View metadata, citation and similar papers at core.ac.uk brought to you by CORE A history of the Republicprovided by ofK-Developedia(KDI School) Repository Korea’s industrial structural transformation and spatial development Sam Ock Park

The Korean peninsula, which is situated is divided into Yongnam (the southeast at the northeastern rim of the Asian con- region) and Honam (the southwest region). tinent, covers 221,000 square kilometers In general, the western part of Korea con- and includes both the Democratic People’s sists largely of plains, while the eastern part Republic of Korea and the Republic of consists largely of mountains. Korea. Of that total, 99,000 square kilome- Historically, when agriculture was the ters constitute the Republic of Korea, the major economic activity, the western part of 19 focus of this paper. Korea was relatively affl uent, largely due to chapter The Korean peninsula historically served high agricultural productivity in the plains. as a land bridge over which Chinese culture However, since the early 1960s, Korea’s eco- was diffused from China to Japan. Despite nomic geography has changed signifi cantly, the signifi cant infl uence of Chinese culture with rapid industrial development start- and the frequent invasions by foreign pow- ing in the southeastern and capital regions. ers, the Republic of Korea has managed to Construction of the Seoul-Busan express preserve a cultural and ethnic identity that is highway and the industrial development of different from that of either China or Japan, the southeastern region, centered on Busan, with a distinct language, alphabet, arts, and increased the spatial disparity between the customs (Lee and others 1988). axis of Seoul-Busan and the axis of the south- The province (do) is the country’s larg- western and northeastern corners of Korea. est administrative unit. Presently, Korea has Korea has experienced remarkable eco- nine provinces, with names originating in nomic growth for the past fi ve decades. Korea the early Chosun Dynasty. In addition, Korea was among the poorest countries in the world has one special city (Seoul) and six mega following the devastation of the Korean War cities (Busan, Daegu, Daejon, Gwangju, (1950–53). Korea’s per capita gross national Inchon, and Ulsan) that have populations product (GNP) rose from less than US$100 over 1 million and are at the same adminis- (in 1996 US$) in 1960 to US$20,000 in 2007. trative level as provinces (see fi gure 19.1). This remarkable economic achievement, Traditionally, the Korean peninsula known as “compressed economic growth,” was divided into three geographic regions: is closely related to the successful imple- north, central, and south. Due to the politi- mentation of export-oriented, sector-spe- cal division of the Korean peninsula in 1953, cifi c industrial development strategies and some of the northern part of the central the development of human resources since region and the whole of the northern region the launch of the First Five-Year Economic belong to the Democratic People’s Republic Development Plan in 1962. of Korea. In addition, there are cultural and Korea’s compressed economic growth geographic differences between the east and is dynamic, resulting, fi rst, in the concen- west of each region. For example, the south tration of industry and population in the A history of Korea’s industrial structural transformation and spatial development 321

capital region and, subsequently, in the con- Figure 19.1 Administrative divisions of Korea: provinces, mega cities, and provincial cities vergence of regional GDP per capita, as pro- vincial cities and rural areas began to evolve with the development of information and communications technology (ICT). Chunchon Considering the dynamics of the Korean economy and the country’s rapid spatial development, this chapter investigates the Seoul KANGWON following issues: Inchon KYONGGI

• The role of government policies in the NORTH transformation of industrial structure CHUNGCHONG Chongju and spatial development; SOUTH CHUNGCHONG • The spatial development of economic NORTH growth in terms of “distance” and “den- Daejon KYONGSANG sity” effects, agglomeration, factor mobil- Daegu ity, and technological development; and Chonju

• The lessons and policy implications. NORTH CHOLLA SOUTH Ulsan In Korea, structural dimensions are KYONGSANG closely related to spatial dimensions, and Gwanju Changwon Busan so this chapter examines industrial poli- Mokpo SOUTH cies, spatial transformation, and industrial CHOLLA restructuring. The analyses at the national level are conducted mostly for the period from the 1960s to 2005. However, the analyses at the regional level are conducted mostly for the period from the 1980s to 2005 due to the availability of data Provincial Boundaries by regions and inconsistency of data for Megacities earlier years. CHEJU The basic unit of analysis is the province: 9 provinces and 7 major cities (Seoul and the mega cities), making 16 units. The 16 basic units of provinces and cities are clas- sifi ed into 4 regions: capital, middle, south- 82 percent of the chemical industries, and west, and southeast (see fi gure 19.2). 90 percent of the electronic power–generat- ing facilities were located in the north when Industrial policies, structural Korea was liberated from Japanese occupa- tion in 1945 (Park 1981). To make matters changes of industry, and spatial worse, more than half of the manufacturing transformation facilities were destroyed during the Korean The history of Korean industrialization War, weakening the foundations for indus- is rather short. Manufacturing activities trial development. were mainly in handicrafts created by mid- Industrialization in Korea has progressed dle-class people in the Chosun Kingdom rapidly since the early 1960s, when the First (1392–1910). During the period of Japa- Economic Development Plan (1962–66) nese occupation (1910–45), Japan began was launched. The manufacturing indus- developing heavy and chemical industries try became the major driving force of the in the north (now the Democratic People’s Korean economy for the next two decades. Republic of Korea) to make use of the abun- The share of manufacturing in total national dant hydraulic power and mineral resources production increased rapidly from 12.1 per- there. As a result, 90 percent of the minerals, cent in 1960 to 29.6 percent in 1980, while 322 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

Figure 19.2 Four regions, nine provinces, and major cities in Korea to the proliferation of industrial cities in the capital region, while the development of a large-scale industrial complex was the major source of growth for industrial cities in the southeast region. Korea’s rural-urban transformation took place through the

CAPITAL KANGWON concentration of industry and population REGION in major urban areas, on the one hand, and MIDDLE the decentralization of industry and popu- KYONGGI REGION lation from the large core cities to their

