Fiscal Policy in Korea for building Fiscal Policy in Korea for building Infrastructure and Infrastructure and

its Knowledge based economy its Knowledge based economy

October 9, 2003October 9, 2003

WB-Vietnam-Korea Conference WB-Vietnam-Korea Conference

on Public Expenditureon Public Expenditure

Moon-Kyu BangMoon-Kyu Bang

Ministry of Planning and Budget Ministry of Planning and Budget

Republic of Korea Republic of Korea

I. Korea’s Public Expenditure in building SOC and I. Korea’s Public Expenditure in building SOC and

Knowledge based economyKnowledge based economy

II. Korea’s Building InfrastructureII. Korea’s Building Infrastructure

III. Korea’s Transition into Knowledge Based III. Korea’s Transition into Knowledge Based EconomyEconomy

• • Knowledge Revolution in KoreaKnowledge Revolution in Korea

• • Its strategy for building a KBEIts strategy for building a KBE

Contents Contents

0

2

4

6

8

1958 1962 1966 1970 1978 1982 1986 1990

Rep. of Korea

Ghana

Per capita GDP Thousands of 1985 international dollars

Difference Difference attributed to attributed to KnowledgeKnowledge

Difference due Difference due to physical and to physical and human capitalhuman capital

I-1. Korea’s Economic MiracleI-1. Korea’s Economic MiracleKorea’s GDP/Capita growth(61-96) : average 7.9%

GDP per capita(PPP): US$14,731(96), US$17,380(00)

1974

Source: WBI knowledge for development program

Source: WBI knowledge for development program

1 1

2 2

• • Korea’s public expenditure has focused on buildingKorea’s public expenditure has focused on building

- physical capital (SOC) and human development, - physical capital (SOC) and human development,

- its knowledge based economy. - its knowledge based economy.

< Expenditure ratio by sectors in the integrated public finance (%) >< Expenditure ratio by sectors in the integrated public finance (%) >

‘‘70 70 ‘80 ‘80 ‘90 ‘90 ‘97 ‘97 ‘03‘03

economic development 27.7 28.5 30.5 31.2 25.0economic development 27.7 28.5 30.5 31.2 25.0

education education 16.7 14.6 17.0 16.4 15.1 16.7 14.6 17.0 16.4 15.1

socail welfare 6.2 6.7 9.8 10.5 16.4socail welfare 6.2 6.7 9.8 10.5 16.4

• • Expenditure in economic development and education is very Expenditure in economic development and education is very high compared with other countries.high compared with other countries.

USA(01) USA(01) UK(99) UK(99) Japan(recent)Japan(recent) Korea(03)Korea(03)

economic development 9.3 6.6 16.2 25.0economic development 9.3 6.6 16.2 25.0

education education 1.9 3.7 6.0 15.1 1.9 3.7 6.0 15.1

socail welfare 50.1 51.9 38.4 16.4socail welfare 50.1 51.9 38.4 16.4

2. 2. Public Expenditure for this MiraclePublic Expenditure for this Miracle

33

For 40 yrsFor 40 yrs, , SOCSOC investment has been very highinvestment has been very high

< Public SOC investment ratio to GDP (%, 2000) >< Public SOC investment ratio to GDP (%, 2000) >

KoreaKorea France France Germany Germany UK UK Itary Itary

2.92.9 1.0 1.2 0.9 0.6 1.0 1.2 0.9 0.6

•• SOC investment ratio to total size of general accountSOC investment ratio to total size of general account

: 11.1 % (‘93) : 11.1 % (‘93) 15.9 % (03) 15.9 % (03)

• • Huge jump in SOC stock accumulation but still way to goHuge jump in SOC stock accumulation but still way to go

: SOC Stock value in 1995 price 0.7 (‘68) : SOC Stock value in 1995 price 0.7 (‘68) 388.3 trillion won (‘97) 388.3 trillion won (‘97)

•• 40 yrs investment 40 yrs investment SOC Stock is still small SOC Stock is still small <Stock of transportation facilities to GDP* (%, 1999)><Stock of transportation facilities to GDP* (%, 1999)> KoreaKorea Japan Japan USA USA UK UK Germany Germany

