2 Contents 2 Major Economic Indicators and Driving Force of Growth 1 13 Major Industrial Policies...

3

Contents

22Major Economic Indicators and Driving Force of GrowthMajor Economic Indicators and Driving Force of Growth11

1313Major Industrial Policies and AchievementsMajor Industrial Policies and Achievements22

2525Korea Innovative Capability in Science and TechnologyKorea Innovative Capability in Science and Technology33

3232Key Characteristics of Korean Innovation SystemKey Characteristics of Korean Innovation System44

3737Policy Lessons and Future DirectionsPolicy Lessons and Future Directions55

Major Economic Indicators and Major Economic Indicators and Driving Forces of GrowthDriving Forces of Growth

11

5

Korea’s Major Economic Indicators Current Situation

1960 1970 1980 1990 2000 2009

Population(1000) 25,012 32,241 38,124 42,869 47,008 48,747

GDP(US$, Billion) 2.0 8.1 63.8 263.7 511.8 832.5

Growth Rate of GDP(%)

1.2 8.8 -1.5 9.2 8.5 0.2

GDP per capita (US$) 79 254 1,645 6,147 10,841 17,074

Trade Balance(US$, Million)

-311 -1,149 -4,787 -4,828 11,786 40,469

Exports(US$, Million)

33 835 17,505 65,016 172,268 363,554

Imports(US$, Million)

344 1,984 22,292 69,844 160,481 323,085

6

Korea’s Economic Growth

< Trend of Korea’s Economic Growth >< Trend of Korea’s Economic Growth >

※ Source : The Bank of Korea

1971~801971~809.5%9.5%

High Growth High Growth PeriodPeriod

1981~901981~909.1%9.1%

High Growth High Growth PeriodPeriod

1991~20001991~20006.7%6.7%

2001~102001~104.3%4.3%

2011~20152011~20153%3%

Low Growth Low Growth PeriodPeriod

Potential Potential Growth RateGrowth Rate

Real Growth Real Growth RateRate

7

Growth Engine (1) : Export

2003 2004 2005 2006 2007 2008 2009

Economic Growth Rate

2.8 4.6 4.0 5.2 5.1 2.3 0.2

Export’s Contribution

Rate111.2 93.3 69.2 72.9 64.3 20.1 172.1

< Export’s Contribution Rate to Economic Growth >< Export’s Contribution Rate to Economic Growth >

(Rate : %)

8

Trade Trend Until 1980’s imports exceeded exports, but after 1990’s the situation reversed.

From 1990s, the products of heavy chemical industry exceeds those of light industry in the structure of exporting items.

※ Source : The Korea International Trade Association, The Korea National Statistical Office

Total Amount of Trade

Amount of Export

(A)

Amount of Import

(B)

B-A

Structure of Export Products(%)

Primary Industry

Light Industry

Heavy Chemical Industry

No. of Export

Countries

No. of Trading Items

1960 3 0.3(0.03) 3(0.3) -3 45.4 45.4 9.2 59 712

1970 2.8 8(0.3) 19(0.6) -11 17.5 67.9 12.8 122 1,504

1980 397 175(0.9) 222(1.1) -47 11.7 46.4 41.8 172 6,010

1990 1,348 650(1.9) 698(2.0) -48 4.9 38.5 56.6 197 7,062

2000 3,327 1,722(2.7) 1,604(2.4) 117 2.8 16.2 81.0 238 8,241

2007 7,283 3,714(2.7) 3,568(2.5) 146 1.6 6.9 91.5 227 8,641

9

Change of Major Export Item

< Change of the Five Export Items by Year >< Change of the Five Export Items by Year >

1970 1980 1990 1995 2000 2005 2009

1st Textiles(40.8%)

Textiles(28.8%)

Clothing(11.7%)

Semi-conductor(14.1%)



Ship(12.4%)

2nd Plywood(11.0%)

Electronics(11.4%)

Semi-conductors

(7.0%)

Automobile(6.7%)

Computer(8.5%)

Automobile(10.4%)

Semi-conductor

(8.5%)

3rd Wig(10.8%)

Iron & Steel(9.0%)

Footwear(6.6%)

Ship(4.5%)

Automobile(7.7%)

Mobile Phone(9.7%)

Mobile Phone (8.5%)

4th Iron Ore(5.9%)

