The Korean Experience in the Development of Transport and Communication Sectors

(Prepared by Agung Cahaya Sumirat, Patrick Hasjim and Priadji for Sesparlu-54 Group Blog)

After being ravaged by war in early 1950s and becoming a poorer country than most African countries in the 1960s, South Korea has now emerged as the 15th biggest world economy. The prominence of South Korean economy is impressive. The Hyundai, Daewoo and Samsung groups are the backbone of the South Korean economic achievement. The very first foundation of Korean economic success was the launching of First Five-Year Economic Development Plan in 1962, which then generated huge demand for new technologies.

The South Korean strategy was to initially rely on foreign technology sources through the adoption of technology transfer. At the same time, the Korean established policy to develop its capacity designed to digest, assimilate and improve upon those new technologies. The South Korean experience is worthy of learning and is indeed a best practice. How can Indonesia learn from the Korean experience in the development of transport and communication sectors?

Trends

Source pic: ibtimes.com

Over the years, the image of Korean products has steadily improved and now become the world’s market leader. In the car industry, Hyundai is the world’s largest company in industrial equipment sector and the 4th largest global car company after Volkswagen, Toyota and Daimler. The other data has shown that in 2015 the South Korea produced 4.56 million vehicles. This has placed South Korea in the fifth world rank in terms of car production, behind China, the US, Japan and Germany.

During the Asian crisis, the Hyundai Group took the advantage of the crisis situation by buying Kia, the third biggest South Korean car company. The bankruptcy of its main competitor, Daewoo, has also opened the way for Hyundai to control 80% of the national market. Other groups has followed the Hyundai’s strategy of restructuration and rationalization, such as Hanjin (transport) which controls Korean Air.

Source pic: mobile.reuters.com

In 2015, Samsung was the world’s second biggest brand, after Apple, in terms of consumer electronic and high-tech industry sales. Samsung has occupied 20% of the global market share. In electronics, Samsung has engaged in a tougher competition with other established brands like Siemens, Motorola, Nokia, and Sony. It has also engaged in a fight with Apple for the global technology leadership. The group now represents 10% of Korea’s national income and 20% of its total exports.

South Korea is also one of the most notable countries in possessing an advanced internet communication access. Nothing symbolizes a better South Korean global influence than the success of the song “Gangnam Style”. South Korean has acknowledged that its economy could take full advantage of the global enthusiasm for the South Korean cultural model. The Korean Government has therefore proactively supported the production and export of audio-visual works and at the same time put limitation on the importation of foreign films. The Government has established Koica to help SMEs in producing and selling Korean films.

Policy option

There are options that Indonesia can learn from the success of South Korean experience in the development of transport and communication sectors as follows:

First, South Korean policy-makers are strongly aware about upgrading the education and technology system. They think that technology mastery should come first before it enters into a tough global market competition. The Government assumes full responsibility for the promotion of human resource development and deems that technological competence becomes a critical factor. South Korea has over the past four decades invested heavily in research and development (R&D) as well as innovation. South Korea is one of the biggest countries for spending in research and development in the world.

Second, another key to South Korean success is the dominance of major Korean conglomeration groups, mainly established in the 1960s. The design of the conglomeration is structured as multi-diversified conglomerates. Thanks to the Asian crisis, this conglomeration system has been successful in settling excessive indebtedness through a severe restructuring. Samsung is the best example in this regard.

Third, the promotion of South Korean’s pop-culture which has been successful in promoting Korean music and films to the outside world. The Korean pop stars have been gaining wider popularity not only in the Asian market, but also spreading out to Europe and America. This success has been influenced by the combination of technological innovation and cultural creation.

Policy recommendation

Based on the three options above, arguably the most important part that Indonesia should learn from the South Korea is creating policy to prioritize investment in education and research development in technology. The South Korean experience has clearly shown that gaining the world’s acknowledgement to its high technology product neccessitates much investment in a long time period. But in the end, it makes a stronger competitive edge of its products in the world market.

Conclusion

There is much best practice that the world can learn from the South Korean experience. In fact it attests to the fact that there is no an over-night job for creating high calibre capacity in technology product development particularly in transport and communication sectors. The R&D is a fundamental key that any country needs to take if it wishes to become one of the leaders in global market.

Fortunately, Indonesia and South Korea have forged an enhanced bilateral cooperation through a strategic partnership. This is a good platform in advancing bilateral cooperation with the South Korea for the future. The key highlight is the agreement of both countries in the development of military jet of KFX/IFX which has been signed by PT Dirgantara Indonesia (PTDI) and KAI last year. This project may take up more than ten years to be materialized. Both PTDI and KAI will work together in the maintenance/sustainability, modification and upgrading of KFX/IFX. This means that there is a bright prospect for both countries in advancing wide arrays of cooperation in technology related capacity.
Jakarta, 11 April 2016