SOME SOURCES AND REASONS FOR THE IMPRESSIVE ECONOMIC SUCCESS OF THE REPUBLIC OF KOREA
M. A. MOREKHODOV
Republic of Korea in the Global economy Keywords:, innovative technologies. investment climate, export opportunities
December 5, 2011 was a landmark day in the history of the Republic of Korea. On this day, the country's foreign trade balance has crossed the $1 trillion threshold since the beginning of the year. There were still 27 days left until the end of the year, and at its end it turned out that the total balance for the year amounted to $1.08 trillion (exports - $557 billion, imports - $523 billion; a positive balance in the trade balance - $34 billion).
The Republic of Korea (ROK) has become one of the world's leading countries that have passed the $1 trillion threshold in the trade balance and is here in the "community" of the most developed economies in the world. At the same time, it should be taken into account that in the club of trillionaire countries, South Korea is one of the smallest; in terms of territory size and population, it is ahead only of the Netherlands. And at the same time, it firmly occupies the 3rd place in terms of the variety of exported products; only Germany and the Netherlands are ahead of it in this indicator.
Economic reforms in the country began in 1962 with the adoption of the first five - year plan (1962-1966). Then the Republic of Korea ranked 104th in the world, now-15th in terms of economic development, and GDP per capita has grown many times 1.
It's been 50 years. The hard creative work of the state and society leaders has radically changed the country's economic and social image, political development has gained stability, and democratic institutions have gained a modern look. The main social problems and issues of employment of the population have been solved. The leaders of the country and the people managed to unite their efforts around the main directions of economic development that combine high technologies with an innovative path that all industries follow, as well as adapt the traditional business model to modern conditions. This allowed Kazakhstan to increase its economic, technical and intellectual potential from year to year, increase the export component and reduce the country's import dependence.
The export-import component reached its first billion dollars in 1967. Further, it grew as follows:
$10 billion level - 1974
$100 billion - 1988
$300 billion - 2000
$500 billion - 2005
At first glance, the secret of success is simple and obvious: it lies in the orientation of the entire society and, above all, its economy, on the one hand, on the development of the domestic market, its saturation with various goods, and increasing the purchasing power of the population. On the other hand, it focuses on increasing the production of various high - quality products for export, and the growth of the "export component", i.e., the demand for and competitiveness of goods in foreign markets. It seems to be nothing out of the ordinary, many other countries are following the same path, and in this case, as can be assumed, we are mainly talking about intensifying labor processes, creating better conditions for business, and the peculiarities of a mentality focused on quality work.
Of course, this is also the case, but the "South Korean way" also has a number of features that have ensured the country's success.
SIX MAIN FEATURES
1. From the very beginning, the task was set to significantly increase the role and importance of the Republic of Korea in the global economic space. And the country coped with this task.
According to the Ernst & Young rating agency, South Korea ranked 29th in 2011. By the way, much higher than the economies of China (39th) and Japan (40th). And in the countries of the Asia-Pacific region (APR), South Korea is in 4th place. For many years, Hong Kong has been the leader here, and, for example, Taiwan, which is technologically advanced, is only in 12th place.
In total, the rating list includes 60 of the largest and most highly developed countries in the world. When compiling it, priority is given to such factors as the scale and nature of foreign trade; capital movement; exchange of technologies and technical ideas with other countries; the scale of production capacity; and the labor market.
According to the agency's forecasts, several other countries may make a significant leap in their economic development in the next three years, in particular, Vietnam, Malaysia, Mexico and Colombia. The global economy as a whole, I believe, will pick up momentum for another two or three years and reach a peak in 2015, after which it is expected to start a downturn. It will not pass South Korea either, although it is likely to leave it without significant losses. After the crisis of 2008-2009, its economy made a leap forward in 2010-2011 due to the introduction of
new technical ideas and enhanced economic and trade cooperation with developing countries. Currently, Kazakhstan directs more than 60% of its export products to the markets of developing countries, taking into account the favorable forecasts for the development of these markets in the coming years.3
2. The Republic of Korea has made a timely and correct assessment of the role of Free Trade Agreements (FTAs)4, the importance of further development of free trade and its benefits compared to conventional forms of international trade.
The years 2010 - 2011 were particularly significant in this regard. In 2011, the country signed a number of new FTAA agreements with several countries, which allowed to increase the volume of exports with them to $296.1 billion; this accounted for 27.4% of the total trade turnover, which reached$1.08 trillion that year. These agreements covered both the European Union and ASEAN, as well as the United States, Chile, Peru and Singapore. The treaty with the United States was signed in 2007, but it was revised in 2010, which some South Korean society, as well as the opposition, regarded as infringing on the country's interests. Protest statements and various public actions followed. However, it was ratified by the National Assembly (Parliament) of the country5 in November 2011.
