From: yeonwook@hardy.u.washington.edu (Mark Choi)
Newsgroups: soc.culture.korean
Subject: Re: KOREAN ECONOMY
Date: 24 Dec 92 08:54:42 GMT
Article-I.D.: u.1992Dec24.085442.8652
Organization: University of Washington, Seattle

In article <1992Dec23.225157.26097@jhunix.hcf.jhu.edu> shlee@jhunix.hcf.jhu.edu (Seunghun Lee) writes:
>First thanks for your thoughtful reply.
>
>
>In article <1992Dec22.232241.8176@u.washington.edu> yeonwook@hardy.u.washington.edu (Mark Choi) writes:
>
>>
>>Korea has failed to do this, this is why there are so many financial short
>>falls and structural problems. The Korean economy is based on "giantism",
>>where nearly 60% of Korea's economy is controlled by the chaebol (Hyundai,
>>Goldstar, Samsung, Daewoo, etc.). These chaebols are always dependent on
>>small parts from Japan, that is what makes up a large part of the trade 
>>deficit, not because of Korean consumers buying Japanese consumer products,
>>but because of Korean large businesses being dependent on Japanese parts.
>>
>>Some people look at Japan and see huge companies much like in Korea. Then
>>why do their keiretsus not have huge deficits with part supplier nations?
>>Because for years, the Japanese version of "huge business conglomerate" is
>>different from the Korean chaebol. Korean chaebols are made up of several
>>huge companies, Japanese chaebols are made up of several huge companies plus
>>their suppliers. Also, small business didn't have to compete with large
>>businesses. Most of the components you find in Nikons, Sonys or Toyotas 
>>are from Japanese suppliers.
>>
>>
>>I think Korea is good on R&D spending. From what I've read, most Korean
>
>excuse me, but i don't know what R&D stands for.
>is it  research and something?

Yes, R&D = Research and Development

>>chaebols are cutting down facility expansion for this year, but keeping 
>>the projected investments in R&D, although I am not sure what the exact
>>statistics are. In any case, there remains many structural problems which
>>the government must face. In order to promote the growth of the small 
>>business sector, the government must lure the small business sector to 
>>participate in many infrustructure projects. For example, the new airport
>>off Kangwha will do nothing to the economy unless small business and large
>>business participate in its construction. The government must also make
>>investment an attractive choice by increasing interest rates and allowing
>>small businesses to have many tax breaks. 
>>
>
>Do you happen to know what present tax policy of our government is ?

I do not know the exact numbers off hand, but I believe that the tax 
breaks are only going towards big companies, or the government has its
priorities set on nurturing the chaebols.

>and what would it be under next regime?

I hope the tax incentive and other government concentrations are geared
towards a more diversified group of companies (small on up to large),
not just the chaebols.

>many tax breaks on technology ?
>and high tax on excessive possesion of land?

I'm afraid I don't know what the government will do.

>>What is also necessary is a central R&D facility where all small 
>>businesses can cooperate. Small businesses are usually in charge of 
>>creating the parts from raw materials. These raw materials are made by
>>machines created by large companies. And the machines are made with parts
>>from the small sector, so it is like a circle. The winning nation 
>>economically will have the strongest small business sector that finds
>>ways to efficiently extract parts from raw materials. The central R&D 
>>facility should be only used by the government, since the government
>>will have the most financial resources. Of course, the small businesses
>>can also set up their own R&D labs, etc., but because they are small,
>>and their financial power indirect, they will not have enough to actively
>>invest. So, the government must seek cooperation between state or
>>chaebol R&D labs and small businesses, large businesses and small businesses, 
>>and a general cooperation between all business sectors so the financial
>>R&D resources can be evenly spread. The problem with the Korean economy
>>is that the R&D research money is concentrated in only the big business
>>sector.
>>
>
>right, a central R&D would help our companies not to waste 
>precious time and money
>doing same things and competing each other uselessly.

Very correct. Also, it is necessary for the smaller companies to form
a centralized R&D lab in conjunction with the government because they 
lack the financial resources that large companies do, even though their
products are just as important to the economy as the technologically 
complex T.V., automobile, or computer. (i.e. you cannot have a computer
without the case, the chip, or the drive).

>>I'm interested in hearing the opinions,too
>>one more question.
>now many korean GeaBul try to invest in china,

Hmm..I believe all of them have some investments, but to date, they are
relatively small partnerships. But recently, I heard of a large partnership,
although I forgot the nature of the deal. I will get back later with more
details if I can remember or find the article.

>what effect would it be on our korean economy

Cooperation between large Korean companies and Chinese companies will benefit
both IF Korean small companies also benefit. Large Korean companies are just 
as dependent on small companies as the other way around. It is generally 
thought that the small companies possess only medium technological prowess.
However, they indirectly influence the performance of the more "advanced"
larger companies. If the Korean government overlooks the suffering of Korea's
small business sector, they will pay for it with tremendous losses and debt
(and lost investment) in the large sector. So as long as every sector of the
Korean economy remains healthy, cooperation with China is all for the better
because they are growing at tremendous speed and they are a huge market, 
much larger than the United States.

>and in what way they should invest in china to make korean economy better
>without costing many job in korea?

This is the though question =). But I think that the stories you see on the
news about Hyundai, GoldStar, or Sunkyong signing a huge contract with a
Chinese firm is not that important if the small businesses are left in the
dark without any Chinese connections. At this time in the relationship between
Korea and China, both small sectors should cooperate. Again, people think of
the small business sector as the "manual labor", "low technology" sector 
because its work force is more influenced by outside forces than the large
sector. But its importance is just as important and investment in small
business technology and manual labor should always be high because in an
international economy, the only stable domestic thing is labor and home
grown technology. Therefore, the distribution line should, for the meantime,
not be extended to China. But Korea's own distribution line (small sector)
should seek connections of their own. 

>Sincerely
>Seunghun
>