NORTH hinterlands within the region, on the other. CHUNGCHONG Both processes are related to distance and density effects. SOUTH CHUNGCHONG Understanding the government’s indus- NORTH KYONGSANG trial policy is a prerequisite to understanding the spatial transformation of Korea. Since SOUTHEAST the First Five-Year Economic Development REGION Plan was launched in 1962, the national NORTH CHOLLA government has sought to promote particu- SOUTH KYONGSANG lar sectors and locations. Export-oriented SOUTHWEST industrialization has been a major strategy REGION since the early 1960s, and the strategy was SOUTH CHOLLA fashioned to promote the most promis- ing industries at a certain stage. These were called “strategic industries.” Labor-intensive industries were the key sectors for the Provincial Boundaries expansion of industrial exports before Regional Boundaries the early 1970s, while heavy and chemical > 500,000 population industries were the strategic industries for < 500,000 population the expansion of exports in the late 1970s CHEJU and early 1980s. The government’s policy of support for heavy and chemical industries contributed to the evolution of the chaebol (business conglomerate) system by allow- the share of agriculture decreased from 39.9 ing chaebols to borrow foreign capital and to 14.6 percent (see table 19.1). granting them incentives to invest in heavy The “density” of a core city and the “dis- industries (Park and Markusen 1995). Since tance” to the core city were important in the the mid-1980s, high-technology industries industrialization phase, as rapid industrial- such as semiconductors have been increas- ization was accompanied by rapid urban- ingly favored. Since the 1990s, especially ization. The urbanization ratio (share of since the fi nancial crisis in November 1997, cities with a population more than 20,000) the Korean government has sought to increased from 35.9 percent in 1960 to 78.6 promote the development of knowledge- percent in 1990. Most of the rapidly growing intensive industries with the intention of cities during the last four decades were in the opening up the country to trade and capi- suburban areas of Seoul and the southeast tal movements, restructuring the economy, region. In addition, most industrial cities including the fi nancial sector, and making grew rapidly, suggesting that agglomeration the labor market more fl exible. Regional or scale economies were important. Most innovation has been the key policy in the of the industrial cities in these regions were twenty-fi rst century (see fi gure 19.3). rural agricultural areas in the 1960s. Along with sectoral policies, the national Industrial decentralization from Seoul government established several large indus- was one of the major factors contributing trial estates in the southeastern part of the A history of Korea’s industrial structural transformation and spatial development 323

Table 19.1 Structure of production in Korea, by sector, 1960–2005 percentage of GDP in current prices Sector 1960 1970 1980 1990 2000 2005 Agriculture 39.9 31.1 14.6 9.0 4.6 3.4 Industry 18.6 28.4 41.4 44.7 42.8 40.4 Mining 2.3 1.3 1.4 0.5 0.3 0.4 Manufacturing 12.1 19.1 29.6 28.9 31.5 28.8 Construction 3.5 6.4 8.2 13.2 8.2 9.0 Utilities 0.7 1.6 2.1 2.1 2.8 2.2 Services 41.5 40.5 44.0 46.3 52.6 56.2 Total (GDP) 100.0 100.0 100.0 100.0 100.0 100.0 Source: Bank of Korea (various years).

Figure 19.3 A brief history of Korean industrial policies

• Industrial cluster 2000s • Innovative cluster • Regional innovation policy late • Restructuring of chaebols 1990s (conglomerates) financial crisis 1990s • New start-ups Industrial (venture firms) restructuring • Labor strategy early • Subcontracting 1990s • Foreign direct investment • Technological development

1980s • High-tech industrial development • Industrial dispersion • Spatial division of labor

1960s • Industrial complex development ~1970s • Import substitution; Export oriented

Source: Author.

country. The major new industrial cities without signifi cant intraregional produc- or production agglomerations of Ansan, tion networks. Changwon, Kumi, Pohang, and Ulsan The industrial policies have had a sig- were created as a result of industrial poli- nifi cant impact on the structural and spatial cies implemented in the late 1960s and the makeup of industries. To show the struc- 1970s. Chaebols contributed heavily to the tural changes more clearly, industries can development and growth of industrial cit- be classifi ed by level of technology or inten- ies by establishing large branch plants with sity of labor. In this chapter, manufactur- imported technology and borrowed foreign ing industries are classifi ed, for the sake of capital. However, the idea of territorial pro- convenience, into fi ve types: labor intensive, duction systems was not successfully imple- capital intensive, resource intensive, assem- mented in the early stage of development. bly, and other special types. The classifi ca- That is, at the initial stage, the industrial tion is based on the results of a factor analy- estates in the industrial cities had only lim- sis of manufacturing industries conducted ited local interfi rm linkages and were just by Park (1993). Assembly-type industries agglomerations of production activities are mostly technology-intensive industries, 324 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

except for the manufacture of furniture try’s industrialization, and, even though the (see table 19.2). Since the share of furniture share of assembly-type industries has risen manufacturing is very small, assembly-type slightly since the early 1990s, it remains lower industries are considered to be technology- than the share of labor-intensive industries. intensive industries. In Seoul, the structural changes within an The most distinctive structural change industry have been more intensive than the has been the shift from labor-intensive to structural changes among types of industry. technology-intensive industries. Labor- For example, within the apparel industry, intensive industries played a dominant role Seoul is highly specialized in fashion design during the phase of rapid industrialization and high-value-added products rather than in the 1960s and 1970s, but their share has standardized mass production. declined steadily since the late 1970s. On Spatial changes are closely related to the the contrary, assembly-type industries have industrial policies and structural changes of steadily increased their share since the late industries. In the early phase of industrial- 1970s. There have been slight changes in the ization, the export-oriented industrial policy use of resources and capital, but the most and heavy and chemical industrial policy signifi cant structural shift at the national reinforced spatial disparities, with industries level has been from labor-intensive to tech- concentrated in the capital region and the nology-intensive industries. southeast region (Park and Wheeler 1983). In addition, there are considerable dif- The capital region increased its share of ferences in the structural changes occurring manufacturing employment in the 1960s and in different regions. The southeast region peaked in 1975, with 48.3 percent (see table became highly specialized in assembly indus- 19.3). The southeast region increased its share tries during the last three decades. The mid- sharply, peaking in 1980, with 40.4 percent. dle region began to transform from labor-in- Furthermore, the government’s heavy tensive to technology-intensive industries in and chemical industrial development policy the 1990s. The changes to the middle region resulted in a spatial division of labor, with are closely related to the extension of indus- the headquarters of chaebols concentrated trial agglomeration from the capital region in Seoul and production functions decen- to the nearby Chungcheong region as well as tralized to other regions, especially the the development of Daeduck Research Park southeast. The high-technology industrial in Daejun in the 1990s. The shift to technol- policy resulted in a slight reconcentration ogy-intensive industries also occurred in the of production in the capital region in the southwest region, but the degree of the shift 1980s, due to the region’s locational advan- is relatively small compared to the nation- tages. The concentration of high-technology wide trend. The southwest region is rather industries and advanced services, including specialized in resource-based industries. research and development (R&D) activities, Changes in the industrial structure of in the capital region intensifi ed the spatial Seoul are signifi cantly different from the division of labor in the 1980s (Park 1993). nationwide changes. Seoul specialized in The middle and southwest regions, labor-intensive industries early in the coun- which can be regarded as peripheral regions,