4242 61 73 114 91 61 73 114 91

(* accumulation ratio) (* accumulation ratio)

Korea’s Public investment to SOCKorea’s Public investment to SOC

Public Expenditure to support KBEPublic Expenditure to support KBE

Aggressive Investment Aggressive Investment in R&D, Education and IT infrain R&D, Education and IT infra

R&D investment : R&D investment : 2.9% of GDP, 4.8% of cetral government budget2.9% of GDP, 4.8% of cetral government budget

< R&D investment ratio to GDP (IMD,2003, %) >< R&D investment ratio to GDP (IMD,2003, %) >

KoreaKorea USAUSA JapanJapan France France UKUK

2.92 2.80 2.98 2.20 1.85 2.92 2.80 2.98 2.20 1.85

Education has been a stepping stone for Korea’s miracleEducation has been a stepping stone for Korea’s miracle

< Expenditure ratio to the Integrated Public Finance (%) >< Expenditure ratio to the Integrated Public Finance (%) >

USA(01) USA(01) UK(99) UK(99) Japan(recent) Japan(recent) Korea(03)Korea(03)

education education 1.9 3.7 6.0 15.1 1.9 3.7 6.0 15.1

Investment in IT infra and trainingInvestment in IT infra and training

- For 3 yrs (00~02), 7.9 trillion won invested (annually 2% of IPF)- For 3 yrs (00~02), 7.9 trillion won invested (annually 2% of IPF)

- - Information highway : 1.2 trillion won (95~03)Information highway : 1.2 trillion won (95~03) 4 4

Total R&D Expenditure (PPP, 1996)

Russia

Japan

USAustraliaDenmark

CanadaUK

NetherlandKorea

SpainItalyPoland

Austria

Switzerland

FinlandFrance

Germany

Turkey

China

IndiaBrazil

0

1000

2000

3000

4000

5000

6000

0 0.5 1 1.5 2 2.5 3 3.5R&D expenditure as % of GNP

Sci

enti

sts

& E

ng

inee

rs (

per

mil

lio

n p

eop

le)

a. Initial industrialization: ‘60s a. Initial industrialization: ‘60s

EconomyEconomy• • Take-off (‘60s) Take-off (‘60s)

: launched the 1st 5 yr : launched the 1st 5 yr economy development plan economy development plan

• • Export-oriented policyExport-oriented policy

: policy loan, promoting : policy loan, promoting general exportersgeneral exporters

• • Top 5 ExportsTop 5 Exports : Iron, Tungsten, : Iron, Tungsten,

Silk, Anthracite, CuttlefishSilk, Anthracite, Cuttlefish

Key PoliciesKey Policies• • develope develope Seoul-Pusan Seoul-Pusan

Highway, Highway, Pusan Port Pusan Port

• • focus on steam power focus on steam power plant (urgent needs) plant (urgent needs)

• • main resources from main resources from foreign borrowing foreign borrowing

• • KIST (‘66)KIST (‘66)

• • expand primary expand primary education education

5 5

b. Accelerated industrialization: 70’sb. Accelerated industrialization: 70’s

EconomyEconomy• • Promoting Heavy and Promoting Heavy and

Chemical Indusry (HCI)Chemical Indusry (HCI) - HCI ratio to manufacturing: - HCI ratio to manufacturing:

4141 51% 51%

• • Top 5 Exports:Top 5 Exports:

- - Textiles, Plywood, Wigs, Iron Textiles, Plywood, Wigs, Iron Ore, ElectronicsOre, Electronics

Key PoliciesKey Policies• • Building SOC investment Building SOC investment

system : National Land system : National Land Development PlanDevelopment Plan

• • Seoul Metro, Honam Seoul Metro, Honam Highway, yongdong Highway, yongdong

Highway, Industrial complexHighway, Industrial complex

• • nuclear power plantnuclear power plant

- able to supply electricity - able to supply electricity

more than demandsmore than demands

• • established established KDI (‘71)KDI (‘71)

