By Yoke Har Lee
When Samsung Electronics received its first order from a United States company for 100,000 14-inch black and white televisions in 1975, it was decades behind Japan in TV production technology and market share.
By 1977, it was already the world's second-largest manufacturer of black and white TVs.
Fast-forward to 1999: three decades into the business, Samsung can probably match the Japanese at the TV game. In January, the company was voted the world's leading consumer goods and services company by Forbes Global Business and Finance.
Back in history, Korean innovation was already ahead of others: the first cast-metal characters were used to print Buddhist religious texts years before the Gutenberg Bible.
The South Koreans are very aware that innovation is the key to the future. Never mind that Dr Kenichi Ohmae, a noted management critic, recently kicked up a storm by predicting that most of the country's industries will be wiped out when the free market dawns on Korea. He said the economy was structured like Japan's and was too dependent on Japanese parts, subjugating it to the yen's vagaries.
Dr Ohmae has a point. The South Koreans have survived on electronic consumer goods, much like Japan, but Korea trails the Japanese in technological innovation.
South Korea also ranks behind Japan, Singapore, Hong Kong and Taiwan in technology, according to the Geneva-based World Economic Forum Global Competitiveness Report of June this year.
But leading industries are fully aware they need to change their tack in the global market, which is why Samsung and Hyundai spend 7 to 8 per cent of sales income on research and development.
Productivity improvements are also becoming a way of life. On Samsung's television-production lines, 98 per cent of key components are inserted automatically. In 1997, it could make one TV every 30 seconds; now it is 11 seconds.
Samsung has also raced on with the development of the world's first wristwatch phone and a one-gigabyte Dram (dynamic random access memory) chip used for high-speed computing.
At Pohang Iron and Steel Co (POSCO), the world's largest integrated steel-producing company, the research centre focuses on productivity and new processes for stainless-steel making.
A state-owned company being privatised in the reform era, it is a relic of former President Park Chung Hee's industrial ambition. In 1968, Pohang, 300km southwest of Seoul, was a backwater, until the Government decided to put a mill there, complete with a port for exports.
Today POSCO's capacity is 25 million tonnes. Its research team has managed to commercialise a process called Corex, a new smelting reduction process bypassing the need for coking. The first pilot plant is in South Africa.
The buzzword in South Korea is a knowledge-based society, very much as in New Zealand. But the Korean Government actively manages industrial policies to ensure South Koreans can compete with other players.
Looking into the digital age, the Government has stepped in to support a private sector-initiated project to build a Media Valley, akin to Hong Kong's Cyberport and Malaysia's Multimedia Super Corridor. The valley will be west of Seoul in the municipality of Inchon. The Inchon city Government will supply land at low cost and the central Government will chip in with incentives for foreigners.
Foreign investors in the company promoting the concept include CISCO and SAP.
Among the plans are to designate the valley a free-trade zone, to exempt companies from corporate tax for the first seven years, and offer full exemption from acquisition tax, property tax and real estate tax for the first five to seven years.
Some sceptics doubt South Korea's ability to match the likes of Silicon Valley in producing innovation and world-class technology. A question they often ask is whether South Korea has universities churning out research that can be commercialised in the way the universities around Silicon Valley did.
South Korea already has a high level of R&D spending proportionate to GDP, at 2.8 per cent. But, according to Dr Cho Dong Chul, of the state-funded Korea Development Institute, more important is how efficiently the R&D expenditure is used.
The World Competitiveness Report shows that Japan's R&D spending, at 2.8 per cent of GDP, equals South Korea's. But Japan's technological assets are far more positive.
But Dr Cho believes Korean industries will survive future competition provided they continue to move one step up the technological ladder.
* This is the last of a series on South Korea. The writer was a guest of the South Korean Government
Knowledge economy no mere buzzword
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