform
•
Park assassinated in 1979.
Chun takes power by a military coup in 1980.
A sharp recession following the second oil shock, political
instability and the results of over-investment in late 1970s
=> Korea on the verge of a major financial crisis
•
•
Chun adopt the stabilization package recommended by IMF
Tight monetary policy
Consolidating industries and chaebols
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•
Reformatory ideas
Of Chun’s technocrats
Korea outgrew the Korean Model of Development.
The economy became too complicated to be understood and
controlled by the government.
The market and the private sector should lead.
– Liberalizing the banking industry
Privatizing commercial banks
Interest rates chosen by banks
 Ministry of Finance keeps the lever by retaining the power to select
bank presidents
From State-owed to semi-public.
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– Pro-competition policy
New Fair Trade Law
 Without splitting Chaebols or opening up trade,
limited impact on competition structure
Government tries to regulate the behavior of Chaebols.
Bureaucratic control of the government remains.
Political resistance of vested interests
Chaebols and bureaucrats
Korea democratized in 1987
Chaebols form a new relationship with presidents and politicians
thorough (legal or illegal) campaign funds
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