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Oil prices have skyrocketed beyond belief. Soaring diesel prices have brought worries everywhere. Wouldn¡¯t it be nice if our country, too, produced oil, freeing us from oil price worries and ensuring a more comfortable life for Koreans?
But we need only to remember that oil producer Indonesia recently saw violent protests against an oil price raise a little while ago to be brought up short in our reveries. Oil production alone doesn't solve everything. Indonesia, though an oil producer, imports all oil products because it has no refineries.
Nor do the people of Venezuela, a typical oil producer in Latin America, look too happy. Despite massive oil exports, the number of businesses dropped from 1,200 to 600-odd in the past five years, due perhaps to poor governance. The same goes for the Middle East. Neither Saudi Arabia nor Iraq, two major oil producers, are all that well off. Instead, it is the people of the United Arab Emirates who have the most money: the UAE produces little oil, but Dubai has attracted many global corporations.
Abundant natural resources don't necessarily guarantee high living standards: it is how many good businesses producing added value a country has that determines the living standards of its people. Thus our hope of buffering the current third oil crisis lies in our businesses.
Let's recall the first and second oil crises in 1973 and 1979: these were much more serious than the current one. Our economy looked likely to go belly-up right away and the consumers were stunned when oil prices doubled overnight. Ironically, however, the Korean economy grew and businesses became strong under the oil shocks.
Confronting the first oil crisis, Korean construction companies rushed to the Middle East, where they earned petrodollars in competition with the world's leading corporations. The money they earned was invested in the country to boost the economy. With over 10 percent annual growth, Korea achieved the cherished target of US$1,000 in per capita income and $10 billion in exports.
During the second oil crisis, the Korean economy, coupled with the political upheaval in wake of the assassination of president Park Chung-hee on Oct. 26, 1979 threatened to retreat into negative growth. But businesses, armed with strong leadership and a fighting spirit, saved the economy. Leading Korean corporation like Samsung, Hyundai, SK, LG and POSCO made concentrated investments in high added value industries and maintained the growth trend under an export-oriented policy. They proved in effect that a well-run business is worth more than tens of millions of barrels in oil deposits.
The example of the Philippines shows what can happen to a country that fails to develop its businesses. In the 1960s we envied and benchmarked the Philippines. Filipino engineers built a number of buildings in Seoul that our own engineers couldn't even dream of. They built the dome of the 7,000-seat Jangchung Gymnasium in 1963 and the U.S. Embassy building and the Ministry of Culture, Sports and Tourism in front of Gwanghamun Gate. Now Filipino graduates work as migrant domestic staff and construction workers around the globe. The biggest business in the Philippines is a brewery.
Dubai is the opposite of the Philippines. It is blessed with strong leadership and an education system supplying excellent talent and entrepreneurship. Global businesses are rushing to Dubai because of this.
And Korea stands at a crossroads: to follow Dubai or the Philippines? If we can use the current oil crisis as an opportunity to improve our competitiveness as we did during the first and second oil crises, we may be able to emulate Dubai. If we move to a business structure that produces higher added value, we have nothing to fear of high oil prices. It goes without saying that we need a genuinely business-friendly spirit from the political establishment to meet that challenge.
This column was contributed by Kim Young-soo from the Chosun Ilbo's Business News Desk.
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