Footwear(5.2%)

Media Equipment

(5.6%)

Artificial Fiber

(4.3%)

Petroleum Products (5.3%)

Ship(6.2%)

Display(7.0%)

5th Electronics(3.5%)

Ship(3.5%)

Ship(4.4%)

Media Equipment

(3,9%)

Ship(4,9%)

Petroleum Products (5.4%)

Automobile(7.0%)

Total 72.0% 57.9% 35.2% 33.6% 41.4% 42.2% 43.5%

10

Growth Engine (II) : Manufacturing Industry

Industry Growth Rate(2002~2007, Average)

Agriculture -1.1

Mining Industry -1.2

Manufac-turing

Industry

Manufacturing Industry 4.9

High Tech Industry 7.7

ICT Industry 5.3

Mid-High Technology Industry 3.3

Mid-low Technology Industry 1.5

Low Tech Industry -0.7

Electrics, Gas, Water Supply 2.4

Construction 2.4

Service Industry 4.0

Total 3.9

< Growth Rate of Real Value-Added by Industries (2000) >< Growth Rate of Real Value-Added by Industries (2000) >

※ Source : Korea Institute for Industrial Economics and Trade(2010)

11

Change of Industrial Structure

※ Source : Hwang, Yongsoo(2007), “Role and Performance of S&T Policy to Cope with Transitional Needs of Economic Development”, Symposium for the Forty Anniversary of S&T Administration in Korea, 2007. 10. 29, MOST & STPEI, Seoul

1960s1960s

Industry

for

Promotion

Industry

for

Promotion

1970s1970s 1980s1980s 1990s1990s 2000s2000s

Light

Industry

Light

Industry

Heavy and

Chemical

Industry

Heavy and

Chemical

Industry

Technology-

intensive

Industry

Technology-

intensive

Industry

New Industry

Including

ICT

New Industry

Including

ICT

Knowledge-

Intensive

Industry

Knowledge-

Intensive

Industry

Factors of

Competitive-

ness

Factors of

Competitive-

ness

Simple

Labor

Simple

LaborSkilled

Labor

Skilled

LaborCapitalCapital TechnologyTechnology InnovationInnovation

12

Indicators – Change of Industrial Structure

< < Change of Industrial Structure Over Times Change of Industrial Structure Over Times >>

Year \ Industries

Agri-culture/ Fishery

MiningManufac-

turing

Electrics/Gas/

Water Supply

Construc-tion Service

Structure of Manufacturing Industry

Light Industry

Heavy Industry

1960 36.8 2.1 13.8 4.1 - 43.2 76.6 23.4

1970 29.2 1.8 17.8 1.4 5.1 44.7 58.4 41.6

1980 16.2 2.0 24.4 2.2 8.0 47.3 42.5 57.5

1990 8.9 0.8 27.3 2.1 11.3 49.5 30.7 69.3

2000 4.9 0.4 29.4 2.6 8.4 54.4 22.4 77.6

2007 3.0 0.4 27.9 2.3 8.9 57.6 16.9 83.1

* Note : 1) Data before 1950 are based on the criteria of 1975, and data after 1970 are based on the 2000 & total amount of value added.

2) Data before 1960 include construction industry ※ Source : The Bank of Korea

13

Growth Engine(III) : Technology Innovation

1971-1989 1990-2004 1971-2004

Growth by (%)

Share(%)

Growth by (%)

Share(%)

Growth by (%)

Share(%)

Labor 2.22 29.1 1.17 20.4 1.75 25.9

Capital 3.24 42.5 2.58 45.0 2.95 43.4

TFP 2.16 28.4 1.98 34.6 2.08 30.7

R&D Stock

1.77 23.3 1.74 30.4 2.07 30.6

Real Growth 7.62 100 5.73 100 6.79 100

< Contributions of Factors to Growth (1971~2004) >< Contributions of Factors to Growth (1971~2004) >

14

< History of Overcoming Economic Crisis >< History of Overcoming Economic Crisis >

Economic CrisisEconomic Crisis

1st Oil Shock(Oct’73~Aut 74)

2nd Oil Shock(Oct’78~Apr’82)

Financial Crisis(Dec’97~Aug.01)

Global Financial Crisis (2008~)

Decisive InvestmentDecisive Investment• Invest in heavy industry such as petroleum chemical, steel industry etc. * Declare we enter the stage of heavy industry(’73)

• Invest in high tech industry such as automobile, and semiconductor etc.

