I nternational Journal of Contemporary Research and Review

IJCRR 11 (05), 21807–21810 (2020) ISSN (O) 0976-4852

Learning from the “Miracle of ”

† TAO Shiyi⋆,

National University of Public Service, Budapest, Hungary

DOI: https://doi.org/10.15520/ijcrr.v11i05.809 Accepted 21-05-2020; Received 05-05-2020; Publish Online 22-05-2020

ABSTRACT The overall competitiveness performance has four basic dimensions: Economic perfor- mance, government efficiency, business efficiency and Infrastructure. improving na- tional competitiveness is like an investment, investing from the physical infrastructure to soft infrastructure. ’s transition from one of the poorest countries in the early 1960s to the world’s 11th -largest economy is unprecedented. Government plays a dominant role in the Korean since 1960s, first step taken by the government was building infrastructure. Korean government has always been committed to investment in education, improve people’s education level to meet the new requirement of labor markets. Nowadays, the high development of Korea is becoming innovation hub in the creative economy. By launching “creative economy” initiative, “creative Korea” strategy is to mainstream the use of ICTs across the entire economy and in particular to increase ICT adoption within SMEs. In addi- tion, an area that will increase in importance is the Internet of Things (IoT). Korea is implementing Knowledge Sharing Program with worldwide partners and learning advanced experience. Sharing Korean experience and jointly developing sustainable growth. However, solving the youth unemployment issue is priority to President Moon Jae- in, the unemployment rate of March triggered the alarm again, his administration planned to implement a series of promotion policies help youth out of catastrophe. Besides, developing a high-quality employment, training the workers to adjust the fourth technological revolution. knowledge sharing program with Hungary provides some suggestions from the Korean experiences. This proposal tries to find out how do Korea improve competitiveness since last century and some experiences of solving the unemployment. Key words: Innovation–Technology–Creative economy–Youth Unemploy- ment,knowledge sharing program

1 INTRODUCTION: (WEF,2017). What can we learn from Korea? Figure 1 The overall competitiveness performance has four basic dimensions: Economic performance(employment), Govern- ment efficiency(Public finance, Tax policy), Business effi- ciency(Productivity, efficiency, management practices) and Infrastructure(Education). Improving national competitive- ness is like an investment, invest from the physical infras- tructure to soft infrastructure. The government translates the policies into the practice. Korea’s transition from one of the poorest countries in the early 1960s to the world’s 11th -largest economy is unprecedented (See Figure 1 ). Accord- ing to the latest GCI, Korea is ranked 26th out of 137 [1]

⋆ Corresponding author. † Email: [email protected] Source: MOSF,KSP Figure 1. Graph1: Success, Challenges and Triumphs again-Experienceof Korea