6 6

c. Industry rationalization : 80sc. Industry rationalization : 80s

EconomyEconomy

• • Industry Restructuring Industry Restructuring

: expansion : expansion upgrading upgrading

• • Top 5 ExportsTop 5 Exports : : Textiles, Electronics, Iron & Textiles, Electronics, Iron &

Steel Products, Footwear, Steel Products, Footwear, ShipsShips

Key PoliciesKey Policies• • high growth, trade surplus high growth, trade surplus

inflation pressure inflation pressure slow SOC slow SOC investment investment SOC shortage SOC shortage high cost high cost

• • develop LNG base, regional develop LNG base, regional energy supply system energy supply system

• • upper secondary upper secondary & tertiary & tertiary educationeducation (Vocational HS & (Vocational HS & Junior Colleges) Junior Colleges)

• • National R&D programNational R&D program

7 7

d. Transition into KBE: 90s~03d. Transition into KBE: 90s~03

EconomyEconomy• • CCompetitiveness,ompetitiveness,

Knowledge-based Knowledge-based Economy Economy

• • Top 5 Exports:Top 5 Exports: 1990: Electronics, Textiles, 1990: Electronics, Textiles,

Footwear, Iron & Steel Footwear, Iron & Steel Products, Ships Products, Ships

2000: Semiconductor, Motor 2000: Semiconductor, Motor Cars, Computers, Ships, Cars, Computers, Ships, Petroleum ProductsPetroleum Products

Key PoliciesKey Policies• • Established the special account for Established the special account for

transportation facilitiestransportation facilities• • private investment to SOCprivate investment to SOC• • Inchon Airport, High speed Inchon Airport, High speed

railwayrailway•• Informatization highway project Informatization highway project : 97-05, 831 bllion won : 97-05, 831 bllion won • • E-government project (01~07)E-government project (01~07) : 1 trillion won : 1 trillion won • • Public investment in higher ed.Public investment in higher ed.

8 8

II-1. Korea´s SOC Investment II-1. Korea´s SOC Investment

60 60 70 70 80 80 90 90 00 00 02 02

- - SOC (A) Investment 0.1 1.4 5.7 15.4 31.3 29.2 SOC (A) Investment 0.1 1.4 5.7 15.4 31.3 29.2

- - GDP (B) GDP (B) 16.3 56.2 115.0 263.4 478.5 524.7 16.3 56.2 115.0 263.4 478.5 524.7

- SOC/GNP(B/A, %) 0.6 2.4 5.0 5.8 6.5 5.6 - SOC/GNP(B/A, %) 0.6 2.4 5.0 5.8 6.5 5.6

9 9

((trillion won=about $ billion, 1995 price)trillion won=about $ billion, 1995 price)

During ‘60~‘02, average growth of SOC investment is 14.5 %, During ‘60~‘02, average growth of SOC investment is 14.5 %,

•• much higher than GDP growth : 7.9 % during ‘61~’99 much higher than GDP growth : 7.9 % during ‘61~’99

• • SOC investment ratio to GDP : 0.6 % (‘60) SOC investment ratio to GDP : 0.6 % (‘60) 5.6 %(‘02) 5.6 %(‘02)

((The value in 1960 is adjusted by 1970 value)The value in 1960 is adjusted by 1970 value)

Infrastructure Investment and Ratio to GDPInfrastructure Investment and Ratio to GDP

(billion won, (%) , 1995 price)

25,438

5,745

10,466

15,373

29,21931,284

2,1311,36928999

(5.6)(6.5)

(6.7)

(5.8)

(6.3)

(5.0)(2.6)(2.4)(1.3)(0.6)-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2002

(Bank of Korea) 10 10

1111

Investment Increase rate (%)Investment Increase rate (%)

6060s s 70s 70s 80s 80s 90s 90s 00s 00s

30.1 15.4 10.3 7.4 15.530.1 15.4 10.3 7.4 15.5

In 60s : Foreign borrowing (World Bank, countries) In 60s : Foreign borrowing (World Bank, countries) In 70s : building SOC investment systemIn 70s : building SOC investment system • • BBudget expenditure in SOC increasedudget expenditure in SOC increased

• • National Land Developmet PlanNational Land Developmet Plan

In 80s :In 80s : slows down to avoid inflation pressure from slows down to avoid inflation pressure from

current account surplus current account surplus (low oil price, strong Yen)(low oil price, strong Yen)

high transportation cost and high transportation cost and

weak competitiveness in 90s.weak competitiveness in 90s.