• Enlarge IT venture investment• Enlarge government R&D investment * Enact ‘Special Act on Promoting Venture Companies(’97)

• Promote new growth engine

• Green Growth

Improve Economic InfrastructureImprove Economic Infrastructure

• Move industrial emphasis from light

industry to heavy industry

• Price stabilization, open economy

• Promote high tech industry such as automobile and semiconductor as major industry

• Restructuring of large conglomerates

• Promote IT as major industry

• Knowledge, innovation driven industry

• Low carbon economic system

※ Source : Ministry of Knowledge Economy

22

Major Industrial PoliciesMajor Industrial Policies andand AchievementsAchievements

16

< Science & Technology strategy Roadmap of Korea Government >< Science & Technology strategy Roadmap of Korea Government >

CompetitiveDevelop-

mentStage

CompetitiveDevelop-

mentStage

Major direction ofIndustrial

Policy

Major direction ofIndustrial

Policy

1960s1960s 1970s1970s 1980s1980s 1990s1990s 2000s2000s

Expand export

oriented light

industries

Expand export

oriented light

industries

Expand heavy

and chemical

industries

Expand heavy

and chemical

industries

Expand

technology

Intensive

industries

Expand

technology

Intensive

industries

Promote

high-

technology

innovation

Promote

high-

technology

innovation

Technology

Commer-

cialization

Technology

Commer-

cialization

Factor Driven Stage

Investment Driven Stage

Innovation Driven Stage

Cheap laborCheap labor

Manufacturing capabilityManufacturing capability

Innovative capabilityInnovative capabilitySource of

Competition

2010s2010s

Green Growth

&

New Growth

Engines

Green Growth

&

New Growth

Engines

Convergence capabilityConvergence capability

New Growth EngineDriven Stage

17

S&TRole of

Government

S&TRole of

Government

< Science & Technology strategy Roadmap of Korea Government >< Science & Technology strategy Roadmap of Korea Government >

1960s1960s 1970s1970s 1980s1980s 1990s1990s 2000s2000s

Scientific Institution

Building

ScientificInfra-

structureSetting

R&D and Private

ResearchLab

Promotion

Leading Rolein Strategic

Area

R&BD andInvestmentPromotion

• Establishment of ministry of S&T

• S&T promotion law

• Human resource development

• Establishment of government research institutes

• R&D promotion law

• Highly qualified personnel development

• National R&D funds

• Promotion of the establishment of private research labs

• Promotion of industrial R&D

• Strategic program (highly advanced national project)

• Enhancing university research capability

• Linkages university- industry-government research institutes

• Strategic program for tech. Business (R&BD, TBI, NTB)

• Globalization of technology

• Pursuit newly launched technology business and investment

InnovativeCapability of

Private secret

InnovativeCapability of

Private secret

2010s2010s

Green Technology Promotion

• Strategic increase of R&D investment in GT

• Promoting GT transfer and commercialization

• Strengthening incentive schemes for inducing private investment in GT

18

Major AchievementsMajor Achievements Economic and Industrial Economic and Industrial PoliciesPolicies

Science and Technology Science and Technology PoliciesPolicies

• Fertilizer factories

- Chungju, Honam, and Hanbi

• Cement factories

- Hanil, Dongyang, Hyundai,

Ssangyong Yanghoe

• Build oil refinery complex

- Ulsan, Yeocheon Build refinery

complex

• Fiber factories

- Produce polyester, nylon

• Build Gyeongbu [Seoul-Busan]

Expressway

• 1st Five Year Economic Plan

(1962~1966)

- Promote industries to substitute

imported products

- Change from agricultural to

industrial economy

• 2nd Five Year Economic Plan

(1967~1971)

- Promote export-driven industry

• Enact 7 acts to promote industries

- Machinery, ship, fiber, electrics,

petrochemical, chemical, steel,

non-ferrous metal industries

• Promote to introduce foreign

technology

- Enact ‘Promotion Act of Foreign

Capital’(1962)

• Increase the need of S&T

development for economic

growth

- Establish ‘Korea Institute of

Science and Technology‘

(KIST)(1966)

- Enact ‘Science and Technology

Promotion Act’ (1966)