21808 TAO Shiyi

2 SHORT REVIEW OF KOREAN ECONOMIC Hyundai and LG. So called “” in Korean language. PLAN They play the dominant roles in the growth of economy. Korea export-oriented economy impels rapid development The high development of Korea is becoming innovation of industrialization, advancement in science and technol- hub in her creative economy. In 2013, Former President ogy, reform of national education, rapid improvement in Park Geun-hye launched the “creative economy” initiative, the standard of living, and advancement of urbanization, aiming at generating more jobs and markets through cre- modernization, democratization, and internationalization. ativity and innovation. One of the goals of the “creative At the time of the founding of Korea, it was a agricultural Korea” strategy is to mainstream the use of ICTs across country with almost no decent industrial system. Regard- the entire economy and in particular to increase ICT adop- less of the Japanese model and the Soviet model, build- tion within SMEs. In addition, an area that will increase in importance is the Internet of Things (IoT). Korea is im- ing the infrastructure was priority: the country must have plementing IoT projects in different areas such as public roads and railways, maritime routes, wire and full postal administration (improving public services), industry (im- services, and most importantly, high-quality citizens. Since proving productivity, efficiency), and quality of life (enhanc- 1962, with the promotion of then-president Park Chung-hee, ing safety, convenience, and other aspects related to qual- the Korean government began implementing the ”five-year ity of life). Besides, the digital economy, Korea is reinforc- plan.” The development of country needs a strong leader- ing Green and Creative economy through Green innovation. ship. Korea’s then-president Park Chung-hee, some people Administrative burdens and complex regulatory procedures credit him for sustaining the Miracle on the Han River, are barriers on start-ups and SMEs. Koran government has which reshaped and modernized Korea. Park Chung Hee’s made a reform of “Three-year Plan for Economic Innova- regime as Korea’s first modern nation-state successfully car- tion”, a large number of regulations has been eliminated. ried out its modernization project through capitalistic ex- The reformed and quality-oriented regulations have an im- pansion and construction of national subject. The modern- pact on improving productivity, competition and growth. ization was the dream of a large number of for a Embed new digital skills into training programmes and ed- better life and the development of state. Meanwhile, Park’s ucation, thus making them even more relevant for labour regime was mobilized by mass politics. Multiple identities market needs [3] (OECDa,2015). of individuals such as farmers, workers and university stu- Last century, government-led development was an im- dents joined together to construct the state from different portant feature of Korea’s economic development. The gov- locations and shared common experience [2] (Hwang,2009). ernment is fully involved in economic planning, formulat- The first “five-year plan” was from 1962 to 1966. Inthis ing macroeconomic development strategies and industrial five-year plan, Korea’s goal was to solidify the industrial policies, or indirectly inducing policies, or directly interven- base. The second “five-year plan” was from 1967 to 1971. ing to foster and guide promising industries, and encourage Korea began to implement the export-oriented industrial large-scale development. The enterprise actively explores development strategy. In these two five-year plans, South the market and further enhances its competitiveness. Gov- Korea has focused on strengthening light industries such ernment played a leading role, through the improvement of as light textile and cement, which have already reached a industrial structure and the enhancement of industrial in- certain scale, and exchanged these light industrial primary dependent innovation capabilities and technology, country products for foreign currency. By usinf the foreign currency, realized the leap-forward development. Korea’s economic purchasing the foreign equipment, technology and training take-off was achieved under high-power government poli- personnel and accelerating economic development. tics, or even autocratic autocracy. Today, Korea no longer During the period of the 3rd and 4th Five-Year Plans, needs that kind of political system. But at that time, with- the focus of the Korean government’s construction shifted out such a highly centralized political model, it is hard to to heavy industries: steel, shipbuilding, and chemical engi- imagine that subsequent achievements in Korea. neering. From this time on, the Korean economy has really started to take off. By the time of the 5th and 6th Five-Year Plans of the 1980s, the focus of the Korean government’s construction was turned to technology-intensive industries. 3 THE EMPLOYMENT ISSUES Korea proposed a technology-based country, from the in- OECD suggested “Korea speed up job market and social troduction of technology to independent research and de- protection reforms to strengthen inclusive growth, said that velopment. During this period of time, Korea established a social protection institutions now provide income and em- large number of institutes to promote technological research ployment support to millions of households in need. But and development and develop cutting-edge industries. Ko- many workers still struggle with jobs of poor quality and rea transformed a large number of state-owned enterprises low social protection, because policies and rules are often into private ones and retained only some companies that poorly enforced. Labour regulations and agreements are also required huge investments and were unable to afford pri- geared towards protecting permanent jobs but often fail to vate ownership or were not suitable for private operations. help people in less regular jobs [4] (OECDb,2018).” Since the 1970s, economic growth in Korea has largely been Last year, President Moon Jae-in’s government passed driven by big and successful companies such as , 2018 budget plans to boost spending to a record 429 tril-

