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).