Table 19.2 Share of manufacturing industry in Korea, by type of fi rm, 1981–2005 percent, unless otherwise noted Type 1981 1986 1991 1996 2001 2005 Resource based 16.5 15.4 14.9 16.8 15.9 15.1 Technology intensive (assembly) 27.6 33.7 41.8 47.8 51.3 57.6 Labor intensive 43.5 38.3 29.8 21.5 19.0 14.3 Capital intensive 4.5 4.3 5.0 8.8 8.6 8.1 Other 7.9 8.3 8.5 5.0 5.2 4.9 Korea, total number of fi rms 2,559,473 3,290,035 4,231,080 3,748,516 3,415,996 3,450,893 Source: KNSO, Census on Basic Characteristics of Establishments (various years). A history of Korea’s industrial structural transformation and spatial development 325

Table 19.3 Share of manufacturing employment in Korea, by region, 1963–2005 percent Region 1963 1970 1975 1980 1985 1990 1995 2000 2005 Seoul 29.6 33.9 30.5 22.1 19.8 15.6 12.5 10.5 9.1 Incheon — — — 7.7 7.2 7.8 8.3 7.8 6.9 Gyunggi 10.2 12.1 17.8 16.1 20.3 24.4 25.9 28.2 30.9 Capital region 39.8 46.0 48.3 45.9 47.3 47.8 46.7 46.6 47.0 Middle region 10.4 9.8 7.7 7.5 6.9 7.9 10.3 11.4 12.2 Southeast region 36.9 34.5 37.5 40.4 40.2 37.8 35.6 34.8 33.6 Southwest region 12.9 9.7 6.5 6.3 5.6 6.4 7.3 7.2 7.2 Korea, total number of 401,981 861,041 1,420,144 2,014,751 2,437,997 3,019,816 2,951,885 2,652,590 2,865,549 fi rms Source: KNSO, Census of Mining and Manufacturing Industry (various years).

experienced a decrease in their share of man- in labor-intensive industries were either ufacturing employment until the mid-1980s, closed or restructured in the early 1990s. after which the middle region recovered According to research on industrial somewhat. The southwest region increased restructuring in the Asian newly industrial- its share of manufacturing employment izing economies of Korea; Taiwan, China; from the mid-1980s to the mid-1990s, but Hong Kong, China; and Singapore in the no signifi cant change has occurred since the early 1990s, Korean fi rms pursued four strat- mid-1990s. Such regional changes are shown egies for industrial restructuring in the areas in table 19.3. of labor, organization, location, and tech- nology development (Park 1995). Flexible Firms’ industrial restructuring, labor strategies, which focused on numeri- spatial changes, and globalization cal rather than functional fl exibility, reduced In the 1990s Korea experienced two phases the costs of production by increasing the use of industrial restructuring: one was related of fl exible labor, such as temporary work- to the labor movement in the late 1980s ers, part-time workers, and foreign workers. and one to the fi nancial crisis in 1997. Subcontracting—the major organizational From 1987 to 1989, the country experi- strategy—reduced costs by outsourcing pro- enced severe labor disputes, and wages rose duction activities or separating some parts sharply. The sharp wage hikes, appreciation of production lines. Locational strategies of the won with regard to the U.S. dollar, focused on foreign direct investment (FDI), high interest rates, weak fi nancial structure, which was mainly geared toward low-cost high turnover rates, and labor shortages in areas such as China and Southeast Asian production lines triggered the restructuring countries during the early 1990s. There was of fi rms, especially the labor-intensive small an increase in outward FDI from Korea dur- and medium enterprises (SMEs; see Park ing the 1990s until right before the fi nancial 1993, 1994). crisis in 1997 (see fi gure 19.4). Along with Individual corporate strategies became efforts to reduce costs, technological devel- more important than ever for fi rms’ sur- opments also were emphasized, and the vival and competitiveness as consumer number of fi rms involved in R&D activities markets became more diversifi ed, technol- rose. About 19.9 percent of fi rms conducted ogy advanced rapidly, and product life cycles R&D activities in 1993, compared with became shorter. Before the early 1990s, the about 34 percent in 1996 (Park 2000). government played a critical role in the A second industrial restructuring industrial development and structural occurred after the fi nancial crisis in 1997, changes taking place in Korea (Markusen when the central government took a leading and Park 1993; Park 1991). Since the liber- role in restructuring chaebol groups. During alization of labor in 1989, the strategies of this period, outward FDI stagnated, while private fi rms have been as important as the inward FDI increased dramatically. Since policies of the government, and many fi rms 2002, outward FDI has again increased. The 326 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

Figure 19.4 Inward and outward FDI in Korea, 1981–2006 cultural “distance” effects were important. US$ thousand Two-thirds of outward FDI to China went 18,000,000 to northeast China, focusing on Shandong province, which is near to and has close his- 16,000,000 torical linkages with Korea. 14,000,000 Changes in innovation systems, 12,000,000 recent regional innovation, and cluster policies 10,000,000 Innovation systems in Korea have changed 8,000,000 signifi cantly during the last four decades. thousand $ In Korea the issues of innovation were 6,000,000 relatively neglected in the 1960s, because the ultimate goal was to provide a founda- 4,000,000 tion for industrialization. The government 2,000,000 took the initiative in the 1960s and 1970s by helping research institutes to take a leading 0 role in improving industrial technologies.