International Journal of Contemporary Research and Review, Vol 11 Iss 05, 21807–21810 (2020) Learning from the “Miracle of Han River” 21809 lion Koran won ($383.05 billion) to step up fiscal stimu- lus to buttress overall economic growth by funding rising generate a large number of job opportunities. The govern- welfare costs, creating jobs and stoking domestic consump- ment should relax restrictions on new technologies in order tion [5] (Reuters,2017). Unemployment in March jumped to to create a more favorable environment for business invest- the highest level since 2010 (See Figure 2 ). ment and provide young people in these areas with new job opportunities. 2017/2018 knowledge sharing program with Hungary provides some suggestions from the Korean experiences such as expanding the vocational training program(VET) to the disadvantaged groups and building a customized sys- tem for each support target; the employment subsidy pro- gram are more focused on low-skilled workers; Increasing in part-time jobs in the regular job markets, emphasizing on VET,STS,and PES,etc [7] (Ministry of Strategy and Fi- nance, n.d.). Source: Bloomberg Figure 2. Graph2: Unemployment Jumps in Korea 3.1 Entrepreneurship of Youth: Creating more jobs is one of the key promises of Presi- Entrepreneurship is one of the most important drivers dent Moon Jae-in, President Moon’s administration pushed of both employment and economic growth. Youth en- through an extra budget to add public-sector jobs, aimed trepreneurship plays an important role in youth employ- to help youth people start companies and to support firms ment. Korea’s government made efforts to change its edu- that hire them to deal with youth jobless rate. cational system in order to prepare Korean youths to start The plan includes the government will provide funds to their own businesses. Universities respond to these policies create jobs for young people. The new measures show that by providing a practical curriculum and incubators. Sup- the government has introduced all policy measures includ- porting programs for incubators and entrepreneurship ed- ing budget, tax relief, subsidies, and transformation and ucation packages in universities will be effective tools for upgrading. The focus is mainly on four aspects, such as promoting youth entrepreneurship. National innovation sys- providing incentives for small and medium-sized enterprises tems for SMEs supports the start-ups. Mostly important, that employ young people, nurturing new start-up compa- expanding the source of financing for start-ups and SMEs. nies, adding new job opportunities overseas, and creating Korea’ s government introduced a credit guarantee scheme new markets in the service industry. The government will to allow start-ups to borrow money from the banking sec- also thoroughly reform the education system and encour- tor. Corporate Social Responsibility (CSR) is another way age young people to look for work and study again. The of funding start-ups [8][9] (MOSF,2016). Korean government’s budget is mainly allocated to 12 ar- eas, and the budget for education has increased the most, reaching 11.8%. For example, those employed by SMEs will 3.2 Infrastructure: be allowed to go to college to learn the knowledge they PPP arrangement helped promote investment in infrastruc- need to work. The government will establish a new man- ture in Korea. The key indicators enable PPP in Korea suc- agement system. Those who serve as military experts will cessfully as follows: have more advantages when applying for jobs. In addition, 1. Sound legal framework: PPP Act start-up companies founded by young people will be ex- Ministry of Strategy and Finance draw the basic plan empted from corporate income tax. This year will provide for PPP and prepare directions of government policy. This 900,000 Korean won(716.14 Euro) for young job seekers workable,clear and detailed legal framework reduce poten- for a three-month, 300,000 Korean won(238.71 Euro) per tial business risks for private sectors. month. The six-month allowance plan to be launched next 2. Creation of Supporting Agency: Public and Private year will be expanded to 3 million Korean won(2387.14 Infrastructure Investment Management Center (PIMAC) Euro) and 500,000 Korean won(397.86 Euro) per month [6] Establishing Private Infrastructure Investment Center of (KBS,2018). Korea (PICKO)to provide professional supports for PPP Youth unemployment is the result of Korea’s economic projects. Expanding to PIMAC, which consists of experts structural problems and is also the result of recruitment and from economics, finance,accounting,law,etc,performs feasi- underinvestment by large companies. It is difficult to han- bility studies, provides education programs for government dle this problem without changes. The government have to officials, and cooperation with international organizations promote the fourth industrial revolution and make greater and foreign countries. PIMAC contributed to designing effi- efforts from a longer-term perspective. cient PPP implementation conditions and enhancing trans- With the development of new technologies, creating qual- parency on bidding process. ity jobs is important and solve unemployment. The core 3. Reasonable level of Incentives areas of the Fourth Industrial Revolution include artificial Support for land acquisition, credit guarantee, risk- intelligence, Internet of Things, 3D printing, virtual reality sharing structure, tax benefit, termination payment and technology, cloud computing, smart cities, etc., which will construction subsidy.

