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3. The Republic of Korea

Preamble
History
Development policies and strategies from the 1960s to the 1980s
The plans
Impact on the agricultural and industrial sectors
Science and technology in korea before the 1960s
The role of science and technology in recent development
Science and technology and the exogenous environment
Education and training
Research and development
Reassessment of the policy and strategy
Achievements in industrial development
The electronics industry as a case-study
Self-reliance targets at each stage
Problems and issues
Future plan for self-reliance of science and technology
The long-term goals and strategy of national development
Role of science and technology for future development
Long-term goal of S&T development
Summing-up and regional cooperation
Regional cooperation
Bibliography

Preamble

Self-reliance in science and technology (S&T) is defined here as the potential capacity to innovate and adapt either existing or new technologies. This definition assumes that a country has technology demands which vary according to its economic and social condition. The technology that is needed can be either obtained domestically or imported. In the latter case, the technology is bought because it is cheaper to import it than to generate it in the local environment. This also implies that a given society has the potential locally to obtain previously imported technology, at a production cost not very much higher than the import price, if importing turns out to be impossible.

A society pursuing self-reliance in S&T would also normally trade technologies with other societies, and may in fact have a trade deficit. The society maintains the deficit and begins to provide itself with the technology it needs.

The S&T in focus here includes not only technology but also scientific knowledge and know-how. In other words, self-reliance aims at achieving self-sufficiency across the whole spectrum, ranging from basic scientific knowledge, which is easily available from professional journals, to on-the-spot application methods that are imported if needed for use in a short span of time.

This definition of self-reliance in S&T assumes that developed economies are close to being self-reliant, while developing economies are not. But among developing economies, the degree of self-insufficiency may vary depending on the condition of the particular economy. A rapidly growing economy will have a lower degree of self-reliance than a stagnating economy, not because its supply capacity is limited, but because its demands expand faster than the available supply.

The acquisition of technology can be divided into four different stages as follows: (1) operation, maintenance, and repair; (2) imitation and modification of foreign technology; (3) design; and (4) mass manufacturing based on independent design.

The discussions below on the Korean experiences assume the above background of S&T self-reliance.

History

Korea's written history, stretching back over 4,000 years, has been influenced by Buddhism and Confucianism. Its "closed door" policy towards the Western world was abandoned in 1867 under pressure from Japan and other countries. Korea was now obliged to allow access to Western trade and technology. Further, starting in 1910, Korea was occupied by Japan for 35 years.

Japanese rule significantly influenced Korea She suffered the consequential misfortunes of economic dependence and cultural repression, although the customs and structure of society were not deeply affected. Japanese influence was most evident in the administrative and legal fields. During this period, a substantial inflow of Japanese capital and administrators changed Korea's economic structure, particularly through the introduction of new agricultural practices and the development of a fairly significant industrial base. However, the potential impact of the Japanese was limited by the restrictions placed on Korean participation in economic and political planning and management.

Korea regained her independence in 1945, but was partitioned into two states along the 38th Parallel. This had far-reaching consequences. The division destroyed an interdependent economy, giving the South less than half the land, about three-fifths of the population, most of the agriculture, and very little of the industrial capacity of undivided Korea.

With the establishment of the Republic of Korea in 1948 in the South, some economic progress was made in the first two years of the new republic. The most significant development was the land reform programme, which redistributed about three-fourths of the cultivatable land and benefited over half the rural households.

Soon afterwards, the Korean War (1950-1953) devastated almost the entire country: large sections of the economy were destroyed and a quarter of the population became refugees. War deaths alone were estimated at over 3 million for both sides.

With financial assistance, largely from the US and the UN, the process of reconstruction of the ruined economy was undertaken after the war, and the foundations of the industrial sector were laid. During the next few decades, the economy notched a respectable rate of growth, mainly by the expansion of industry.

Development policies and strategies from the 1960s to the 1980s

Under Japanese domination, Korea was mainly an agricultural economy, exporting rice and importing manufactured goods. Since its liberation from Japanese occupation, the Korean economy developed in three phases: periods of economic instability and destruction from 1953 to 1954; reconstruction and expansion of the economy from 1954 to 1961; and accelerated economic growth after 1962.

During the reconstruction period, import substitution of consumer durables was attempted by guaranteeing a secure, though limited, market. Production was also expanded continuously throughout this period.

