From: yeonwook@hardy.u.washington.edu (Mark Choi)
Newsgroups: soc.culture.korean
Subject: Re: KOREAN ECONOMY
Date: 22 Dec 92 23:22:41 GMT
Article-I.D.: u.1992Dec22.232241.8176
Organization: University of Washington, Seattle

In article <1992Dec22.224622.3881@jhunix.hcf.jhu.edu> shlee@jhunix.hcf.jhu.edu (Seunghun Lee) writes:
>Dear folks
>
>I heard a news that russia and china reached an agreement
>on economical coperation several days ago when Yelshin visited china.

Yes...this is good for China because now they can tap into Russia's 
natural resources freely.

>It is well-known that china and south-asian countries
>are rapidly developing with low-cost labor force.
>it is why korean middle and small companies are getting bankrupted these days.
>now korean company can not compete with cheap price.

Yes, this is bad for the Korean small business sector, and in the long run,
bad for the chaebol. A good developing economy needs to develop from the 
bottom up, like Taiwan. That way, the larger companies on up in the scale 
will have a good network of local suppliers and the money doesn't come out
of the pocket once it enters. Having a healthy small business sector also 
promotes quick flexibility and adaptation to swift market changes, much more
so than large and slow-to-adapt companies, or chains of companies. Also, 
it is known that the small to medium size business sector employs more people
in technical areas than large companies. The innovative and creative jobs
are created in the small business sector because more money is allocated 
towards promoting product niches because of the intense product competition.

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.

The Korean government has, for years, looked past the integral need of 
the small business sector because the large business sector is what 
DIRECTLY makes the profits. On the other hand, the small business sector
inspires/drives the large business sector and is indirectly in charge of 
the chaebol's profits.

>only way for korean economy to keep growing is to improve quality of goods.
>but unfortunately, big companies has not been invest enough
>money for science and technology to improve the quality.
>instead, they have been greedy on land.

I think Korea is good on R&D spending. From what I've read, most Korean
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. 

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.

>--- does anyone know how many percentage of whole land they own? ---
>and they just pay loyalty to mostly japanese company for such high tech
>so when korean company sell a mechandise, most of profit goes to japan.
>
>i want to hear your opinion, specially from folks studying economy.

I'm interested in hearing the opinions of others, too.

>sincerely
>Seunghun Lee (e-mail: shl@holger.pha.jhu.edu)




-- 
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  --|--|      | Mark Yun Wook Choi              |
   /.\ |      | yeonwook@hardy.u.washington.edu |
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Newsgroups: soc.culture.korean