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The primacy of Seoul and the capital region

Concentrated growth: A recent trend

Population

In spite of government efforts at decentralization in Seoul and the Capital region, its population has quadrupled during the past three decades. The population growth rate in Seoul and the Capital region peaked during the period 1966-1970 at a rate of 9.4 per cent in Seoul and 6.1 per cent in the Capital region per annum. Population growth in Seoul declined to 2 per cent in the period 1985-1990, while that in Incheon and Kyunggi province increased at a rate of 5.2 per cent. During the period 1970-1979, about 3 million rural immigrants moved into Seoul. But in the period 1980-1989 this fell to 2.3 million. Also net out-migration from Seoul to Incheon and Kyunggi province increased by 120,000 (see fig. 5.4).

Fig. 5.3 Population growth by region, 1960-1990 (Source: Economic Planning Board, Population and Housing Census,1960-1990)

Table 5.4 Population concentration in the Capital region, 1985 and 1990 ('000 and %)

Source: Economic Planning Board, Population and Housing Census, 1985-1990.

Fig. 5.4 Migration to and from Seoul, 1970-1979 and 1980-1989 (Source: Economic Planning Board, Annual Report on the Internal Migration Statistics,1970, 1979, 1980, and 1989)

Manufacturing and services

With rising domestic labour costs and competition from China and the ASEAN nations, the South Korean manufacturing sector has been readjusting its structure from labour-intensive manufacturing to assembly-type production activities such as machine assembly, machinery, electronic equipment, and furniture. The share of employment in the labour-intensive sector (e.g. textiles, apparel, footwear, and rubber products) decreased from 38.8 per cent in 1980 to 29.9 per cent in 1990, while the share of assembly products increased from 33.1 per cent to 45.2 per cent during the same period (table 5.5). In the Capital region as a whole, the pattern of industrial adjustment is not much different from the national trend. However, in Seoul, the share of labour-intensive manufacturing employment is still relatively high.

Table 5.5 Distribution of workers by industry, 1980-1990 (%)

Source: Ministry of Labour, Survey Report on Establishment Labour Conditions, 1991.

With strict controls on industrial location since 1964, the share of secondary industry in the Capital region and Seoul decreased during the period 1980-1990. On the other hand, service industries grew much faster than other sectors of the economy. At the national level, the share of tertiary industry employment in establishments with more than five employees increased from 35.2 per cent in 1980 to 40.1 per cent in 1990. In the Capital region, the share increased from 38.1 per cent to 41.8 per cent, while in Seoul the increase was from 48.7 to 58.1 per cent. Meanwhile, the share of secondary industry decreased from 61.3 to 56.5 per cent in the Capital region and from 50.7 to 41.6 per cent in Seoul (Park, 1992). In 1990, 44.7 per cent of the nation's service industry employment was concentrated in Seoul and 10.3 per cent in Kyunggi province.

Producer services

The growth of producer services, including wholesale, finance, insurance, and real estate, was very conspicuous in the South Korean economy during the 1980s. At the national level, the employment share of producer services increased from 20.7 per cent in 1980 to 30.7 per cent of the service industry as a whole in 1986. In the Capital region, the share of producer services increased more rapidly than the national average. During the period 1981-1986, producer services in the Capital region (including Seoul, Incheon, and Kyunggi province) accounted for 49.7 per cent of the national total. In business services, the region's share was 62.1 per cent of the national total (Lee, 1990). Producer services are concentrated in Seoul, with 59.8 per cent of the nation's employment, with an additional 8.2 per cent in Kyunggi province, which made producer services in the Capital region 68 per cent of the national total in 1990. The rapid increase in producer services is mainly attributable to the growth of business services and wholesale in Seoul and of finance and business services in Incheon.

High-tech and R&D

The number of high-tech industries grew at an annual rate of 9.5 per cent, 1.4 per cent faster than the manufacturing sector as a whole during the period 1980-1984. According to one projection, high-tech industry is expected to grow at the rate of 10 per cent per annum until the year 2000 in South Korea (KRIHS, 1986). The government was aiming to raise the share of R&D investment to 2.5 per cent of GNP by 1991. The semi-conductor, computer, fine ceramics, and auto industries are expected to be the leading sectors in high-tech in the coming years.

The high-tech industries, classified by R&D investment and technological content, have concentrated in Seoul and its satellite cities. Over 60 per cent of semi-conductors are produced in Seoul alone and more than 50 per cent of all high-tech items are produced in the Capital region.