The foreign exchange required for industrialization during this period was limited. This was obtained through the export of agricultural goods and other raw materials, and partly through limited transfers from abroad. Because of this foreign exchange shortage, the Republic of Korea shifted, from the 1960s on, to an export-oriented growth strategy, exporting labour-intensive manufactured products.

Significant development and increases in real per capita GNP were seen only after the first Five-Year Economic Development Plan in 1962. From 1962 to 1984, real GNP grew at an annual rate of 8.2 per cent- the result of the adoption of the export-oriented industrialization strategy - and was much higher than the figure of 4.3 for the period 1954-1961. As the Korean economy became productive, foreign capital entered the country voluntarily, in the form of both loans and direct investment. This not only contributed to high growth rates, but also resulted in a high external debt.

Soon, the export of labour-intensive products reached its limits, as labour costs rose and the labour surplus disappeared. The economy now had to shift to other types of manufacturing with different comparative advantages. One was the import substitution of capital goods, which until then were imported.

This shift was not easy, as the technologies in capital goods manufacturing were much more sophisticated, and, in contrast to labour intensive manufacturing, it was hard to attain scale production. A compromise was the choice of a limited range of capital goods that were relatively labour-intensive, as in the machinery industry, construction equipment, and shipbuilding. However, even here, the labour required was of a more skilled character. In pursuing this strategy of skilled-labour intensive manufacturing, the Republic of Korea faced shortcomings in both technologies and skilled labour.

To overcome these difficulties, the country now began to import and then adapt foreign technology whilst simultaneously enhancing its indigenous technological capability. In this difficult task it was broadly successful, although there were partial failures, as in the fields of precision machine tools and heavy electrical equipment.

The plans

One of the main development strategies and aims of the first Five-Year Plan (1962-1966) had been the formation of the social overhead capital for industrial development, as in electrical power generation and transportation, and the production of important industrial goods that support industrial development. Another main aim was the building of light consumer goods industries, principally the synthetic textile industry for both import substitution and exports.

The second Plan (1967-1971) continued and accelerated this thrust. Strategically important high-quality labour-intensive industries, such as electronic consumer goods and synthetic textiles, were selected for exports. During this Plan period, the foundation was also laid for heavy and chemical industries, with an emphasis on machinery, shipbuilding, electronics, iron and steel, non-ferrous metals, and petro-chemicals. The government also initiated the systemization of industries, the building of industrial complexes, and the cultivation of technical manpower.

The third Plan (1972-1976) saw a significant change in the Republic of Korea's industrial structure. Heavy and chemical industries grew rapidly, while the modernization and balancing of the industrial structure was promoted, indicating a new growth stage. The export of manufactured goods from these industries increased and new industrial expansion also occurred through the establishment of industries in various regions.

During the fourth Plan (1977-1981), a further diversification of the industrial sector was carried out, and technology-intensive industries such as machinery, electronics, and specialty chemicals were developed. The fourth Plan also expanded the export of production materials and capital goods. A long-term development strategy was formulated to promote technology and knowledge-intensive industries and to achieve the high-level industrialization characteristic of an industrially advanced nation.

Table 1. Performance of Five-Year Development Plans

Source: Economic Planning Board (EPB), Major Statistics of Korean Economy.
a. Figures are from the revised plan.

The main objective of the fifth Plan (1982-1986) was to solve the problems caused by the rapid economic growth that had occurred since the 1960s, as well as to continue economic growth. Table 1 shows the performance of the different Five-Year Development Plans.

Impact on the agricultural and industrial sectors

In its development, the Korean economy showed a disparity between agricultural and industrial growth. This had several causes, among them the changes in the structure of foreign demand, the changes in domestic demand as per capita income rose, the policies that favoured industrialization for export, the uneven expansion of factor inputs, the unequal increases in productivity between the sectors, the different rates of adoption of new technologies, and the fact that the industrial sector received priority in the government's economic plans.

There was a wide disparity between agricultural and industrial growth of total output as well as output per worker. Table 2 shows the employment and output per worker in both sectors during the 1962 - 1984 period. The growth of output per worker has been substantial, for two reasons. One is intersectoral, a result of the changes in the distribution of employment as workers shifted to sectors where output per worker was high. The other is intrasectoral, a result of increasing output per worker in any given sector. The output per worker in the agricultural sector was high; yet the disparity, as a ratio, has remained roughly unchanged. During this period the distribution of employment shifted substantially from the agricultural to the industrial sector.

Table 2. Sectoral employment and output per worker

Sources: GNP: Bank of Korea (BOK). Economic Statistics Yearbook, 1985; employment: EPB Annual Reports on the Economically Active Population, 1985.