II-2. Mobilizing Resources for Soc InvestmentII-2. Mobilizing Resources for Soc Investment

1212

In 90s : Expansion of public spending to stimulate economyIn 90s : Expansion of public spending to stimulate economy

• • SOC investement ratio to general accountSOC investement ratio to general account 11.1 % (93) 11.1 % (93) 14.2% (97) 14.2% (97) 15.9 % (03) 15.9 % (03)

• • The special account for transportation facilities openedThe special account for transportation facilities opened

- It sets up a stable base to mobilize funds for SOC investment- It sets up a stable base to mobilize funds for SOC investment

- Main revenue : transportation tax, fee, etc. - Main revenue : transportation tax, fee, etc.

- 5 sub accounts for road, railway, port, airport, etc.- 5 sub accounts for road, railway, port, airport, etc.

•• Private Investment Promotion Law (95) establishedPrivate Investment Promotion Law (95) established

- During 90~01, total 33.2 billion US$ is invested - During 90~01, total 33.2 billion US$ is invested

- Private investment ratio to SOC in general account increases.- Private investment ratio to SOC in general account increases.

: 0.2% (95) : 0.2% (95) 9.6% (02) 9.6% (02)

•• SOC for building knowledge based economy strengthenedSOC for building knowledge based economy strengthened - - Informatization highway (97-05, 831 billion won) Informatization highway (97-05, 831 billion won)

- E-government project (01~07, 1 trillion won)- E-government project (01~07, 1 trillion won)

SOC total Road Railway Airport Port etc.SOC total Road Railway Airport Port etc. (10 point) ((10 point) ( ㎞㎞ // ㎢㎢ ) () ( ㎞㎞ // ㎢㎢ ) (1,000 person) (10 point)) (1,000 person) (10 point)

- - KoreaKorea 4.51 0.88 0.0313 31,319 4.74 4.51 0.88 0.0313 31,319 4.74 (rank)(rank) (29) (20) (18) (8) (38) (29) (20) (18) (8) (38)

- - SingaporeSingapore 8.66 4.71 0.0002 15,283 8.76 8.66 4.71 0.0002 15,283 8.76 (1) (2) (47) (20) (3)(1) (2) (47) (20) (3)

- - Malaysia Malaysia 5.68 5.68 0.17 0.0059 14,985 6.45 0.17 0.0059 14,985 6.45 (18) (38) (37) (22) (22)(18) (38) (37) (22) (22)

- - JapanJapan 5.48 3.05 0.0533 105,960 6.85 5.48 3.05 0.0533 105,960 6.85 (1) (4) (16) (2) (19) (1) (4) (16) (2) (19)

II-3. Soc Indicator in Asian countriesII-3. Soc Indicator in Asian countries

1414

1. Background : Fundamental Problems in economy

Booz Allen&Hamilton

McKinsey

Advanced Nations

Knowledge-Based, productivity-ledEconomic Growth Strategy

Knowledge Gap Productivit

y GapSecond-Tier Korea

Solve the High-CostStructure

III. Krea’s transition to Knowledge Eeconomy

Korea’s World Competitiveness declines :26 (‘95) 30 (‘97) 41(‘99)

Resource / Input-BasedEconomic Growth

Productivity Realityof 8 Industries(Half of USA)

1515

1999 ‘00‘98‘975 10 11

12

1 4

Knowledge Campaign by the Press (e.g.Vision Korea Campaign)

The WB joined (W B-OECD:

Korea’s KBE Report)

Booze-Allen-Hamilton ReportMcKinsey Report Monitor Report

Road Map to KBE: Background and Proceeding

M

acro

KB

E

IMF Crisis

NEAC

CrisisManagement(-6.7 % G)

Rebound & Recovery(10.9 % ---> 9.3%)

12

Research Project

PublicHearing

Implementation

Strategy Report

3-Years Action Plan

Presidential Mandate

Policy Forum (KDI -MOFE)

‘01-02

Setback & Regaining (3.0% -> 6.2 %) ?