3. Over the past 50 years, the Republic of Korea has fought persistently, purposefully and consistently to attract new resources and expand its markets. In recent years, this work has been carried out mainly on the African continent. The country's government and private companies strive to fill African markets with products from South Korean enterprises, persistently promote their investments and technical projects, conduct exploration of mineral resources and develop new deposits.
South Korea's interest in the African market is not accidental. After all, Africa today is 12% of the world's oil reserves and 6.5% of gas6 (and according to other sources-even more). For some types of minerals - cobalt, diamonds, platinum - Africa is confidently leading the way. In particular, 50.3% of the world's cobalt reserves, 60.3% of diamonds, and 95.5% of platinum are concentrated here.
South Korean companies now operate in more than 10 African countries. Samsung makes investments in South Africa, Morocco, Nigeria, Tunisia, Algeria, and Egypt. In addition to the direct construction of industrial facilities and the opening of regional offices, it organized training for local specialists in production management and development. Hyundai is building a large transformer substation in South Africa. SK Energy is upgrading and mining 9 mines and quarries in six African countries. POSCO is upgrading a coal mine in Mozambique and a manganese ore quarry in South Africa. STX invests $10 billion. in housing construction in Ghana and Madagascar. HANJIN has started laying a major transcontinental highway.
Today, South Korea's investment in the African economy is $3 billion. In general, this is not much compared to the contribution of China, India and some other countries to the development of the continent, and they reach 7.2% of the total investment of foreign countries in Africa. But the situation is gradually changing. The government has allocated $7 billion to 25 South Korean companies for a "targeted purpose." - specifically, so that they will invest them in African projects in the coming years. And Samsung alone plans to send $10 billion. for the modernization and development of the Sub-SAH ARAN Africa subsidiary.
South Korea's" Africa Program " is long-term, has strong intellectual support and, more importantly, is supported by the Government of the country, which strongly encourages the interest of private companies in Africa. Kazakhstan would like to see Africa not only as a source of raw materials, but also as a community of stable, technologically and technologically advanced countries with highly educated specialists. There is evidence that South Korea is actively contributing to this. It intends to expand the scope of assistance to African countries, first, in the traditional direction - in the exploration of their subsurface resources and the expansion of mineral extraction. Secondly, it is ready to help Africans develop high technologies, expand their domestic market and enter foreign markets.7
4.Well-developed short-and long-term economic development planning contributes to the country's success. Thus, the development program of the Republic of Kazakhstan until 2050 has been developed and published, by which time its economy will become the 4th largest in the world, and GDP per capita will increase from the current $23,749 to $107,752.
The vector of the country's future economic development is being built today and consists of the following components::
- development of innovative technologies and search for new energy sources that can radically change the energy market in the future; whoever opens or creates such sources, Koreans believe, will "own the world";
- further strengthening of South Korea's position in the international arena as a reliable business partner, stable investor, exporter and importer;
- implementation of a new state policy aimed at creating more favorable conditions for business, expanding and developing sales markets, as well as developing the raw material base as the main driver of economic growth.
5. The country has an exceptionally attractive and stable investment climate. Foreign direct investment (FDI) in the South Korean economy is growing rapidly. In 2011, foreign investors invested $44.49 billion in the development of local companies, which is 29.5% more than in 2010. Another 19 foreign companies announced their readiness to invest $2.3 billion in the country's economy. In one of his interviews, the Minister of Economic Development of the Republic of Kazakhstan, Hong Suk-woo, said that the government has met almost all the requests of foreign investors-both in terms of
to reduce taxes, as well as simplify the procedure for registration and registration of businesses. He also gave the following figures: foreign companies that placed their business in South Korea before 2020 increased their revenues from $17.26 billion in 2000 to $62.62 billion. in 2010, 8
6. The state-funded public expert organization, the National Think Tank, has identified several main areas in which it is advisable to develop exports in the future. These are: semiconductors; sea and river vessels; automobiles; IT products: computers and related equipment, displays, flat panels, printers and monitors, mobile phones; products of the chemical and petrochemical industries. This group does not include, but it is joined by, also developed in South Korea, metallurgy and the food industry.
MAIN EXPORT DESTINATIONS
Let us now consider each of these areas in a little more detail.
It is not an exaggeration to say that semiconductors are the basic component of the Republic of Korea's exports, and their share in the country's export structure is 10.9%. South Korean semiconductors account for 53.2% of the global market. Revenue from their sale in 2011 was $52.5 billion. Production of semiconductors increased by 3.5% compared to 2010; demand for them continues to grow9.