The heavy concentration of industry in large cities and industrial complexes probably helped the export effort, but also resulted in a rural-urban income disparity. Since the early 1970s, there has been an attack on this unbalanced regional growth. One important objective of new policies has been to create more industrial jobs in the rural areas and thus expand off-farm employment opportunities.

Science and technology in korea before the 1960s

The introduction of Western culture and technology to Korea began around 1880. Until 1910, the introduction of modern technology was dominated by Japan and the Western powers. Some technologies in small arms, explosives, agriculture, paper, mining, printing, leather goods, communications, and railroads were introduced from Japan, the US, Germany, and Russia. Electricity was introduced from the US in 1898. The first scientific institution was the Industrial Research Institute, founded in 1883.

Under their rule, the Japanese introduced, between 1910 and 1945, Western technology on a large scale. During this period hydroelectric power, fertilizers, cement, textiles, and steel industries developed, along with a general consumer goods industry. But the development of industry was determined by the Japanese strategy for controlling the Far East and preparing for the Second World War, with a main emphasis on mining and transportation.

The production of crude and semi-processed agricultural and mineral products was intended for export to Japan and its other colonies. Manufacturing during the colonial period also had a heavy Japanese imprint with regard to the capital equipment, entrepreneurs, engineers, and technicians involved, and even the labour, particularly skilled labour.

Steady progress was made during this time in the education system. The first modern university was established under Japanese rule in 1924, while the first college of engineering was set up in 1938. How ever, a strict ratio between Korean and Japanese students severely restricted Korean participation. By 1945, only 800 Koreans had graduated, of which 300 were from the Medical School and about 40 from the School of Science and Engineering. After independence, education, including technical and higher education, was sharply accelerated. During this colonial period, Koreans acquired mostly on-the-job knowledge of the operation of modern industries.

Industrial development during the Japanese period, it should be noted, was concentrated in the North. So, when Korea was divided into North and South after the Second World War, there was almost no heavy industry in South Korea.

After the end of Japanese colonialism, the relationship with the United States served to augment Korean resources, both directly and indirectly, especially in the formation of human capital. American aid directly contributed to the rapid expansion of education, which by 1960 led to universal primary education and nearly universal adult literacy, while contributing to increasingly higher enrolment rates at all grade levels above the primary. Aid also financed the overseas education and training of thousands of Koreans.

An indirect contribution, because of universal military service, was made by American military advisers. The Korean military learnt modern concepts and techniques of management and organization. For the labour force, military service was an important source of skill formation, similar to training in modern industry. An important channel of industrial technology was technical advisers.

The role of science and technology in recent development

Beginning with the first Five-Year Plan, the Korean government enthusiastically promoted the development of S&T to support socioeconomic growth. During the 1960s, Korea was completely dependent on advanced countries for production facilities and technology. The choice of the appropriate technology to adopt was a very important task for economic development. The choice of strategic industries for economic development was affected by the possibility of success in technological adaptation.

A primary emphasis was put on the import of advanced technologies for solving problems that arose in import-substitution industries, such as the energy, fertilizer, and cement industries, and in the export-oriented industries that were now being promoted. In 1960, a law was enacted promoting the inducement of foreign capital and this hastened the introduction of foreign technology and capital goods. But the accelerated importation decreased foreign exchange holdings and resulted in many unfavourable contracts.

Consequently, the government turned to a passive but stable policy on the import of foreign capital and technology. As a result, the number of technology imports decreased from seven in 1962-1963 to two in 1964, rising slightly to four in 1965. The major sources for technology imports were the United States and the Federal Republic of Germany.

In 1965, a Korea-Japan agreement led to resumed diplomatic relationships, and Korea obtained the right to demand compensation from Japan. As a result there was a significant ten-year inflow of Japanese capital, starting in 1966, which made Japan the major source of technology. The number of technology imports now increased sharply.

The primary emphasis of S&T policy during the 1970s was the adaptation and improvement of imported technologies and the establishment of private research and development (R&D) systems. During this period, joint investment of domestic and foreign capital was promoted, with a consideration for its spread effect on domestic technology. Foreign interests had made investments since 1962 and these had been favoured by the Korean government. But direct foreign investment turned out to be ineffective in the domestic dissemination of foreign technology. Therefore, the government enacted a law for foreign capital inducement which added some limitations on the terms and conditions for direct foreign investment while encouraging the import of technology.