- Establish Ministry of Science

and Technology(1967)

Major Industrial Policies and Achievements

1960’s1960’s

19



• Pohang Steeler

• World-class shipyard

- Build 26o thousand ton level

oil tanker, VLCC

• Localize automobiles

- Hyundai produce ‘Pony’

• Boom in Constructing in the

Middle East

- Construct “Al-Jubayl Port” in

Saudi Arabia, Waterway in

Libya

• Declare ‘Heavy Industrialization’

(1973)

- 6 strategic area such as steel, non-

ferrous metal, machinery, ship,

electrics and chemical

• Promote defense industry

- Build 4 core factory in heavy

machinery, cast pig iron, special

steel, ship

※ Economic crisis of excess of heavy

industry in the late of 1970‘s, decline

of the economy of the Middle East, and

the 2nd oil shock

• Self reliance of private

technology and raise excellent

technology human resources

- Enact ‘Technology Development

Promotion Act’(1972)

- Promotion Act on Technology

Service(1973)

- Law of National Technique

Qualification(1973)

• Organize government-led

technology supply system

- Act on Promoting Specific

Research Institute(1973)

- Start to build Daedeok research-

academy complex (1973)


1970’s1970’s

20

Major AchievementsMajor Achievements Economic and Industrial PoliciesEconomic and Industrial Policies Science and Technology PoliciesScience and Technology Policies

• Semiconductor - Develop D-RAM miconductor(1983)• Automobile - Export ‘Excel’ to the U.S. (1986)• Communication - Develop domestic calculator(TDX-1)• Machinery - Produce NS machine tool, and large excavator,• Ship - Produce LNG ship

• Privately-led economy - Prevent monopolistic, foster market structure and competitive market, enact ‘Monopoly Regulation and Fair Trade Act’• Measures to rationalize industry - Enact “The Regulation Law on Tax Reduction and Exemption”(1981) - Appoint 9 rationalization industries such as textile, fertilizer, footwear (declining industry) and automobiles • Shift from the fostering policy of individual industry to focusing on technology - Enact ‘Industrial Development Law’, Abolish 7 fostering acts• Increase freedom of import and introduction of technology - Abolish negative list of import

• Host ‘Further Meeting of Technology Promotion (1982~1987)• Launch ‘National R&D Project’ (1982)•Policies to promote private R&D - R&D Tax Support (1981) - Alternative military service for researchers (1981) - Acknowledgement system of company research center (1982) - Establish KTDC(1982) - Reduce tariffs on research materials (1983)• Make a Long term roadmap of science and technology for 2000’s (1986)• Introduce ‘Product Patent System (1986)


1980’s1980’s

21



• Semiconductor - World-first development of 256M D-RAM (1995) - The first semiconductor memory in the world• Automobile - Firstly develop domestic engine( engine) (1991)α - World 5th Automobile Producer• Ship - Top in ship order(1993)• Home Electronics Appliances - World-first commercialization of Digital TV - World-first development of flat Display

• Five Year Plan for New Economy (1992)• Enact ‘Law of Invention Promotion’ (1994)• Globalization policy (1995)• Become a member of OECD (1995)• Policy for promoting small venture company - KOSDAQ market(1996) - Act on Special Measure for Fostering Venture Company (1997)

• National Project - G7 Project (1992) - Original Research and Development Project (1998) - 21st century Frontier Project (1999)• Establish 「 Sector Plan for Science and Technology(1993) 」 in Five Year Plan for New Economy• Enact “Special Law on Science and Technology Innovation (1997) - Five Year Plan for Science and Technology Innovation (1997) - Establish ‘Long-term Science and Technology Vision toward the Year of 2025(1999)


1990’s (1)1990’s (1)

22



• Communication

- World-first commercialization

of CDMA

- World-first commercialization

of TDX 10

• Pharmaceutical

- Develop new substance and

new medicine in nation first

(1999)

• IMF Foreign Exchange Control

Period (1997~2000)

- Industrial restructuring and

aggressive M&A

- Special Committee of Small

Companies (1998)

• Establish Ministry of Information

and Communication (1994)

- Basic Plan for Information

Communication Research and

Development (1998)

• Liberalize introduction of

technology

• Law on Creating the Basis of

Industrial Technology (1995)