Shipbuilding is a sector that provides 10.5% of the state's export component. South Korea currently has about 300 shipyards; 30 of them can build vessels with a deadweight of 10-10 thousand tons or more. Since 2003, the country is a world leader in shipbuilding; 7 plants are in the top ten largest shipyards in the world, 10 - in the top twenty.
In 2011, the South Korean shipbuilding industry built and delivered 48.2% of the total global order portfolio, totaling $56.5 billion. An important feature of this industry is a huge variety of nomenclature: tankers, bulk carriers, container ships; specialized vessels for the transportation of bulky cargo, icebreakers, cable and pipe laying machines. Production of particularly expensive gas carriers, vessels performing deep - water (up to 2-3 thousand meters) drilling, and drilling platforms has been mastered. It is no exaggeration to say that there are currently no vessels of this type that cannot be built in South Korea.
Shipbuilding companies of the Republic of Korea do not miss any promising tenders and, as a rule, win them, leaving well-known European firms "overboard". Many shipping companies prefer to order vessels for various purposes in South Korea, and most often several vessels at once, "directly", without participating in tenders. Such customers include, in particular, SOVCOMFLOT, for which 2 vessels for the transportation of liquefied gas with a total cost of $420 million will be built at one of the industry's plants in 2013. This is still a relatively modest order - the company "Hyundai Heavy Industries" (NIS) recently signed a contract for the construction of 5 ships with a total cost of $1.1 billion. But over time, there will probably be more Russian orders.
South Korea also produces a wide variety of equipment - lifting equipment, navigation equipment, radio equipment, etc. - that is used to equip civilian vessels. To coordinate the supply of such equipment abroad, a modern, well-equipped Maritime Center of South Korea was opened in Busan in November 2011. The total volume of exports of equipment for the shipbuilding industry and ships in 2011 amounted to $46.2 billion 11.
The automotive industry of the Republic of Korea consists of five major factories: Hyundai Motor Co., KIA Motor Co. GN Korea (formerly known as Daewoo Motor Co.), Renault Samsung Motor Co. and Ssang Yong Motor Co. They meet both domestic and export needs. There are South Korean companies located outside the Republic of Korea, but they are not discussed in this article.
In total, cars account for 7.6% of the country's exports. In 2011, South Korean firms produced 6,293,707 vehicles domestically and abroad , an increase of 19.6% compared to 2010. Exports in the same year totaled 3,151,930 vehicles , which is 27.9% more than in the previous year. Export revenue - $45.3 billion.
Hyndai Motor Co. (1,193,343 vehicles) and KIA Motor Co. (1,089,302) became the record holders for export deliveries (these enterprises belong to the same owner and form a powerful carmaker). Thus, a record of export deliveries was set for the entire period of operation of the two plants - 2 282 645 cars.
Renault Samsung Motor Co. and Ssang Yong Motor Co. also exported their cars, but their sales abroad are much smaller, although they amount to hundreds of thousands.
The peculiarity of the South Korean automobile industry is that no other country supplies 5 to 7 new or upgraded models to the market every year. The development of each of them takes about 3 years and costs an average of about $250 million. The Republic of Korea is a recognized world leader in terms of the pace of renewal of the passenger car model range.
It should also be emphasized that today PREMIUM models are being developed that can compete with such European brands as Mercedes, BMW, and Audi. For example, KIA Motor delivered a K9 car to the domestic market at the end of April 2012, the development of which was started in 2008; the project was funded in the amount of $461 million. The release of the export version is scheduled for the near future, these are models from Prestige Class to President Class at a price of $50 thousand to $71 thousand.
A total of 1,579,589 domestically produced cars were sold on the domestic market in 2011. In addition to passenger cars, South Korea produces trucks of various classifications and capacities, buses, special vehicles, forklifts, cranes, fire trucks and ambulances. The market of motor transport in the country is rich, diverse, modern-
it is safe, reliable and able to meet any needs and even whims of consumers.
The share of IT products (industrial products related to information technologies in one way or another) in the country's exports is 7%. The volume of production of such products reached $156.97 billion in 2011. and it grew by 2% compared to 2010. The Republic of Korea has long had a reputation as a global center of information technology and the technology designed for them. In the global market, a number of South Korean companies are known not only to specialists, but also to the broadest masses of consumers. These are Samsung Electronics, LG Electronics, SK Telecom. Directly in the Republic of Kazakhstan, CT Group and NHN Corporation are popular.
