KBE Chapter 7 Harnessing the Potential of Science and Technology Draft outline

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Evolution of the RD System in Korea Harnessing
the Potential of Science and Technology for
Economic Development
July 2008Sungchul Chung
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Objectives

• To overview the process of building technological
  capability within the framework of economic
  development
• To assess the Korean RD system
• To derive policy lessons

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Structure

• Industrialization and RD How Korea has acquired
  and utilized ST for industrialization?
• Contribution of RD to economic development
• International RD cooperation
• Key characteristics of the Korean RD System
• Policy lessons

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ST has been the key source of growth
Where Korea was in the 1960s

• Geo-political and geo-economic situation
• A small divided country relying on foreign
  countries for security social and political
  instability
• A resource-poor, densely populated country with
  small domestic market and weak technological
  base industrial base totally devastated during
  the Korean war (1950-53)

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• Economic situation (1961)
• GNP 2.3 billion (1980 prices), GNP P/C 87
• Exports 55 million, Imports 390 million
• Share of manufacturing in GNP 15
• Unemployment rate 22.3
• One of the poorest counties in the world

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• ST situation
• RD manpower (1969) 5,337
• RD investment (1963) 9.5 million (Govt
  9.2 million)
• RD organization National Defence RD Institute
  (1953) Korea Atomic Energy Research Institute
  (1959)
• A barren land as far as ST was concerned

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• Human resource situation Educational attainment

• Source Authors compilation from governments
  statistical resources.
• Human resource was the only asset for economic
  
• development
• ? Outward-looking development strategy based on
  human resources and technology

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• The Growth path of the Korean economy

20,000
12,646
11,432
7 Five-Year Economic Development Plans
7,355
Per capita GNI(US)
1,000(1977)
87
100(1964)
67
Liberation (1945)
Korean War (195053)
Join OECD (1996)
Financial Crisis (1997)
Big Push
Source World Bank
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• Effect of Knowledge on Koreas Long-Term Economic
  Growth (19602005)

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How Korea acquired technologies for
industrialization?

• Acquisition of technologies for development
  60s and 70s
• Development of light industries and heavy
  chemical industries for import substitution and
  export-expansion
• Generated enormous demand for technologies that
  were not available from domestic sources
• Policy responses
• Promotion of inward transfer of technologies
• Developing domestic absorptive capacity to
  digest, assimilate and improve upon the
  transferred technologies

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• Promotion of technology transfer
• Policy constraints shortage of foreign
  exchanges, and strong desire for economic
  independence
• Restrictive stance toward DFI and FL
• Policy relying on long-term foreign loans to
  finance industrial investment Govt brought in
  large-scale foreign loans and allocated them for
  investments in selected industries, which led to
  massive importation of foreign capital goods and
  turn-key plant. Industries later
  reverse-engineered the imported capital goods for
  the purpose of acquiring the necessary
  technologies.
• Creation of GRIs in strategic areas to
  facilitate industrial technology adoption and
  assimilation RD to help industries adapt,
  assimilated and improve upon new technologies
  transferred from foreign sources

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• Building up indigenous RD system
• ? Korean economic growth into the 1980s
• Increased demand for complex and sophisticated
  technologies
• Increasing reluctance of foreign countries to
  transfer
• technologies to Korea
• ? Policy response Launching the NRDP and
  promoting private
• industrial RD
• NRD P in 1982
• Policy incentives for industrial RD financial,
  fiscal, tax, etc.
• ? But actual policy preparation had already
  been going on since the early 1960s

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• RD strategies by development stage

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• Establishment of KIST (1966), MOST (1967)
• ST Promotion Act (1967)

1960s

• Establishment of GRIs in the field of chemical
  heavy industries from mid-1970s
• Construction of Daeduk Science Town (Started in
  1974)

1970s

• Launching of the national RD program (1982)
• Promoting private industrial RD by offering
  financial tax incentives

1980s

• Promotion of university research SRC, ERC, etc.
• Introduction of new types of natl RD programs
• - Highly Advanced Natl Program, The 21st
  Century Frontier RD Program.
• Establishment of inter-ministerial coordination
  body NSTC

1990s

• National Technology Road Map (NTRM)
• - To suggest TRMs for key technology areas
• Introduction of overall coordination system
• - Office of ST Innovation in MOST was created
  in Oct. 2004

2000s
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ST Legal System
ST Framework Law (2001)
RD Institutes Promotion
Promotion of Technology Development

• Technology Development Promotion Law (72)
• Engineering Technology Promotion Law (73)
• Biotechnology Promotion Law (83)
• Basic Scientific Research Law (89)
• Collaborative RD Promotion Law (94)
• Dual use Technology Promotion Law (98)
• Brain Science Research Promotion Law (98)
• Nano Technology Development Promotion Act (02)

• Specific Research Institute Promotion Law (73)
• Korea Atomic Energy Research Institute Act (73)
• Korea Science and Engineering Foundation Law
  (76)
• Industrial Research Association Promotion Law
  (86)
• Act on Korea Institute of Nuclear Safety (89)
• Daegu-Kyongbuk ST Institute Law (03)
• Act on Establishment and Promotion of Government
  Research Institutes (04)

Nuclear Energy
HRD
Others

• Atomic Energy Act (58)
• Nuclear Liability Act (69)
• Act on Governmental Contract for
• Indemnification of Nuclear Damage (75)
• Law for Physical Protection of Nuclear Facilities
  (03)
• Radiation Radioisotope Promotion Act (02)

• Meteorological Service Act (61)
• Standard Time Act (86)
• Science Museum Act (91)
• Presidential Advisory Council on ST Law (91)
• Daedeok Science Town Management Law (93)