- 1st Five Year Plan for Industrial

Technology Development

Plan(1996~2000)


1990’s (2)1990’s (2)

23



• Semiconductor

- Develop 32G RAND Flash Memory

(2006)

• Automobile

- World top 5, Reexport foreign

technology (Hyundai Motors. Mitsbishi)

• Ship

- World-first construction method on the

ground

- Icebreaker, Aegis destroyer, ocean plant

- Obtain 40 percent of all world orders

• Steel

- Build FINEX(Fine Particle Extraction)

plant

• Enact ‘Promotion Act of

Technology Transfer’(2000)

• Innovation-driven Economy

(2003)

• New Industry-Academy

Cooperation (2003)

• Balanced National

Development

- Enact ‘Promotion Act for

Regional Technology

Innovation’ (2003)

• Enact ‘Basic Law of Science

and Technology (2000)

- Establish 1st, 2nd Basic Plan of

Science and Technology

(2002, 2007)

- Current government’s basic

plan of science and technology

• Fostering New Growth Engine

(2008)

• 2nd Five Year Plan for Industrial

Technology Development

(2003~2008)


2000’s (1)2000’s (1)

24

Major AchievementsMajor Achievements Economic and Industrial Economic and Industrial PoliciesPolicies Science and Technology PoliciesScience and Technology Policies

• Home Electronics Appliances

- World-first TFT-LCD (2001)

- World first Digital TV

• Components

- Secondary battery enter into

world market

• IT

- World-first development of

ground wave DMB(2002)

- Top high speed internet in the

world(2002)

- Develop portable wireless

internet ‘Wibro’ (2005)

• Northeastern Economic Hub

(2003)

• Win-win Cooperation

among large, medium, and

small sized companies

(2006)

• Create Future Food Items

- Next-Generation Growth Engine

Project (2003~2007)

- Green Technology Development

Project (2008)

• National Innovation System (NIS)

Focusing on Science and Technology

(NIS) (2003)

- Appoint Minister of Science and

Technology as a Vice Minister

• Policy to introduce global R&D Center

• National Task to reach 5% R&D of GDP


2000’s (2)2000’s (2)

25

To Become the World 7th Green Power 2020,and the 5th by 2050

To Become the World 7th Green Power 2020,and the 5th by 2050

< Korean National Strategy for Green Growth >< Korean National Strategy for Green Growth >

VISIONVISION

Three Objectives, Ten Policy Directions

Mitigation of Climate Change & Energy Independence

Creating New Engines for Economic Growth

Improvement in Quality of Life &Enhanced International Standing

1. Effective mitigation of greenhouse gas emissions

2. Reduction of the use of fossil fuels and the enhancement of energy independence

3. Strengthening the capacity to adapt to climate change

4. Development of green technologies

5. The “greening” of existing industries and promotion of green industries

6. Advancement of industrial structure

8. Greening the land, water and building the green transportation infrastructure

9. Bringing green revolution into our daily lives

10. Becoming a role-model for the international community as a green growth leader


2010’s (1)2010’s (1)

26

Selection of New Growth Engines

Develop 17 new driving forces in three areas Green technology industry (6) : the foundation for future growth, energy use reduction and the high potential to tackle climate change and lack of resources High tech convergence industry (6) : large world market size and high technology capability in Korea. Capable to create new industry and advance the existing industries through convergence High value added industry (5) : huge potential of job creation. Capable to create high value added by complementing service industry

Green technology industry Green technology industry High tech convergence industryHigh tech convergence industry High value added industryHigh value added industry

1. New renewable energy2. Low carbon energy3. Advanced water treatment4. LED applications5. Green transportation system6. High-tech green city

7. Broadcasting telecommunication convergence industry

8. IT convergence system9. Robot applications10. New material Nano convergence11. Bio medical medical devices12. High value added food industry

13. Global health care14. Global education service15. Green financing 16. Contents Software17. MICE Tourism

2010’s (2)2010’s (2)

Korea Innovative Capability in Korea Innovative Capability in

Science and TechnologyScience and Technology

33

28

Korea’s S&T Capability

S&T Statistics (Input)

※ Source : Ministry of Science and Technology* R&D / GNP

1970 1980 1990 2000 2009

GERD (US$, 100 million)

0.03 0.4 46.8 138.4 297.0

Gov’t-funded vs. Private-funded (%)