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Most fi rms were more interested in receiv- year ing technology transfers from the industrial Inward FDI Outward FDI countries than in conducting their own Source: Korea Trade Statistics (www.global.Kita.net). R&D activities. Universities, not fi rms, took the lead in the development of technology. Therefore, the national systems of innova- tion in the 1960s and 1970s were directed two periods of industrial restructuring sig- mainly by the government’s science and nifi cantly contributed to the globalization of technology policy, which supported the trans- the Korean economy by strengthening the fer of technology to fi rms and the process relationship between Korea and other Asian of learning from imported technology. The countries in terms of trade and FDI. impact of inbound FDI on the development The two restructuring processes in the of innovation systems was not signifi cant 1990s had a considerable impact on space during this period. and globalization in Korea. In the early Since the 1980s, however, the major role 1990s, many SMEs in labor-intensive indus- in R&D and innovation has shifted from the tries were closed or relocated to China government to private fi rms (Park 2001). or Southeast Asia, seeking low-cost areas. Many fi rms have established their own R&D Accordingly, regions that specialized in centers and significantly increased R&D labor-intensive industries, such as Seoul, expenditures. Private fi rms accounted for were under severe pressure to restructure. 56 percent of total R&D expenditure in 1981, Because the fi rms pursuing strong techno- surpassing the share of government expendi- logical development were mostly located in ture, and reached 81 percent in 1985 (MOST the capital region, the share of the capital 1990). In 1980 only 54 fi rms, most of which region did not decline in the early 1990s. belonged to chaebols, had their own R&D Because many new high-tech start-ups were centers, but the fi gure increased to 2,226 in established in the capital region, especially 1995 (KITA 1995, 1996). Chaebols aggres- in Seoul, there was a slight reconcentration sively established R&D centers in the early of industries for three to four years after the 1980s, but by the late 1980s, even the SMEs crisis. During the subsequent restructur- began to establish their own R&D centers. ing phase, scale economies and “density” According to a survey conducted right effects were signifi cant for high-tech spin- after the fi nancial crisis in December 1997, offs. Globalization progressed rapidly, with SMEs continued to be involved in R&D increasing outward FDI. Especially in the activities in the 1990s (Park 2000). Out of case of outward FDI to China, physical and 825 fi rms that responded to the question- A history of Korea’s industrial structural transformation and spatial development 327

naire, 20 percent of fi rms conducted R&D of national industrial complexes, including activities in 1993 and 34 percent did so in the electronics and information technology 1996. All in all, the survey revealed that larger (IT) cluster in Kumi, the machinery clus- SMEs were more interested in R&D activi- ter in Changwon, the automobile cluster ties than smaller SMEs. However, among in Ulsan, the parts and components clus- the fi rms that conducted R&D activities, ter in Ahnsan, the parts and components smaller SMEs spent a higher percentage of of automobile and machinery cluster in total sales on R&D than larger SMEs, which Gunsan-Janghang, the photonics cluster suggests that a considerable proportion of in Kwangju, and the medical instruments these smaller SMEs are high-tech businesses. cluster in Wonju. Thirty-six mini-clusters Presently, more than two-thirds of all R&D emanating from the seven innovative clus- centers were established by SMEs. ters have been developed to promote col- The R&D activities of fi rms in the 1990s laboration and solve problems in industrial had some distinctive characteristics (Kim practices. 1997): (1) large fi rms of chaebols established Daeduck Research Park in the city of strategic alliances with worldwide high-tech Daejun has been supported by the spe- fi rms; (2) large fi rms, which mostly belong cial law to promote commercialization of to chaebols, were aggressive in establishing R&D and innovations and was renamed as foreign R&D centers and labs; and (3) due the Daeduck R&D Special District in 2003. to the diffi culties in getting licenses for lead- Innovation clusters have been promoted ing-edge complex technology, large fi rms through support for strategic industries in sought to secure original technology by each region. High-tech IT clusters and local merging with or acquiring high-tech fi rms culture clusters have been supported through in the developed countries. collaboration among diverse economic Since the 1990s, regional innovation actors. And the development of clusters by networks have begun to evolve due to the private fi rms, such as Suwon’s IT cluster by development of regional clusters of SMEs Samsung, Paju’s semiconductor cluster by in technology-intensive sectors. The estab- LG-Phillips, and Pohang’s material cluster lishment of science parks and high-tech by POSCO, has also been promoted. parks in areas outside the capital region, This strong promotion of balanced in addition to the Daeduck Research Park, national development seems to have had has contributed to the clustering of inno- an impact on the share of regional GDP vation networks since the 1990s. Starting compared to the share of population in the in 2002, the participatory government has capital region, a subject examined in the emphasized balanced national develop- next section. The regional innovation poli- ment and promoted regional innovation cies have certainly increased the density of and cluster policies (Park 2007). Regional regional innovation networks in the prov- innovation policies, which have been pro- inces. However, restrictions on the auton- moted as essential for balanced national omy of universities have exerted negative development, seek to integrate “talent,” effects on the development of high-quality “technology,” and “industry.” Major poli- manpower, limiting the ability of Korea cies for regional innovation are seeking to innovate. to establish regional innovation systems, strengthen the innovation capacity of uni- Spatial development and versities in provinces, promote science and technology in the provincial regions, and change establish networks of industries, universi- During the last fi ve decades in Korea, “dis- ties, and research centers. tance” and “density” effects have been sig- In addition to regional innovation poli- nifi cant in Korea. Population and economic cies, the policy of promoting innovative activities have become increasingly concen- clusters has been pursued strongly since trated in the capital region, which accounted 2002. Seven innovative clusters have been for only 28.3 percent of the country’s total reformulated through the reorganization population in 1970 and for 48.2 percent in 328 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

2005. Other regions, accordingly, experi- effect of distance from Seoul. Furthermore, enced a decline in their share of population the middle region, which is adjacent to (see fi gure 19.5). Gyunggi province, has declined in popula- However, there were meaningful excep- tion share, refl ecting the effects of distance tions to and fl uctuations in this trend. The from the capital region. southeast region’s share of population The entropy index, which declines as remained steady during the 1970s, when disparity rises, suggests that the distribution heavy and chemical industries developed of population has become more regionally rapidly along the southeastern coast, but uneven over time (see fi gure 19.6). While its share of population has decreased the degree of spatial disparity of popula- slightly since then. The population share tion is lower than that of regional GDP and of the middle region declined steadily until of manufacturing, the spatial disparity of 1995, after which it increased slightly. The population is increasing, whereas that of southwest region, which was underdevel- regional GDP or manufacturing is not. The oped during the phase of rapid industri- entropy value in this chapter is measured alization, has seen a steady decrease in its as follows: share of the population, from 21.3 percent in 1970 to 11.7 percent in 2005, having n Hqq=− log , lost many residents to the capital region. ∑ ii2 (19.1) Seoul’s share of population increased i steadily until the end of the 1980s, but has where H is entropy value; q is a set of declined since then, even though there has nonnegative numbers that sum to unity been no signifi cant change in the absolute ⎡ n = . ⎤ ⎢∑ qi 10⎥; n is the number of sub- number of population (see table 19.4). ⎣ i ⎦ Gyunggi province, which is essentially a groups (in this case, 16). If any q is equal to suburb of Seoul, has steadily increased its 1 and all other qs are 0, then H is equal to 0. share of population from 8.2 percent in For a given n, H is at its maximum when all 1970 to 22.0 percent in 2005, refl ecting the qs are equal, so that