International Journal of Contemporary Research and Review, Vol 11 Iss 05, 21807–21810 (2020) 21810 TAO Shiyi

4. Foreign Investors’ Participation [7] Employment Promotion in Taxation and Labor Market Poli- Korean government equally treat foreign investors with cies: Measurement and Experience. Ministry of Strategy and domestic investors and entitle to additional benefits, for ex- Finance (nd) DRAFT REPORT 2017/18 Knowledge Sharing Program with Hungary;. ample, government could offer subsidies or long-term loans [8] 2015/16 Knowledge Sharing Program with Hungary: Enhanc- for foreign exchange losses, Busan Aquarium project, for- ing Governmental Promotion Policies for Economic Develop- eign investment occupies 100%. ment. In: Ministry of Strategy and Finance; 2016. . Infrastructure development plays a leading role, govern- [9] JI, K. (2012). Knowledge Sharing Program-Shaping the Future with ment, private sector, regulators and consumers should set Korea. up a strong framework of coordination.

4 CONCLUSION: Government plays a dominant role in the Korean economic growth since 1960s, first step taken by the government was building infrastructure. Korean government has always been committed to investment in education, improve people’s ed- ucation level to meet the new requirement of labor markets. Solving the youth unemployment issue is priority to Pres- ident Moon Jae-in, the unemployment rate of March trig- gered the alarm again, his administration planned to add extra budget to help youth out of catastrophe. A series of promotion policies such as subsidy, education re form, shorten working hours to 52 hours per week(Saturday and Sunday included), increase hourly pay, increase tax burden for ultra high-income earners and super-large enterprises. Korea is a leading country in technology and innovation. Developing a high-quality employment, training the workers to adjust the fourth technological revolution. Government should coordinate with stakeholders to create a business- friendly environment, provides a guarantee to implement PPP Act. Besides, government should systematically assess and monitor the existing labor market program to evaluate its effectiveness and maintain link to the policies of different government organizations and agencies that are connected. Last but not least, implementing Knowledge Sharing Pro- gram with worldwide partners and learning advanced ex- perience. Sharing Korean experience and jointly developing sustainable growth.

REFERENCES [1] The Global Competitiveness Report. World Economic Fo- rum. 2017;. [2] Hwang B. The Ruling Discourse and Mass Politics of the Park Chung Hee Regime. The Review of Korean Studies. 2009;12(3):11–40. [3] OECDa. (2015). “Better Policies” Series KOREA Policy priorities fora dynamic, inclusive and creative economy. [4] Oecdb; 2018. Available from: http://www.oecd.org/korea/ korea-should-speed-up-job-market-and-social-protection- reforms-to-strengthen-inclusive-growth.htm. [5] Reuters; 2017. Available from: https://www.reuters.com/ article/us-southkorea-economy-budget/south-korea-to- boost-government-spending-in-2018-to-fund-welfare-create- jobs-idUSKCN1B9003. [6] kbs co kr W, editor. Focusing on Korean Youth Unemploy- ment; 2018. Available from: http://world.kbs.co.kr/chinese/ program/program_economyplus_detail.htm?No=6529.

International Journal of Contemporary Research and Review, Vol 11 Iss 05, 21807–21810 (2020)