1616

1. 1. Government : Strong PushGovernment : Strong Push - Cyber Korea 21 (99) : Top 10 Informatization Country- Cyber Korea 21 (99) : Top 10 Informatization Country

- The 3-yr Action Plan for Knowledge based economy: 00-02 - The 3-yr Action Plan for Knowledge based economy: 00-02

- SOC for building knowledge based economy strengthened- SOC for building knowledge based economy strengthened : : Informatization highway (97-05, 831 bllion won) Informatization highway (97-05, 831 bllion won) : E-government project (01~07, 1 trillion won): E-government project (01~07, 1 trillion won)

2. 2. Media : improving public awarenessMedia : improving public awareness - Maeil Business Newspaper, Vision Korea Campaign (96)- Maeil Business Newspaper, Vision Korea Campaign (96)

3. 3. Private sectorPrivate sector - knowledge management boom, cultural changes in work place- knowledge management boom, cultural changes in work place

4. 4. Venture MovementVenture Movement - KOSDOQ market opened in 1996 (like US NASDOQ)- KOSDOQ market opened in 1996 (like US NASDOQ) - 380 venture firms listed - Total Mk Value/GDP: 11%- 380 venture firms listed - Total Mk Value/GDP: 11%

3. 3. Moving into a Knowledge driven economy Moving into a Knowledge driven economy

1717

Push to Internet UsesPush to Internet Uses IT training during 99~04 : 190 billion wonIT training during 99~04 : 190 billion won - 15 million people (housewives, soldiers, students, etc.)- 15 million people (housewives, soldiers, students, etc.)

Various programs conductedVarious programs conducted - - Internet PC Drive : Internet PC Drive : Supplied 2 Million Low-Price PCs in 1999)Supplied 2 Million Low-Price PCs in 1999)

- - Internet Skills Education for 10 Million Students Internet Skills Education for 10 Million Students

- - Internet Skills Education for 2 Million Housewives Internet Skills Education for 2 Million Housewives (Partnership with 1,057 private institutions)(Partnership with 1,057 private institutions)

- - Internet Skills Education for 100,000 Elder Citizens Internet Skills Education for 100,000 Elder Citizens

- - Internet Skills Education for 600,000 SoldiersInternet Skills Education for 600,000 Soldiers - - One Million Free HomepagesOne Million Free Homepages

- Ten Million Free Internet Ids- Ten Million Free Internet Ids

-- Used PC Donations to SchoolsUsed PC Donations to Schools

1818

Nationwide Informatization (as of 2002)Nationwide Informatization (as of 2002)

• Internet Users : 26 mil. (total population 47.6 mil.)Internet Users : 26 mil. (total population 47.6 mil.)• High Speed internet : 19 per 100 persons (world 1st)High Speed internet : 19 per 100 persons (world 1st)• Mobile phone service : 68 per 100 personsMobile phone service : 68 per 100 persons• Internet Banking: 31%, Cyber trading: 67 %Internet Banking: 31%, Cyber trading: 67 %

1998 1998 2002 2002

• E-procurement rates : 19.3 % E-procurement rates : 19.3 % 91.6 % (‘03) 91.6 % (‘03)• Customs process for imports : 2 days Customs process for imports : 2 days 2.5 hrs 2.5 hrs • Low income Internet users : 5.0 % Low income Internet users : 5.0 % 34.9 % 34.9 %• Female internet users : 7.7 % Female internet users : 7.7 % 52.4 % 52.4 %

1919

IT Industry is a new Growth Engine in KoreaIT Industry is a new Growth Engine in Korea

IT industry grows fast in its production, exports and creates jobs. IT industry grows fast in its production, exports and creates jobs.