The concentration of high-tech industries in Seoul and the Capital region is paralleled by a concentration of higher education institutions and research institutes operated by manufacturing industries. According to an industrial survey undertaken by the Korea Research Institute for Human Settlements, proximity to a research institution was singled out as one of the more important locational factors for high-tech industry (KRIHS, 1986). The other important locational factors for high-tech industries are proximity to Seoul and existing agglomerations (see table 5.6). It is noteworthy that six locational factors chosen out of 20 factors point to the irrefutable attraction of the Seoul area for high-tech industries. In 1989, more than two-thirds of industry's research institutions were located in the Capital region and one-quarter in Seoul (see table 5.7).

Including 22 research institutions located in Pusan in 1989, 136 research institutions were located in the South-east region. Most of those were affiliated to manufacturing establishments located in Taegu and the neighbouring city of Pusan.

Table 5.6 Major locational factors for high-tech industries

Source: KRIHS (1986).

Table 5.7 The regional distribution of research institutes, 1989

Source: Industrial Research Institute Survey, Data 49, 87-3.

Centrality and global attributes

The centrality of Seoul

Being the capital city for over 500 years since the Yi Dynasty, Seoul has been the nation's centre of politics and culture. The city also has 24 per cent of nation's population, abundant economic opportunities, and quality education. About 41 per cent of nation's population, 47 per cent of manufacturing employees, and 44 per cent of the tangible capital assets of the nation are centred in the Capital region. Above all, Seoul and the Capital region attract skilled workers and professionals from the rest of the country. About 61 per cent of managerial personnel in business and 96 per cent of the top 50 corporations' headquarters are located in Seoul. Seoul has been taking a commanding role in the nation's planning, and in managing and controlling business activities. Seoul is also the centre of academic and industrial research. About 64 per cent of research scientists are associated with private and public research institutions in Seoul. The centrality of Seoul is depicted in figure 5.5.

International exposure

Seoul attracts the majority of international organizations such as communications media, banks, investment consultants, and diplomatic corps (see table 5.8). In 1987, all foreign embassies were in Seoul except one in Pusan, and 15 out of 22 foreign consulates were also located in Seoul. All of 7 stock brokerage offices and 66 foreign bank offices were located in Seoul. All 25 of the offices of foreign media and 8 broadcasting networks were in Seoul. It is no surprise that in 1988, the year of the Seoul Olympics, 92 per cent of all international cultural events and exhibitions were held in Seoul.

In 1985, about 29,000 foreign citizens were resident in South Korea, nearly half of them in Seoul (see table 5.9). The share of foreigners residing in the cities of the Capital region amounted to 54 per cent, including Incheon (6.9 per cent), Bucheon (0.5 per cent), and Sungnam (0.2 per cent). In particular, Seoul dominates the rest of the nation by holding 70.9 per cent of overseas-originated service industries. More specifically, 33 of 37 foreign financial institutions, 22 of 43 hotels, 76 of 114 trading companies, and 25 of 30 communications services were located in Seoul. The proportion of 1.4 foreign residents per 1,000 natives in Seoul was much lower than that of Tokyo (18 per 1,000).

Fig. 5.5 Indicators of the centrality of Seoul (Notes: (1) household excluded; (2) firms with over 5 workers; (3) science and engineering research institute and researchers; (4) science and engineering research institute and researchers; (5) top 50 firms by sales. Source: KRIHS, Basic Strategies for Balanced Development in the Age of Decentralization, 1990, p. 19)

FOREIGN DIRECT INVESTMENT. Currently, there are 3,170 cases of inward foreign direct investment (FDI) totalling US$7.0 billion in South Korea. As of the end of 1989, two-thirds of the cases were from Asian countries, amounting to US$3.8 billion, with Japan standing out (1,922 cases and US$3.5 billion). The United States was the second-largest investor next to Japan, with 717 cases totalling US$1.9 billion. West Germany, Hong Kong, and the United Kingdom were next in order.

About three-quarters of the FDIs are invested in the manufacturing sector. Although only 16.1 per cent of the FDIs in the manufacturing sector are located in Seoul, the satellite cities and suburbs of Seoul have 35.7 per cent of the entire inward FDI in the nation. Thus, 56.4 per cent of FDI projects in manufacturing are located in the Capital region. In terms of the value of FDI in manufacturing, Kyungnam province has the largest share (26.7 per cent), and Kyunggi and Jeonnam provinces are the next in order. In the service sector, however, Seoul has the dominant share in both the number of cases and the amount of investment, with 82.9 per cent and 90.9 per cent, respectively (see table 5.10).

Table 5.8 Foreign agencies in major cities, 1987 and 1990

Source: Y. H. Park, "Policy for Global Functions," mimeo, 1991.

Table 5.9 Foreign residents in South Korea, 1980 and 1985

Source: Economic Planning Board, Population and Housing Census, 1980, 1985.
a. Includes foreign citizens.

Table 5.10 Direct foreign investment (inbound) by region

Source: Department of Finance, Foreign Investment Data, 1989, reproduced with the permission of the government.

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