Figure 19.5 Share of population in Korea, by region, 1970–2004

60

50

40

30 percent

20

10

0

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 year Capital region Middle region Southeast region Southwest region

Source: KNSO, Resident Registration Population (various years). A history of Korea’s industrial structural transformation and spatial development 329

Table 19.4 Share of population in Korea, by region, 1970–2005 Region 1970 1975 1980 1985 1990 1995 2000 2005 Seoul 17.6 19.9 22.3 23.8 24.4 22.9 21.4 20.8 Incheon 2.5 2.8 3.3 3.8 4.4 5.2 5.4 5.4 Gyunggi 8.2 8.9 9.9 11.5 13.9 17.2 19.5 22.0 Capital region 28.3 31.5 35.5 39.1 42.8 45.3 46.3 48.2 Middle region 19.7 18.2 16.5 15.1 13.9 13.2 13.4 13.2 Southeast region 30.4 30.5 30.5 29.8 28.9 28.6 27.9 26.8 Southwest region 21.6 19.8 17.4 15.9 14.4 12.9 12.5 11.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Korea, total 32,240,827 35,280,725 38,123,775 40,805,744 42,869,283 45,092,991 47,008,111 48,138,077 Source: KNSO, Resident Registration Population (various years).

Figure 19.6 Entropy index

3.400

3.300

3.200

3.100

3.000

2.900

2.800

2.700

2.600

1955 1957 1959 1961 1963 1965 1967 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Population GRDP Manufacture (value of products) Manufacture (wage) Manufacture (employment)

Sources: KNSO (various years); author’s calculations.

⎡ ⎛ 11⎞ ⎤ than 5 percent, turning negative only twice: ⎢Hn=− ⎜ log⎟ = logn⎥ . (19.2) during the second oil crisis in 1979 and dur- ⎣ ⎝ nn22⎠ ⎦ ing the fi nancial crisis in 1997. There have been some spatial changes in This trend of increasing population dis- regional GDP (see fi gure 19.8). The capital parity is closely related to the continuous region steadily increased its share of total concentration of population in the capital regional GDP until 1993, when it peaked at region, suggesting the signifi cant effect of 49.1 percent. There were some fl uctuations agglomeration economies and density. after that time: a decrease to 46.8 percent in 1998 and then an increase to 48.6 percent Spatial pattern of regional GDP in 2002. There was an opposite trend in the growth in 1985–2005 southeast region, where the share of regional Since the launch of the First Economic Devel- GDP declined slightly from 1985 until 1993 opment Plan in 1962, the annual growth rate and increased slightly from 1993 to 1998. of gross domestic product (GDP) has been The share of the middle region remained impressive, as shown in fi gure 19.7. For the fairly steady, whereas the share of the south- most part, annual growth rates were more west region declined slightly. 330 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

Figure 19.7 Annual growth rate of GDP in Korea, 1960–2005 leader. Beginning in 2002, the participatory

15 government offered diverse incentives for industries to locate in provinces other than 10 the capital region, on the one hand, and imposed strong restrictions on the expan- 5 sion of economic activities in the capital

percent 0 region, on the other. 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 Moreover, spatial disparity, in terms of –5 regional GDP per capita, declined continu- ously from the mid-1980s until the fi nancial –10 year crisis in 1997, showing a clear trend of con- Source: Bank of Korea (various years). vergence (see fi gure 19.9, panel B). In 1997 the southwest region reached 95 percent of Figure 19.8 Regional GDP in Korea, by region, 1985–2003 the national average, rising from 77 percent in 1985. However, there was a trend of slight 60 divergence after the fi nancial crisis until 2002. Since 2002, the trend once again has 50 been toward convergence. Seoul’s regional GDP per capita has 40 been continuously higher than the national average, even after 2002, when the capital 30 region’s GDP per capita was lower than the

percent national average. Seoul has attracted new 20 industries or restructured its economy to keep its comparative advantages. Seoul is the 10 center of new industries and innovations, taking a leading role in the spatial division 0 of labor in Korea. Accordingly, the relative stagnation of 1985 1988 1991 1994 1997 2000 2003 year regional GDP per capita in the capital region Capital region Middle region Southeast region Southwest region is not the result of the stagnation of Seoul. It is due to the stagnation of Gyunggi prov- Source: www.kosis.kr. ince. Per capita regional GDP in Gyunggi province has stagnated for the following reasons. First, the population growth rate is Regional GDP per capita, by region, high in Gyunggi because of the continuous however, shows an interesting pattern, with in-migration from the rest of the country, a general trend of convergence. There were while the location of industry in the capital two turning points (see fi gure 19.9, panel A). region is controlled by law. Second, the sta- First, the middle region overtook the south- tistics underestimate the amount of service east region in 1989, when President Tae-Woo activities in regional GDP because of diffi - Rho liberalized labor. During the phase of culties in measuring the production of small rapid industrialization in the 1970s, indus- service-related fi rms. Because service activi- try clearly was concentrated in the capital ties are concentrated overwhelmingly in the and the southeast regions. However, with the capital region, the capital region’s regional high-tech industrialization that began in the GDP is underestimated, especially in Seoul. 1980s, especially after the labor disputes from 1987 to 1989, the southeast region lost its Spatial division of labor second-place position to the middle region. Large industrial fi rms or chaebols evolved Second, the capital region lost its primacy during the phase of heavy and chemi- in terms of regional GDP per capita to the cal industrialization in the 1970s. Large middle and southeast regions in 2003. Until fi rms located their headquarters mostly in 2003, the capital region had always been the Seoul and located their plants in the major A history of Korea’s industrial structural transformation and spatial development 331

Figure 19.9 Per capita regional GDP in Korea, by region, 1985–2005

A. Amount (won million) 18

16

14

12

10

8

6

4

2

0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 year Capital region Middle region Southeast region Southwest region

