Five
Keys to Korean Prosperity in the “Chinese Century” (3)
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By Allen H. Kupetz | Published Oct 2007
 5.
Reduce the percentage of GDP produced by the chaebol without being
punitive. Small and medium-sized enterprises (SME) can be a growth
engine and offset job losses as manufacturing migrates to China.
Anyone who has done business
in Korea quickly sees the spirit of entrepreneurialism that permeates
Korean culture. With a higher tolerance for risk and less fear (and
fewer consequences) of failure than Japan, Korea should see tremendous
wealth creation in the SME sector. And the Korean government sponsors
or otherwise supports such organizations as the Small Business Corporation
(http://www.sbc.or.kr/eng/),Small
and Medium Business Administration (http://www.smba.go.kr/main/english/index.jsp),
and Korean Marketplace (http://eng.bestsme.com/main/aboutus/aboutus.jsp)
to help Korean firms.
As with quality, however, Korea
still talks a better a SME promotion game than it plays. The Korean
economy arguably has never been more dependent on chaebol than it
is today. In 2003, according to the Korea Times, the four largest
chaebol (Samsung, LG, Hyundai Automotive, and SK) accounted for
almost a half of the nation’s total exports and 40% of the
GNP. But the big four are not creating many new jobs in Korea. According
to same Korea Times article, “A bigger issue is that the chaebol
are focusing more on expanding operations offshore and reducing
the number of local subsidiaries, which has raised concerns about
reduction in employment.”
According to the 18 March 2006
issue of The Economist, “By one account, 40% of Korean SME
make no operating profits, among them many “zombie”
firms kept alive with government credit guarantees.” Weak
firms must be allowed to fail, and direct and indirect government
subsidies must focus on sectors (i.e., rather than particular companies)
where Korea has a competitive advantage in the global marketplace.
Korea has the intellectual muscle—both from its own universities
and the students that go abroad and return—to enter and compete
in many emerging technology and service sectors.
“The Mayans lost to the
Aztecs, the Romans lost to the Barbarians, and the French lost to
the Vietnamese. In each case the losers had superior technology,
but the victors had more troops.”
I believe the 21st century
may in fact be remembered as the Chinese century, just as the British
dominated the 1800s and the United States dominated the 1900s. Britain
and the United States aren’t going away anytime soon, and
neither is Japan, Vietnam or eastern Europe. There are five provinces
in China that have a larger population than Korea. Even a unified
Korea will not overtake China, Japan, or India in economic terms.
So, what’s a country to do?
Korea must focus on evolution
not revolution. It must make its government, institutions, companies,
entrepreneurs—and therefore its country—just a little
bit better. Then it must start the process over and make the new
and improved Korea just a little bit better. Korea will matter in
the Chinese century only if takes the steps necessary to differentiate
and then redifferentiate itself so as to stand out in the shadow
cast by its neighbors. Financial transparency, IPR protection, quality,
and SME promotion is Korea’s path to relevancy. |