The development of heavy and chemical industries in the 1970s rapidly increased the demand for advanced foreign technology. The Republic of Korea's foreign exchange holdings had increased remarkably from the mid-1970s, and the government realized that, for further economic growth, it was necessary to transfer its leadership in economic and technological development to industries. These factors, along with an international trend in liberalization of trade and foreign investment, forced the Korean government, from 1978, gradually to liberalize technology and capital imports.

In the 1980s, the country took another leap forward towards the goal of being an advanced industrialized country. In the achievement of this goal, S&T played an active part, leading, rather than supporting, economic growth. Considerable support was provided for graduate education, basic as well as applied sciences, and university research in basic science.

Science and technology and the exogenous environment

Because the import of foreign technologies requires foreign exchange, it has been controlled by the law for foreign capital inducement. Before the revision of 1978, every contract for technology imports was reviewed by the Minister of the Economic Planning Board. The operational decrees of the foreign capital inducement law, revised in 1978, classified technology imports under three categories, enabling some imports to be exempted from the review.

To be classified in the review-free category, the contract would have to be short-term and worth only a small amount and the imported technology would have to be deemed necessary for any one of the following industries: shipbuilding, machines, electronics, electrics, metals, chemicals, or textiles. Technology imports in other categories still had to be reviewed. Long-term contracts or ones involving large amounts and/or the import of technologies necessary for the nuclear, computer, or defence industries belonged to this latter category. Technology imports not included in either of these two categories were exempted from review only when no objections were raised within 20 days by the ministry from which the Minister of the Economic Planning Board asked an opinion.

More revisions were later made in the direction of liberalizing technology imports, and finally, in June 1984, individual review was completely abolished. As a result, technology imports nearly doubled, the amount spent annually increasing from $120 million in 1983 to $213 million in 1984.

Education and training

In the 1960s, the education and training of technology manpower had been led by the government. The light industries of this period required only a supply of enough technicians and some college-graduate engineers to be able to operate and maintain industrial facilities. Manpower policy during the 1960s, therefore, concentrated on training a sufficient number of technicians.

The industrial demand for technicians rapidly increased after the first Five-Year Plan, but school education could satisfy only 30 per cent of this demand. The government, therefore, enacted in 1967 a law on vocational education in order to encourage or force industries either to train the necessary technicians directly or to finance their training at vocational schools. In the same year, the government also enacted a law for job stabilization, in order to reduce frictional unemployment and utilize technical manpower efficiently.

In the 1970s, high-level technologies that were imported required a good base of R&D personnel for their assimilation. Hence, graduate education in science and engineering was actively promoted during the 1970s.

The establishment of the Korea Advanced Institute of Science (KAIS) as a postgraduate school in applied science and engineering was a turning point. KAIS led the nationwide upgrading of graduate education and contributed to the establishment of a mass supply system of high-quality scientists and engineers. To supply sufficient numbers of college-graduate engineers to the heavy and chemical industries, the government began in 1973 to foster specified departments in some universities. Such departments and universities were appointed with consideration to the industrial needs of their regions.

From the mid-1970s, it was widely understood that, for further economic growth, the Republic of Korea would have to compete with developed countries in high-technology industries. The government realized the importance of basic science as well as applied science in this competition. As a result, the Korea Science and Engineering Foundation was established in 1977, in order to support researchers in basic science.

Fostering high-quality scientists and performing basic research became urgent tasks for the new higher technology requirements. Increasing the quantity and quality of graduate education was one effort in this direction. In addition, the government operated overseas study, training, and research programmes in S&T. These programmes consist of degree, training, post-doctoral, and research courses. Since 1982, the Korea Advanced Institute of Science and Technology has been offering Master's and Ph.D. courses for researchers in government-sponsored research institutes.

Four science high schools were founded in 1984 and the Korea Institute of Technology was established in 1985 to supply scientists comparable with first-class scientists in advanced countries. The foundation of these schools is also a long-term strategy in the competition with developed countries in high-technology industries, which is essential for future economic growth.

To encourage basic research, the Ministry of Education has since 1979 supported the establishment and financing of basic research institutes in universities. But universities spent less than 15 per cent of total R&D expenditures during the 1980-1983 period, although they had more than 40 per cent of total researchers. This may indicate that basic research has not yet been sufficiently supported. According to a recent survey, the proportion of basic research expenditure to total research and development expenditures since 1982 has been around 17 per cent. To foster basic research, this proportion would have to increase by up to at least 20 per cent and the increase in the basic research budget should be distributed to universities more proportionately.

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