B. Korea average in each year = 100 120

115

110

105

100

95

90

85

80

75

70

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 year Capital region Middle region Southeast region Southwest region Korea total

Source: www.kosis.kr.

industrial estates outside Seoul, especially government provided support mainly to in the southeast region. With the trend of large fi rms because the scale of investments spatial separation between headquarters required in these industries was exception- and manufacturing plants, about 85 percent ally large. During the 1970s, loans to heavy of the headquarters of fi rms that had spa- and chemical industries accounted for tially separated plants were located in Seoul, more than 70 percent of all government while about 87 percent of the plants that funds made available to manufacturing had spatially separated headquarters were (Park 1981). These government loans were located outside Seoul (Park 1985). provided at very low interest rates, often During the 1970s, to develop heavy negative in real terms. In addition, govern- and chemical industries in the 1970s, the ment supported the rise of large fi rms by 332 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

establishing highly protective barriers for oriented more toward production research. infant industries and by permitting mono- In addition, high-tech sectors in the capital polistic production to overcome the prob- region had much stronger local linkages lems of a small domestic market. than other areas for purchasing input mate- During the 1980s, when government pol- rials. Such differences in R&D activities and icy emphasized high-tech industrial develop- the degree of local linkages of high-tech sec- ment, another spatial division of labor evolved tors indicate that spatial divisions of labor beyond the division between the headquar- intensifi ed signifi cantly during the 1980s ters’ control functions and the plants’ pro- (Park 1993). duction functions. Because the capital region Since the early 1990s, headquarters and had advantages in terms of skilled labor, tech- high-tech industries have tended to locate nology, engineering services, and so forth, it outside the capital region, especially in the became more specialized in high-tech indus- middle region. However, the spatial divi- tries and R&D activities, while the rest of the sion of labor persists. In recent years, more country remained more specialized in the less than half of the headquarters of the top 100 high-tech industries. Even in the traditional fi rms were located in Seoul, even though sectors, such as textiles and apparel, the pro- some of them have decided to leave Seoul, duction of technology-intensive or high-val- and the share of manufacturing plants of ue-added products was concentrated in the the top 100 fi rms in Seoul has declined capital region. from 3.0 percent in 2002 to 2.3 percent in R&D activities in Seoul were oriented 2007 (see table 19.5). more toward basic and applied research, In addition to the concentration of which required more qualifi ed manpower headquarters in the capital region, knowl- and information infrastructure, whereas edge-intensive activities are concentrated in R&D activities in the periphery were Seoul, suggesting that distance and density effects are important in the advanced ser- vices. However, the capital region’s share Table 19.5 Share of headquarters and plants of top 100 fi rms in Korea, by region, 2002 and 2007 of the headquarters of the top 100 fi rms percent declined from 79 percent in 2002 to 72 HQ of top 100 fi rms Plants of top 100 fi rms percent in 2007, and its share of patents Region 2002 2007 2002 2007 declined from 80.6 in 1995 to 75.3 percent Seoul 66.0 58.0 3.0 2.3 in 2005 (see table 19.6). Seoul has special- Incheon 4.0 5.0 5.6 5.8 ized in advanced production services, such Gyunggi 9.0 9.0 16.1 14.5 as design, advertising, legal and fi nancial, Capital region 79.0 72.0 24.6 22.5 management consulting, and ICT services. Middle region 6.0 6.0 22.3 21.5 For example, Internet domains are highly Southeast region 12.0 17.0 39.0 38.9 Southwest region 3.0 5.0 14.1 17.0 concentrated in Seoul, as is the transaction Korea, total number of fi rms and plants 100 100 305 311 of business-to-business (B2B) e-commerce Source: Maeil Economic Daily (various years). (Park 2004). Dynamics of Seoul and the Table 19.6 Share of industrial patents in Korea, by capital region region, 1995, 2000, and 2005 percent Population growth in Seoul was rapid in Region 1995 2000 2005 the 1970s and 1980s but has stagnated in recent years, whereas population growth Seoul 57.8 43.7 44.9 Incheon 4.6 5.1 4.2 in Gyunggi province has been rapid since Gyunggi 18.2 24.9 26.2 the 1990s, due to the infl ux of in-migration. Capital region 80.6 73.7 75.3 Regional GDP seems to be related to popu- Middle region 5.2 8.4 8.2 lation growth. During the recent years of Southeast region 12.5 14.3 12.8 growth, Gyunggi’s regional GDP per capita Southwest region 1.7 3.5 3.7 Korea, total number has been lower than the national average. 52,449 106,363 162,844 of patents During its period of growth in the 1980s, Source: MOST (various years). Seoul’s regional GDP per capita was lower A history of Korea’s industrial structural transformation and spatial development 333

than the average of the capital region, Seoul, especially from the Gangnam area, though still higher than the national aver- where informal and formal networks are age; as Seoul’s population growth has stag- intensive. The Gangnam area is the center of nated, its regional GDP per capita has risen breakfast meetings and evening gatherings, and is now higher than the average of the where new ideas, information, and knowl- capital region (see table 19.7). edge are exchanged, transferred, and gener- Seoul is the home of many new start-ups ated (Park 2005). There are many high-class in the technology-intensive sectors or newly hotels and restaurants, and Gangnam is the emerging industries, even though many center of new fashion, knowledge creation, fi rms have relocated to adjacent Gyunggi and innovation. province. In the late 1980s and early 1990s, Third, path dependence and path cre- new high-tech fi rms that were established ation are important spatial processes in the in Seoul relocated to or established branch capital region. The extension of high-tech plants in Gyunggi province, while maintain- industrial agglomeration to the middle ing their headquarters in Seoul, creating a region along the Seoul-Busan expressway is spatial division of labor in high-tech sectors a spatially path-dependent process, on the within the capital region. Gyunggi province one hand, and the development of Gangnam has specialized in high-tech industries and as a new core in Seoul and the development has hosted a number of high-tech agglom- of a new R&D center in Hwasung, Gyunngi erations since the 1990s, whereas Seoul has province, are examples of the creation of specialized in advanced services, such as new spatial paths, on the other hand. computer software, engineering, legal ser- vices, and high-tech start-ups. Development of ICT and Three factors have been signifi cant in spatial changes this spatial restructuring: distance, den- The number of ICT-related fi rms has grown sity of network, and path dependence and considerably in recent years, and almost creation. First, the movement of industrial half of all ICT fi rms (44.8 percent) were agglomeration from the central part of concentrated in Seoul in 2003. The degree Seoul before the early 1960s to the inner of concentration in Seoul varies by type of city of Seoul in the 1970s; the movement fi rm. Firms in the ICT-related service sec- of high-tech industrial agglomeration from tor and in wholesale and retail trade are far Seoul in the 1980s to the nearby suburbs in more concentrated in Seoul than fi rms in Gyunggi province in the 1990s; and the cur- ICT-related manufacturing. During the last rent extension of high-tech agglomeration decade, IT-related service industries have to distant suburbs of Gyunggi province and tended to concentrate in Seoul, whereas IT- the nearby middle region, such as the city related manufacturing industries have dis- of Cheonan. The extension of agglomera- persed to other regions. tion has a wave-like pattern, with “distance” The impact of ICT on the Korean econ- being the key factor. omy can be examined through the creation Second, the density of networks and of Internet domains, e-commerce, and vir- collaboration is critical for innovation and tual networks in the rural areas. The Inter- the generation of new fi rms and industries. net infrastructure in Korea has been well New industries in Korea always evolve from developed since the late 1990s. By the end of