South Korea exported $11.88 billion worth of mobile phones of the latest generation-smartphones - in 2011, increasing their sales abroad by more than one and a half times in just one year - by 53.5%. Currently, the country occupies the 1st place in the global market of smartphone manufacturers; its share in this market is 27.1%.
South Korean TV exports grew by 4.8% in 2011, and sales totaled $50.15 billion. The supply of displays for export increased by 7.1% and reached $31.39 billion. Sales of tablets abroad grew by 180% in just one year in 2011, reaching $1.89 billion. However, exports of the industry's" traditional " products-printers and monitors-declined slightly - by 6.2%. The main consumer of South Korean IT products is China; in 2011 it bought them for $73.86 billion. Exports of such products to Japan, the ASEAN countries, the United States, and the European Union are growing (0.8%). By all indications, South Korean companies held the lead in this market in 2012 as well. 12
We have already mentioned above that an important feature of the activities of South Korean companies is that, firstly, they strive to update the product range as often as possible and, secondly, to launch the latest innovative products that are currently in the greatest demand of customers. The activities of companies operating in the IT market demonstrate many examples of this.
So, the company "Samsung Electronics" in 2011 firmly took the first place in terms of sales of "smart phones" - smartphones, ahead of the well-known American company Apple Inc. In 2012, more advanced LSI and AMOLED smartphones appeared on the market, as well as a new generation GALAXY S3 smart phone, which should generate at least $2 billion in revenue by the end of the year.
SK Telecom is the largest telecommunications company in South Korea. Thanks to good prospects in its market and government programs that stimulate production growth, the company constantly reduces the prices of its products and services. More than 40% of the population uses the connection of this company. It is the second largest manufacturer of microchips and chips in the country, and its position in the export direction is constantly strengthening.
KT Corporation is the second largest telecommunications operator in South Korea, with new generation data transmission lines at its disposal. The company took on the service of the latest model of the Samsung Galax-3D smartphone, mastered the transfer of music in digital format. In the city of Kimhe this year, the company, together with the Japanese firm Japan Sofibank, opened a large information center, whose functions include organizing the broadcasting of South Korean radio and television programs abroad.
EnEchEn Corporation specializes in electronic and computer games, advertising in electronic media. It distributes games not only in South Korea, but also in China and Japan. The company provides a variety of services: e-mail, online stores, e-books and maps, materials about cultural heritage - the list of offers is constantly growing. This market is growing very fast: according to forecasts, in 2012 the number of mobile network users using these services will grow by at least 172%, which will bring the company more than $80 million.13
Thus, the South Korean IT industry "overlaps" almost all areas of computer, and in a broader sense - electronic service, widely participating in international exchange in this area.
NOT PRIMARY, BUT VERY IMPORTANT
Other industries that are flourishing in the Republic of Korea and play a significant role in its exports include oil refining and ferrous metallurgy. The food industry has good prospects.
As you know, the country does not have its own hydrocarbon deposits, it has to import all its crude oil; it is the 5th largest oil importer in the world. The country has 5 large enterprises engaged in deep processing of raw materials; their total capacity is about 3 million barrels. of crude oil per day. In addition, there is a large network of specialized factories producing lubricating oils. Thanks to the deep processing of petroleum raw materials into automobile gasoline, aviation kerosene and other equally scarce products, the country is one of the major exporters of refined products. In 2011 it exported $ 64.9 million. bbl. Thus, the company has raised $47.9 billion, which is 63.9% more than in 2010, and has repeatedly recouped the cost of purchasing raw materials - crude oil.
The situation is approximately the same in the metallurgical industry. There are no iron ore deposits in South Korea, and all raw materials have to be purchased abroad. There are 3 large metallurgical plants operating in the country. In 2011 they produced 68.5 million tons of ferrous metals-cast iron and steel, increasing production by 16.2% compared to 2010. In terms of ferrous metal production, the Republic of Korea ranks 6th in the world, and its share in their global production is4.5%. Exports increased by 45% in 2011; the country received $39 billion from the sale of ferrous metals. All 3 plants export metal mainly in the form of castings; rolling production is poorly developed.
Acreage in the country is relatively small-
liki is the second largest importer of food and feed grains in Asia in terms of purchases abroad. According to experts, self-sufficiency in grain will reach 50% only by 2030. The government is concerned about ensuring food security, and it encourages entrepreneurs to implement agricultural projects abroad. Responding to this call, Hyundai Heavy Ind. acquired a 67.6% stake in Russian LLC "Khorol Zerno" (Primorsky Krai), engaged in the cultivation of corn and soybeans. In 2012, the company invested $9 million. c increasing the farm's acreage from 10 to 50 thousand hectares. All the resulting crop is sent to South Korea. The same company bought part of a large farm from New Zealand investors for $6.5 million and plans to produce up to 60 thousand tons of corn and soybeans there annually. Daewoo has leased 1.3 million hectares of land in Madagascar for 99 years. In total, more than 24 South Korean companies are involved in the development of the agricultural industry in 16 foreign countries, receiving up to 87 thousand tons of grain annually from leased and purchased land14.