71 : 29 64 : 36 19 : 81 25 : 75 29 :71

R&D Expenditure / GDP (%)

0.38* 0.77* 1.87 2.39 3.57

No. of Researchers(FTE, Persons)

5,628 18,434 70,503159.973

(108,370)323,175

(244,077)

R&D Expenditure / Sales of Industry (%)

n.a.0.54

(1981)1.72 2.0 2.34

29

S&T Statistics (Output)

※ Source : Ministry of Science and Technology

1970 1980 1990 2000 2008

No. of Applications for Domestic Patents

1,846 5,070 25,820 102,136 170,632

No. of Applications for U.S. Patents

3 8 225 3,7865,908

(2006)

No. of Articles Published on SCI Journals

n.a.236

(1981)1,587 12,472 35,569

No. of Industrial Laboratories

n.a.46

(1981)966 7,110 16,719

30

Korea’s IMD Ranking(’06~’10)

Evaluation IndexEvaluation Index RankingRanking

’06 ’07 ’08 ’09 ’10

Total expenditure on R&D : US$ millions 7 7 7 7 7

Total expenditure on R&D : % of GDP 6 5 5 5 5

Business expenditure on R&D : US$ millions 7 7 7 7 7

Business expenditure on R&D : % of GDP 5 5 4 5 5

Total R&D personnel in business enterprise 7 6 6 6 6

Scientific articles 12 12 10 10 10

Nobel prizes 25 25 26 26 27

Patent applications - - - 4 4

Patents granted to residents 3 3 3 3 3

Number of patents in force 13 7 5 5 5

Total ranking 10 7 5 3 4

31

Technological Needs / Efforts

1960s1960s

Tech-

nological

Needs

Tech-

nological

Needs

Tech-

nological

Efforts

Tech-

nological

Efforts

1970s1970s 1980s1980s 1990s1990s 2000s2000s

Operation

Technology

Operation

Technology

Equipment-

embodied

Technology

Equipment-

embodied

Technology

Production

Technology

Production

Technology

Critical/

Essential

Technology

Critical/

Essential

Technology

Creative

Technology

Creative

Technology

Importation/

Learning of

Turnkey-

based

Foreign

Technologies

Importation/

Learning of

Turnkey-

based

Foreign

Technologies

Absorption/

Assimilation

of Foreign

Technologies,

Reverse

Engineering

Absorption/

Assimilation

of Foreign

Technologies,

Reverse

Engineering

Modification

of Foreign

Technologies,

Fostering of

Endogenous

Technology

Development

Modification

of Foreign

Technologies,

Fostering of

Endogenous

Technology

Development

Broadening/

Deepening of

Domestic

R&D Efforts

Broadening/

Deepening of

Domestic

R&D Efforts

ImitationImitation InnovationInnovation

Strengthening

of Future

-oriented

R&D

Efforts

Strengthening

of Future

-oriented

R&D

Efforts

※ Source : Hwang, Yongsoo(2007).

32

HRD Needs / Efforts

1960s1960s

Needs of

Human

Resource

Needs of

Human

Resource

HRD

Efforts

HRD

Efforts

1970s1970s 1980s1980s 1990s1990s 2000s2000s

TechnicianTechnician EngineerEngineerHigh-

caliber

Engineer

High-

caliber

Engineer

High-

caliber

R&D

Personnel

High-

caliber

R&D

Personnel

Creative

S&T

Manpower

Creative

S&T

Manpower

Expansion

of

Technical

High School

Expansion

of

Technical

High School

Expansion

of

Engineering

College

Expansion

of

Engineering

College

Cultivation

of Graduate-

level S&T

Manpower

Cultivation

of Graduate-

level S&T

Manpower

Cultivation

of Highly

Professional

S&T Manpower

Cultivation

of Highly

Professional

S&T Manpower

Brain DrainBrain Drain Reverse Brain Drain

Reverse Brain Drain

Brain Circulation

Brain Circulation

※ Source : Hwang, Yongsoo(2007).