Table 19.7 Regional GDP per capita in the capital region of Korea, 1985–2005 million won Region 1985 1990 1992 1993 1997 2000 2003 2005 Seoul 5.4 8.5 10.0 10.7 13.2 13.7 15.4 15.8 Gyunggi 6.4 9.0 10.0 10.2 11.1 12.2 13.2 15.0 Capital region5.7 8.7 9.9 10.4 12.2 12.7 14.0 15.1 Korea, total 4.9 7.8 8.9 9.4 11.7 12.3 14.0 15.2 Source: www.kosis.kr. 334 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

June 2007, there were 34.43 million Inter- 79.5 percent share of the total fi rms operat- net users, and the rate of Internet usage had ing B2B e-commerce sites in Korea in 2003 risen to 75.5 percent (see www.nida.or.kr). (Park 2004). If we consider only the public In general, the younger generation shows a B2B e-marketplaces, in which many sell- much higher usage rate than older genera- ers and many buyers can conduct transac- tions, and the usage rate of males is some- tions, the degree of concentration in Seoul what higher than that of females. The data is overwhelming, at 84 percent (Choi 2003). on Internet usage suggest that there is no The predominance of Seoul in the loca- signifi cant difference in access to the Inter- tion of public B2B e-marketplaces might net by regions (that is, between the capital be related to the clustering of ICT fi rms, and other regions), but rural and urban ICT-related spin-offs, and innovative entre- areas differ somewhat, largely as a result of preneurs and knowledge workers, especially the age distribution of the population. In in Gangnam area (Park 2004). ICT-related 2000 the proportion of persons belonging fi rms and advanced producer services are to the older age groups in rural areas was strongly concentrated in the Gangnam dis- 17.9 percent, compared with only 4.3 per- trict within Seoul (Park and Choi 2005). The cent in the cities (see isis.nic.or.kr). overwhelming concentration of the dot-kr Even though the regional disparity in domain, B2B e-commerce, and B2C e-com- usage rates is not signifi cant, the dot-kr merce in Seoul suggests a strong tendency of domains are concentrated mostly in the ICT fi rms to cluster in Seoul, even though capital region. According to a survey by the the Internet infrastructure (transferability) Korea Network Information Center (see is present throughout the country. www.nida.or.kr), in August 2007, Seoul had 58 percent and the capital region had 78 per- Virtual innovation networks in cent of the total number of dot-kr domains peripheral areas in Korea. The share of Seoul and the capital Although many people regard the importance region has increased slightly in recent years of networks in spatial clustering and disper- (see table 19.8). The higher concentration of sal as applicable only to advanced economies, dot-kr domains in the capital region com- box 19.1 shows that new economic spaces pared with the share of population or Inter- can also occur in peripheral areas. net users suggests that the concentration The case of Sunchang suggests a new might be related to other factors that attract paradigm in the organization of production ICT-related fi rms in Seoul. The number of systems and economic spaces, with the cre- B2C (business-to-consumer) e-marketplaces ation of new ideas based on intensive local is also highly concentrated in the capital and nonlocal networks. Sunchang has insuf- region, with Seoul having about 73 percent fi cient high-quality manpower, but it has of the total number (Choi 2003). networks of advanced services and top-level Firms operating B2B e-marketplaces are scientists and engineers. These networks do even more concentrated in Seoul and its not represent actual clusters of advanced ser- surrounding areas. The capital region had a vices; rather, they represent a virtual innova- tion network that has allowed the transfer of knowledge and innovation. High-quality Table 19.8 Share of dot-kr domains in Korea, by region, 2001–07 percent Internet infrastructure has enabled high- tech engineers and scientists to meet peri- Region 2001 2003 2005 2007 odically, while paved roads and easy access Seoul 58.50 55.60 56 57.60 to highways have made Sunchang accessible Incheon 1.20 1.30 3.40 3.40 Gyunggi 2.00 2.00 17.30 17.10 to major regional cities and Seoul. Capital region 61.70 58.90 76.70 78.10 Middle region 11.80 12.10 5.90 5.80 Policy implications Southeast region 21.70 24.40 13.00 12.00 Southwest region 4.70 4.50 4.40 4.10 Industrial and innovation policies need to Korea, total number of domains 457,450 611,548 642,770 928,177 keep pace with the transformation of soci- Source: www.nida.or.kr (National Internet Development Agency of Korea). ety and economy. In the knowledge-based A history of Korea’s industrial structural transformation and spatial development 335

BOX 19.1 The case of Sunchang

Sunchang-gun in Jeonbuk province is one of the traditional taste. Daesang Company has invested in most underdeveloped regions in Korea (Park 2005). advertising and R&D activities and has introduced Sunchang is located in a mountainous, peripheral automated mass production. Daesang Company area in southwestern Korea where the popula- illustrates the possible link between the production tion has been declining steadily since the 1970s. technology of a large company and traditional local Agriculture is the key economic sector, producing culture and resources. That is, the codifi ed knowl- principally tobacco, red pepper, and diverse veg- edge of the Daesang Company is linked to locally etables and fruits. Gochoojang (a thick soy paste embedded knowledge and resources. mixed with red pepper) is a product of Sunchang, Second, the county of Sunchang designed famous for its distinct taste, which is acquired in a complex to gather the traditional gochoojang the fermentation process. Traditionally, most of the makers together in one place. The county allowed households in Korea made their own gochoojang. skilled persons, who have a license to make tradi- However, nowadays most households buy gochoo- tional gochoojang and more than 10 years of expe- jang in the market, and the brand name “Sunchang rience in making it, to move their household into Gochoojang” has become famous. the complex. As a result, 54 households live in the Since the late 1990s, the production system of complex and make their own specialized traditional Gochoojang has changed signifi cantly as a result of gochoojang, selling their products in the local mar- two developments. First, Daesang Company, one of ket and through the Internet to consumers in large the large companies in the food industry of Korea, cities. In addition, the county recently established established a branch plant in Sunchang to produce a Research Institute of Soybean Paste for continu- standardized gochoojang under the brand name ous development of several types of soybean paste “Sunchang Gochoojang,” with quality control and a industries.