Of course, we are not talking about exporting products of South Korean agriculture and animal husbandry yet. But it is possible that the latest technologies that will eventually come to this industry, high-yielding varieties of grain and other agricultural crops, achievements in climate and weather management will help hardworking and inventive people to achieve success in this area.
We spoke in detail about the country's success in exporting its goods. What is the situation with imports? At the very beginning of the article, we gave a figure: the "import component" of the Republic of Korea is $523 billion. But the country considers imports to be excessively large and seeks to reduce them in every possible way.
However, the possibilities for this are small. Kazakhstan needs a lot of crude oil, its imports increased by 6.2% compared to 2010 and reached 92.7 million barrels; purchase costs amounted to $100.7 billion. The country is likely to remain the world's 5th largest crude oil buyer.
The Republic of Korea is the second largest importer of natural gas purchased exclusively in liquefied form. The leading company Kogaz purchased 36.72 million tons of gas last year , which is 3.6% more than in 2010.
The country also ranks 3rd in the world in terms of coal purchases. In 2011 It imported about 120 million tons of solid fuel at an average price of $130.41 per ton. South Korea imported coal from Russia, the United States, Australia, Indonesia, Mongolia, South Africa and a number of other countries. The Republic of Kazakhstan buys large quantities of steel sheet, which is necessary, first of all, for the automotive industry. Imports of sheet metal in 2011 increased by 4.9% compared to 2010. It was mainly imported from China and Japan.
The country's leadership is concerned about the large size of imports of all types of fuel. A program has been developed for the search and implementation of various types of alternative fuels until 2020. If it is successfully implemented, oil purchases will be reduced by at least 35% by this time. At the same time, an intensive search for sources of relatively cheap hydrocarbons is underway. The main focus is on entering into lucrative contracts with oil-producing countries or by creating joint ventures with foreign companies. Thus, a program has been developed for the production and subsequent purchase on preferential terms of oil from 3 newly discovered fields in the United Arab Emirates. In 2013, it is planned to finance the program of development of 5 fields in the Iranian Kurdistan region. In the same year, the Republic of Korea will participate in the development of 4 fields in Greenland and (together with Australian companies) in the shelf zone of the South-East Sea 15.
* * *
The author set out to tell how, due to what a small country - the Republic of Korea-in a historically short period of time turned from poor and backward into a rich, highly developed power -one of the leading in economic terms in the world. How far he managed to do this is up to the readers to judge. Hoping that some of this experience will be useful in Russia as well.
1 Korea forecast to be 4-th richest in 2040. Korea Herald, March 02.2011.
2 Korea's trade tops $l.trln//The Korea. Times. December 6, 2011.
3 Korea ranked 29th in globalization // Korea Herald- January 26, 2012.
4 FTA (English free trade agreement) - an agreement of a group of countries on the creation of a free trade zone; these agreements usually specify a list of goods that are subject to the free trade regime; it is allowed to conclude additional agreements on the introduction of a transition period or on the gradual introduction of the FTAA regime over several years.
5 Koreas trade with FTA signatories jumps // The Korea Times. January 25, 2012.
6 Fostering synergies between Africa and Korea - www.koafec.org 7 Korea FD1 gains momentum in Africa // The Korea Times. Npvember7,2011.
8 19 foreign-invested firms to invest $2,3 bin by 2015 // Korea
Herald. February 12,2012.
9 S.Korea's semiconductor export to reach $2,5 bin in 2011 -www.asiaelectronicsnews.com
10 Deadweight (English deadweight, DWT) - the net cargo capacity of a ship, measured in tons, i.e. the sum of the mass of cargo carried by the ship (fuel, oil, technical and drinking water, passengers with luggage, crew and food). The term "deadweight" applies only to commercial (cargo) vessels.
11 S.Korea world top shipbuilding in 2011 // The Korea Herald. January 11, 2012; Shipbuilders bag orders for LNG carriers, tankers // The Korea Herald. February 16, 2012.
12 S.Koreas IT products hit new high in 2011 www.news.xinhuaanet.com
13 Robuts growth expected for IT giants // The Korea Herald. January 16,2012.
14 S. Koreas Food Security Alarm - www.asiasentinel.com.
15 Korea to raise self-supply of oil, natural gas to 35% // The Korea Herald. February 16, 2012.
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