The global economic crisis was a chance for the Korean economy to demonstrate its resilience, but a closer look at the economic situation shows that this is no time for Seoul to rest on its laurels. In conjunction with the Samsung Economic Research Institute, the Chosun Ilbo diagnosed seven industries to map out a new strategy for the future of the Korean economy 10 or 20 years hence.
On Aug. 22, some 2,000 high-ranking Chinese regional bureaucrats and corporate executives led by Zhang Guobao, vice chairman of China's National Development and Reform Commission, gathered at a shipyard in Dalian to mark the start of construction of a drillship called the Dalian Pioneer. The reason for the huge turnout was that drillships are known in the industry as the highest value-added vessels.
From 2000 until the first half of this year, Korean shipyards had won all 47 of the global orders for drillships, but they have lost the top spots to their Chinese rivals in backlogged vessel orders, total orders and construction volume since 2009. Under these circumstances, Korea has taken comfort in maintaining the leading position in highest value-added vessels like drillships and LNG carriers, but that may change with the Dalian Pioneer.
In terms of solar energy, which is touted as a future growth engine, Chinese companies take the second, fourth, fifth and seventh place in a Deutsche Bank ranking of the world's top seven solar energy companies, but no Korean companies are on the list. China controls 50 percent of the world's solar energy industry, while Japanese businesses have already established themselves as the leaders of the global biotechnology industry.
"Due to the rise of China, the success formula that has kept the Korean manufacturing industry in the lead for decades no longer works," SERI said. Since World War II, Korea was the only one among underdeveloped country in the world to overtake advanced countries and either capture the top spots or emerge as a major player in the shipbuilding, memory chip, LCD, television, mobile phone and automobile industries. Japan, which ceded the top spots to Korea in memory chip, shipbuilding, LCD and TVs, evaluated the "Korean formula" as ability to invest heavily during slow economic times, make decisions quickly and target emerging markets aggressively.
Bok Deuk-kyu of SERI said, "This formula recently lost its effectiveness due to China." With the world's largest foreign exchange reserves and a huge domestic market of 1.3 billion people, China is investing heavily and indiscriminately. China overtook Korea in capital investment back in 1992 and beat Japan in 2006. It also overtook Korea in terms of research and development spending in 2001, with seven times the R&D human resources employed in Korea.
When it comes to green and bio industries, China is also way ahead of Korea. Last year, China invested US$34.6 billion into solar and wind energy projects, twice the amount of investment the U.S. made in those sectors. China recently announced a plan to invest W780 trillion (US$1=W1,131) in developing renewable energy sources by 2020. Korea, by contrast, even failed to make it onto an OECD list last year ranking 10 renewable energy and pharmaceuticals powerhouses. China ranked seventh in renewable energy and ninth in pharmaceuticals.
That means Korea has already fallen behind China in the race toward the future. "At this rate, China will lead the world in terms of green energy just as Korea did in the digital sector and Japan in analogue products decades ago," SERI said.