information society of the twenty-first circulation,” which encourages talented peo- century, a new industrial policy is needed ple to live in the provincial areas. Qualifi ed that focuses on the supply of qualified high schools and good living and service human resources. A policy of simply relo- environments are needed if regions outside cating industrial fi rms may not be enough the capital are to attract and retain talented to spur regional development in the pro- people. Specifi cally, university-industry col- vincial areas. Accordingly, Korea needs inte- laborative networks should be strengthened grated regional innovation policies, which in the provinces, and at least one good high can be improved to promote spontaneous school should be nurtured in each province. regional development. Future policy should Second, regional innovation and clus- seek not only to promote balanced national tering strategies should be promoted with development but also to provide an engine regional integration of the central city and for sustainable development with the inter- hinterlands. The regional innovation poli- play of scale economies, factor mobility, and cies in Korea have been promoted based development of ICT. on the administrative boundaries of 16 cit- First, attracting talented persons to the ies and provinces. Special cities and prov- provincial regions is critical, as regional inces have promoted regional innovation development depends largely on the creation policies separately, and there has been no of knowledge and capacity to innovate. To regional integration between a central city entice such talent to areas outside the capital, and its surrounding province(s). To pro- it is essential to promote the interaction of mote regional innovation successfully, a all economic actors in the region and to cre- central city (special city) and its hinterlands ate an environment in which creative people (provinces) should be integrated to generate and scientists can thrive. A policy of merely synergy effects and scale economies. Accord- relocating R&D centers and fi rms will not ingly, a wide-area regional integration plan, suffi ciently improve the innovation poten- which considers a central city and surround- tial of peripheral regions. “Brain drains” of ing province(s) as one regional innovation the past, which represent out-migration of system, should be developed. Strategic talented people toward Seoul and foreign industries and cluster strategies should also countries, should be transformed into “brain be promoted at the level of an integrated 336 RESHAPING ECONOMIC GEOGRAPHY IN EAST ASIA

wide area, not at the level of a province or competitive by supporting the sustainability city within a wide area. of their population and the development of Third, new strategies to diffuse innova- virtual innovation networks. tion to the level of counties and small cities within an integrated region are needed. For Note example, a “local learning festival” could be Sam Ock Park is a professor at Seoul National considered, in which fi rms, schools, public University. institutes, all levels of students, and resi- dents from counties or cities get together to display their creative and cooperative power. References To counter the recent trend of high school Bank of Korea. Various years. National Indictors students avoiding engineering school and on National Account. Seoul: Bank of Korea. the natural sciences, efforts should be made Choi, Ji-Sun. 2003. Public B2B Electronic Mar- to inspire them to study science and engi- ketplaces: A Spatial Perspective. Ph. D. dis- neering and to help them to understand sertation, Department of Geography, Seoul the importance of scientifi c technology and National University. enterprise in their daily lives through fun Kim, Hyun Sook. 1997. “Innovation Systems opportunities such as symposiums, work in and Science and Technology Policy in Korea.” scientifi c laboratories, and programs that In Technology Capacity and Competitiveness of expose students to science and open them Korean Industry, ed. Keun Lee and others, pp. to the exchange of ideas. Regional innova- 123–66. Seoul: Kyungmoonsa. tion should be promoted, as should net- KITA (Korea Industrial Technology Associa- works joining fi rms, universities, research tion). 1995. Statistics of Industrial Technology. institutions, and government agencies. Seoul: KITA. Fourth, considering the demographic ———. 1996. Directory of Korea Technology trends of low birth rates and population Institutes, 95/96. Seoul: KITA. aging, a new system should be established KNSO (Korean National Statistical Offi ce). to use talented people in the provinces to 2005. Results of the EC Statistical Survey. assist Korea’s aging society. As most longev- Seoul: KNSO. (www.nso.go.kr.) ity is occurring in the provinces, efforts are ———. Various years. Census on Basic Charac- needed to attract “retired brains” to prov- teristics of Establishments. Seoul: KNSO. inces and involve them in contributing to ———. Various years. Census of Mining and local development. Attracting retired brains Manufacturing Industry. Seoul: KNSO. to the provincial regions could enhance the ———. Various years. Resident Registration innovation capacity of regions and help Population. Seoul: KNSO. to solve regional problems, including the shortage of qualifi ed manpower. Lee, Chan, Ki-suk Lee, Yeon-ok Kim, Sam Ock Finally, beyond the regional industrial Park, Man-ik Hwang, Woo-kung Huh, and Dong-won Park. 1988. Korea: Geographical strategy and cluster polices, sustainability of Perspectives. Seoul: Korea Educational Devel- rural areas should be considered. Continu- opment Institute. ous out-migration of population from rural areas can result in the deterioration of rural Maeil Economic Daily. Various years. Annual Reports of Enterprises. Seoul. economies. Virtual innovation networks using local resources and culture should be Markusen, Ann, and Sam Ock Park. 1993. promoted in remote areas. Regional integra- “The States as Industrial Locator and Dis- tion of diverse areas within a region with an trict Builder: The Case of Changwon, South Korea.” Economic Geography 69 (2): 157–81. emphasis on sustainability should be actively promoted, in addition to balanced national MOST (Ministry of Science and Technology). development. Spatial disparity among 1990. Science and Technology Annual 1990. regions has declined somewhat, but dispari- Seoul: Sin Jin Business Affairs. ties among localities within a region are still ———. Various years. Research of R&D Activity. problematic. Some rural areas can be globally Seoul: Sin Jin Business Affairs. A history of Korea’s industrial structural transformation and spatial development 337

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