Robert Atkinson, chairman of the U.S. Info Know-how Innovation Basis (ITIF), a grasp of modern economics, warned that Korea’s financial progress mannequin led by exports to massive corporations has reached its restrict. He warned that the way forward for the Korean economic system is bleak with out innovation and institutional surgical procedure to spice up the capability of small and medium-sized companies.
He visited Korea and interviewed him on the nineteenth in Yeouido, Seoul, about Korea’s innovation course and new authorities duties. The next is the query and reply.
-What do you suppose is the issue with the Korean economic system now.
▷China is shifting to a self-sufficient economic system, and the U.S. is aiming to scale back its commerce deficit. Korea’s progress potential, which makes a residing by way of exports, is inevitably reducing. Nonetheless, Korea is a “two-speed economic system” by which a small variety of massive corporations are at a world-class degree and plenty of small and medium-sized corporations are stagnant. The core competitiveness is concentrated in manufacturing conglomerates. Jobs at massive corporations account for under 13.9% of whole employment. It’s one-quarter of that of america and considerably decrease than that of Germany and Japan. It’s essential to extend the capability of small and medium-sized enterprises with low productiveness.
-Why Did Korean Small and Medium Companies Lose Competitiveness.
▷ Due to the “zombie firm.” South Korea prioritizes survival over company progress. Firms that must be expelled proceed to obtain help for political and social causes. It is like an individual would not train. It is handy proper now, nevertheless it’s deadly to well being.
-Are you telling me to not help small and medium-sized enterprises.
▷ Apply simply because you have got small gross sales or property, and also you shouldn’t be deprived simply since you are massive. Subsequently, small and medium-sized enterprises can’t develop into medium-sized and enormous enterprises. No matter measurement, a “scale-neutral” system must be designed to focus help on corporations with the need and capabilities to develop.
-Is there something the brand new authorities ought to do to this finish.
▷The Ministry of SMEs and Startups must be reorganized into a company progress division. Now, the Ministry of SMEs and Startups is specializing in the operate of defending SMEs. The company progress division ought to concentrate on supporting small and medium-sized corporations to develop into mid-sized and enormous corporations by serving to them in digital transformation, mergers and acquisitions (M&A). Subsidies and credit score help insurance policies also needs to be redesigned with the purpose of ‘commencement’ for SMEs.
-He criticized the Honest Commerce Fee.
▷I feel the Korea Honest Commerce Fee is following the European mannequin. The FTC’s mission is to safe market equity, to not shield small and medium-sized enterprises. Blindly defending and supporting is hindering innovation and limiting competitors for productiveness enchancment. Small and medium-sized companies are a working example. The federal government shouldn’t drive the personal sector to voluntarily do one thing just like the Shared Progress Committee.
-Korea has additionally tried to innovate quite a bit.
▷I do know. Nonetheless, product innovation and course of innovation are fully totally different. Korea succeeded in product innovation, however didn’t obtain the start-up and progress of the world’s first innovation or modern start-ups. I feel this drawback stems from collectivism, hierarchical tradition, and a really inflexible regulatory system based mostly on pre-regulation. In Korea, the place damaging rules will not be widespread, new companies can solely enter after rules are in place. This construction suppresses course of innovation.
-If there’s a place apart from the federal government that wants innovation.
▷ Universities are additionally an issue. Korean universities stay in a complacent place removed from innovation or commercialization. There must be extra instances of making world corporations utilizing science, know-how, engineering, and arithmetic (STEM) abilities. Analysis and growth (R&D) applications for SMEs also needs to be expanded. In new know-how fields equivalent to synthetic intelligence (AI), extra emphasis must be positioned on spreading analysis outcomes than on easy growth. In fact, innovation isn’t simple. Nonetheless, it’s essential to take a stance that even when it fails, it can proceed to problem former U.S. President Franklin Roosevelt, as he did in the course of the Nice Despair.
-How a lot AI will assist remedy Korea’s issues equivalent to ageing and productiveness.
▷AI is a vital know-how. It must be extensively launched in all industries, not restricted to large-scale language fashions (LLMs). South Korea can turn into a worldwide chief in making use of AI-based automation and effectivity applied sciences to all industries, together with agriculture, transportation, administration, and distribution. If AI is used properly, the nation’s general labor productiveness will be elevated by 1-2 share factors yearly. AI is not going to solely enhance productiveness however may also be the premise for Korean know-how corporations to increase their enterprise alternatives within the world market. Nonetheless, Korea’s AI-related legal guidelines and methods are presently hindering this.
-What’s going to occur if Korea doesn’t change.
▷ Korea has the worst demographic construction on the planet. As well as, there are too many small companies, which is stagnating productiveness enchancment. Because the aged inhabitants will increase, the variety of folks depending on switch revenue will improve, and the usual of residing of the working-age inhabitants will deteriorate. The delivery price may also fall additional. It’s a grim future by which each the aged and younger folks will turn into poor.