• Korea Advanced Institute of ST Law (80)
• Professional Engineers Law (92)
• Gwangju Institute of ST Law (93)
• Female Scientists and Engineers Act (02)
• Scientists and Engineers Mutual Aid Association
  Act (02)
• Special Law for Reinforcing National ST
  Competitiveness (04)

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• RDI Support programs 2005

Tax revenue foregone Amount of loan
available
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• Growth of RD investment
• 6th largest RD investor among OECD countries

Note Upper portion of the bar refers to industry
contribution, and the lower parts that of the
government.
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• RD manpower

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• Trend of Koreas RD Structural changes
• Private industries account for over 75 of the
  GERD

Source Ministry of Science and Technology,
Republic of Korea
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Factors behind the growth
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• Factors behind the growth
• Demand side Outward looking development ?
  export-orientation of industries ? pressure from
  international market for technological
  competitiveness ? increased demand for RD
  investment
• Supply side
• Financial resources Large-firm-oriented
  industrial development ? chaebol system ?
  increased abilities of private industries to
  finance long-term, risky RD projects
• Human resource Korea prepared itself well for
  RD by investing heavily in education and HRD
• ST infrastructure institutions, legal systems,
  policy, programs, etc.

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• Effectiveness of RDI Support Programs
  Contribution of government policy (an Example)
• R(g1) F(cb)
• P(g0) 1 - F(cb)
• P Probability to innovate
• X Explanatory variables, including RDI support
  programs
• b Parameters
• No of observation 1,710 (STEPI Survey)

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• Marginal effects of RDI support programs

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Contribution of RD to economic growth

• RD Outputs
• Number of KPO patents granted
• Number of US patents granted to Koreans 7th in
  the world
• Number SCI publications 14th in the world
  (Highest growth)
• Established world prominence in such areas as
  LCD, semi-conductors, PDP, cellular phones, etc.

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• RD Elasticity of TFP (19912004)

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• Contributions of Factors to Growth (19712004)

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International RD cooperation

• International RD cooperation as a channel for
  learning a Korean approach in the early phase of
  development
• To compensate for the inadequacy of domestic RD
  capability, the government launched a program
  entirely for international joint RD in the late
  1980s
• As such, the international cooperative RD funds
  have been mostly directed toward those involving
  advanced countries, say, the US, EU countries,
  Japan, etc.
• - Korea-US joint RD programs account for
  about 42 of the total
• expenditures on international joint RD,
  Korea-Japan 8, multilateral
• 28, etc. (2007, expenditures by individual
  RD programs that involve
• foreign resources and/or personnel
  excluded)
• Such a policy is being changed so that increasing
  emphases are placed on cooperation with
  developing countries and multilateral cooperation
• So far, most of ST cooperation with developing
  countries have been funded by the KOICA, which is
  executing Koreas ODA programs.

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• Cooperation with developing countries
• Koreas ST cooperation with developing countries
  has been directed toward capacity building, such
  as
• - STEPI collaborated with the Egyptian
  government in investigating the feasibility of
  developing an Industrial Technology Center in
  Egypt that included studies on strategies for
  human resource development, financing schemes and
  managing systems. (2000-2002)(Financed by KOICA)
• - In 2005, STEPI worked together with the
  Algerian government to develop a Master Plan of
  Sidi-Abdellah ST Town Development, also with the
  financial assistance of KOICA
• - KOICA is also promoting a cooperative
  program with Tunisia for building capacity in RD
  planning and management STEPI is also involved
  in this.
• - Currently, the South African Republic is
  the only African country that has joint RD
  program with Korea

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• Cooperation with developing countries
• With SE Asian countries, Koreas RD cooperation
  has been centered on food, food processing,
  agriculture and also sharing experiences in ST
  planning
• - Development of hybrid rice was a product of
  long cooperation with the Philippines in the
  1960s through to 1980s.
• - Korean GRIs and SEA RD organizations have
  been and are collaborating for the development of
  technologies related to food processing and
  agricultural development.
• - Currently, STEPI is working with the
  Vietnamese government for the formulation of a
  new Five-year ST Development Plan(2011-2015)
  for this, STEPI conducted a diagnostic review of
  the Vietnamese Innovation System and made
  suggestions on the direction of the plan

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Key characteristics of Korean RD System

• Key factors that influenced the RD system
• Outward-looking development strategy ?Pressure
  for RD investment
• Government policy toward FDI and TT ?Focus on
  indigenous RD
• Government-led industrial development
• Industry-targeting ?Inter-industry RD imbalance
• Favoring large enterprises ?RD system biased for
  large firms/Financial capability to invest in RD
• ST for industrialization ?RD system biased
  toward technology development
• Rich pool of well educate HRST ? High absorptive
  capacity
• Government-led development of ST infrastructure
  ? Relative importance of GRIs

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Policy Lessons

• Lessons
• Market competition is the very source of
  motivation for innovation
• Pressure for technological competitiveness
• Effectiveness of the outward-looking development
  strategy for small economies
• Human resource is the key to learning
• Government can play effectively the role of
  facilitator and promoter at the early stage of
  development

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Policy Lessons

• Suggestions for cooperation
• Differences in ST systems may hinder
  interactions exchanges between Korean and African
  science communities
• - Korea a hybrid system influenced by the US
  and Japan
• - Africa Strong influences from European
  systems
• - To promote cooperation, efforts should be
  made to enhance
• mutual understanding on ST systems
• Both sides need to work together to identify
  mutually beneficial areas for cooperation
• - From a Korean point of view, both sides may
  benefit from cooperating in various areas
  including agriculture, water management,
  technical training, policy training, etc
• The key to realizing cooperation is political
  actions --

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Thank you!