IT Industry IT Industry GDP growthGDP growth

(‘97-’02): 21.6 % 5.6 % (‘97-’02): 21.6 % 5.6 %

1998 1998 20022002

IT share of GDP (%) 9.3 IT share of GDP (%) 9.3 14.9 14.9

IT export share (%) 23.0 IT export share (%) 23.0 29.4 29.4

Mobile phone set exports (US $ bil.) 1.8 Mobile phone set exports (US $ bil.) 1.8 8.9 8.9

No. of IT companies (thou.) 10.2 No. of IT companies (thou.) 10.2 22.1 22.1

No. of IT employees ( mil.) 1.0 No. of IT employees ( mil.) 1.0 1.2 1.2

Korea’s Korea’s World leading producer: CDMA, TFT-LCD, D-RAM,etc.World leading producer: CDMA, TFT-LCD, D-RAM,etc.

2020

4. 4. Korea’s IT boom ModelKorea’s IT boom Model Market changed. Market changed.

a. Created huge Demands a. Created huge Demands

- Old Generation: Cyber trading rate, 69% (commission charge : 3% - Old Generation: Cyber trading rate, 69% (commission charge : 3% 0.3%) 0.3%)

- Young Generation: Computer game, “Starcraft”- Young Generation: Computer game, “Starcraft”

b. Competition brought huge Supply; b. Competition brought huge Supply; new tech new tech cost down cost down

- PCS in mobile telecom ( mobile phone price : 1/10- PCS in mobile telecom ( mobile phone price : 1/10 thth))

- ADSL in high speed internet ( connection fee : - ADSL in high speed internet ( connection fee : $12) $12)

- PC café for online- computer game and cyber trading ($1 per hour)- PC café for online- computer game and cyber trading ($1 per hour)

Government : facilitating changes in marketGovernment : facilitating changes in market

- Demand- Demand : training, banning s/w copy, low-priced PC policy : training, banning s/w copy, low-priced PC policy

- Supply Side : building IT Infra, supporting venture startups (KOSDAQ) and - Supply Side : building IT Infra, supporting venture startups (KOSDAQ) and

e-commerce, educating IT experts e-commerce, educating IT experts

* For Cyber 21 project (Mar.99-02), the gov’t invested US$19.7 billion* For Cyber 21 project (Mar.99-02), the gov’t invested US$19.7 billion

* * Informatization highway (97-05, 831 billion won) Informatization highway (97-05, 831 billion won)

21 21

Strong leadership and Strong leadership and Entrepreneurship Entrepreneurship - - envisioning goals and strategyenvisioning goals and strategy

““We fell behind in the industrial revolution but we won’t be left behind in the We fell behind in the industrial revolution but we won’t be left behind in the

Information revolution” (Information revolution” (The President Kim’s Speech to the Parliament, The President Kim’s Speech to the Parliament, ‘00) ‘00)

Aggressive Investment Aggressive Investment in R&D, Education and IT infrain R&D, Education and IT infra

IT manufacturing Power and Chaebol’s Deep PocketsIT manufacturing Power and Chaebol’s Deep Pockets

- Korea’s - Korea’s IT h/w production’s ranked as 4th with 6.3% in the world marketIT h/w production’s ranked as 4th with 6.3% in the world market

- - DRAM production (1st) : market share: 38% (00) DRAM production (1st) : market share: 38% (00) 41.5% (01) 41.5% (01)

- TFT-LCD production (2nd) : market share: 42% (01, 2/4) - TFT-LCD production (2nd) : market share: 42% (01, 2/4) 37% (02, 1/4) 37% (02, 1/4)

- Mobile phone production- Mobile phone production

: market share: 6.5%(2000) : market share: 6.5%(2000) 10.5%(2001) 10.5%(2001)

: CDMA market share: 53.7%(00): CDMA market share: 53.7%(00)2222

5. 5. Key Factors of this SuccessKey Factors of this Success

Cultural characteristics suitable for Internet Cultural characteristics suitable for Internet - Well educated population : high teciary education- Well educated population : high teciary education

- Tendency to follow fashion - Tendency to follow fashion internet community, game internet community, game

- Quick temper, living pattern (apartments) - Quick temper, living pattern (apartments) broadband broadband

internet, cyber apartment program(99) internet, cyber apartment program(99)

- Shyness to public - Shyness to public active participation in cyber space active participation in cyber space

IT Boom changes Korean Culture and Value SystemIT Boom changes Korean Culture and Value System