33

World Competitiveness of Main Products

DRAM : World market leader since 1998(51%, 2009)

CDMA mobile phone : World market leader since 1998(38%, 2008)

Shipbuilding : World market leader(40%, 2008)

TFT-LCD : World market leader since 2001(46%, 2008)

Automobile : Fair global market share(5.7%, 2009)

TV : World market leader(35%, 2010)

Refrigerator : High global market share(22%, 2008)

Flash Memory : World market leader(54%, 2008)

Iron/Steel : Fair global market leader(3.9%, 2008)

※ Source : Ministry of Knowledge Economy, Korea International Trade Association

Key Characteristics of Key Characteristics of Korean Innovation SystemKorean Innovation System

44

35

Key characteristics of Korean Innovation System Key factors that influenced the Korean Innovation System

Outward-looking development strategy → Pressure for R&D investment

Government policy toward FDI TT → Focus on indigenous R&D

Government-led industrial development

- Industry-targeting → Inter-industry R&D imbalance

- Favoring large enterprises → R&D system biased for large firms/Financial

capability to invest in R&D

- S&T for industrialization → R&D system biased toward technology development

Rich pool of well educate HRST → High absorptive capacity

Government-led development of S&T infrastructure

→ Relative importance of GRIs

36

Government’s role : STI support programs by stage

MOSTMOST MOCIE, MIC, MOE, …..MOCIE, MIC, MOE, ….. Regional gov’sRegional gov’sTechnology Development Reserve Fund(’72)

R&D Tax Incentive(’81) Tariff Reduction for R&D Equipment(’82)

Special Tax Incentives for Foreign Engineers(’02)

Korea Technology Promotion Corp.(’74)

KTB(’82)- Law for the Promotion of Start-ups(’91)- Financial Support for Industrial Development(’86)- S&T Promotion Fund(’93)- IT Promotion Fund(’93)

NRDP(’82) - Industrial Base Technology Development Program(’87)

- New Growth Industries (’03)- Regional Cluster Program (’03)- Green Technology Program(’08)- Total R&D expenditure / 5% of GDP(’08)

TaxTax

Finan-cial

Finan-cial

R&D Subsi-dies

R&D Subsi-dies

1970 1980 1990 2000 2005

Wig

Plywood

Apparels, Steel,

Chemicals,

Construction, Home

application

Automobiles, Ships,

Computer, Semi-

conductor

-TD Reserve Fund- TDPL / ETPL*

-R&D Tax Incentive-Industrial R&D Center-NRDP

-MOST: HAN Project-MOCIE: Industrial Base TD Program-MIC: IT, R&D

-Industrial Base Development Program-Promotion of Ventures-KOSDAQ

-NIS / RIS-New Growth Engine-TT

3,21013,849

24,155

R&DInput-based growth

Semi-conductor, digital

appliances, IT, …..

Knowledge-based growth

GrossExpen-diture

on R&D

TT

2010

212

- Green Growth- New Growth Engine

PCGG, PMOPCGG, PMOR&D tax incentives for

growth engine products

- GT development program - Support for new growth engines

Green Growth FundNew Growth Engines

Fund

29,703(2009)

* Technology Development Promotion Law / Engineering Technology Promotion Law

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Strength and weakness

Strength

- Consensus on the importance of S&T : Dynamism of Korean business

enterprises plus strong commitment of the government to S&T-based national

development

- Economic environments conducive to active innovation : Domestic firms’

exposure to international markets – pressure for R&D

- Chaebol system : Financial capability to invest in long-term risky projects

- Human resources

Growing scientific achievements : publications, IPR, etc

Attained technological leadership in selected areas

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Weakness

Disadvantage of being small

Imbalances in innovation system

- Basic scientific research vs technological development

- Large firms vs SMEs

- Regional concentration

- Manufacture vs Service

Excessive reliance on private investment : vulnerable to changes in

markets

Weak industry-science relationship

Insufficient internationalization : insufficient international R&D

collaboration and international co-invention, etc.

Policy Lessons and Policy Lessons and Future DirectionsFuture Directions

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Policy Lessons and Future Directions Lessons

Market competition is the very source of motivation for innovation

- Pressure for technological competitiveness

- Effectiveness of the outward-looking development strategy for small economies

Human resource is the key to learning

Government can play effectively the role of facilitator and promoter at

the early stage of development

The efficiency of an NIS

Future Directions Industry-oriented policy Catch-up Strategy → Creative Strategy Globalization and Open Innovation Create New Growth Engine

2 Contents 2 Major Economic Indicators and Driving Force of Growth 1 13 Major Industrial Policies...

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