- Knowledge & Technology (=make money) became a key to success in life - Knowledge & Technology (=make money) became a key to success in life

- Confucian Value has been changing into performance, Market Value system- Confucian Value has been changing into performance, Market Value system

Saving face, reputation, seniority, modest Saving face, reputation, seniority, modest show up, self-expression, money show up, self-expression, money

- - chaebol based business culture (lifetime employment)chaebol based business culture (lifetime employment) venture (risk taking) venture (risk taking)

2323

Internet Users in KoreaInternet Users in Korea

366 731 1,6343,103

10,860

19,040

02,0004,0006,0008,000

10,00012,00014,00016,000

1995 1996 1997 1998 1999 2000

18,00020,000

26,270

2002 24 24

Internet Users (per 100 people, 2002)

31.4

40.644.9

53.855.2

0

10

20

30

40

50

60

Korea USA UK France Japan

Korea achieves top level informatization Korea achieves top level informatization

25 25

IT Industry Output and Share of GDP

150.3145.3

115

189.1

88.1

0

20

40

60

80

100

120

140

160

180

200

Tri

llio

n K

ore

an

wo

n

19981998 1999 2000 2001 2002

(9.3%)

2626

(11.2%)

(13.1%) (12.9%)

(14.9%)

Broadband Internet User (per 100 people)

19.1

5.63.8

1.3

0

5

10

15

20

25

World’s Top Broadband Internet Users rateWorld’s Top Broadband Internet Users rate

27 27

USA Korea UK OECD

Internet Usage (hrs per month)

16.2

9.68.2

10.5

7.6

0

2

4

6

8

10

12

14

16

18

Korea USA Germany Canada Japan

Source: Nielsen Co., January 2002 28 28

Online Stock Trading (June 2000)

28%

1.8%

7.2%

40%

57%

0

10

20

30

40

50

60

Korea USA France Japan Sweden

* * Internet banking users : 11.3 million (2001) Internet banking users : 11.3 million (2001) 2929

Mobile Phones per 1,000 people(2000, WDI 2002)

567

398

493

720

526

0

100

200

300

400

500

600

700

800

Korea US France Finland Japan

- In 2001, Mobile phone users : 29 million (617 per 1,000 people) - mobile internet handsets : 23.8 million 3

030

Mobile phone handset Exports (billion US$)

1.8

4.8

7.38.5

11.8

0

2

4

6

8

10

12

14

1998 1999 2000 2001(est.) 2002(est.)

Korea holds 53.7% of world CDMA mobile handset market which was US $14 billion in 2000. 3131

Korea has effectively invested for building SOC and its Korea has effectively invested for building SOC and its

knowledge economy, which enables its eonomic success knowledge economy, which enables its eonomic success

- - Korea’s investment in Knowledge to GDP is ranked as 3rd in the world. Korea’s investment in Knowledge to GDP is ranked as 3rd in the world.

Korea’s experience implies that the government should have Korea’s experience implies that the government should have

an effective strategy for developing its economy by stages.an effective strategy for developing its economy by stages.

- In the early stage, primary education, steam power plant focussed- In the early stage, primary education, steam power plant focussed

- After building capacity, investment in knowledge strengthened - After building capacity, investment in knowledge strengthened

But in 00s, huge demands for public expenditure inBut in 00s, huge demands for public expenditure in

- welfare including pension, medicare, etc. - welfare including pension, medicare, etc.

- regional development and supports for S-North Korea relation- regional development and supports for S-North Korea relation

Under this constraints, it’s important to continue effective Under this constraints, it’s important to continue effective

investment to SOC and KBE to sustain Korea’s succssinvestment to SOC and KBE to sustain Korea’s succss 3232

IV. Prospect and ImplicationIV. Prospect and Implication

Investment in Knowledge * as % of GDP (1998)

5.26

6.5

4.14.7 4.7

0

1

2

3

4

5

6

7

Korea US Sweden France Japan OCEDave.

( * = R&D + software + higher education )

* OECD Science, Technology and Industry Scoreboard 2001 - Towards a knowledge-based economy

Korea’s Investment in Knowledge : world top three

3333

THE END : Thank You