The Story of One “Vision”
Korea has established itself as an emerging Knowledge Economy powerhouse in a remarkably short period of time. Yet, many believe its experience has limited relevance to other countries. Success of such transitions in Asian countries, the conventional wisdom claims, rests solely upon peculiar arrangements allowing governments to authoritatively impose “progressive” top-down policies on businesses and society at large. Korea ’s transition towards knowledge-based economy is not such a story.
The Bright Side of Crisis
Beginning of Korea ’s interest in knowledge economy can be traced to … Mexico. Its financial crisis of 1995 was just an unfortunate event in a remote country for some, and a strong wake up call for others. Is a similar crisis possible in Korea? - asked the Maeil Business Newspaper (MBN), one of the major media groups in the country. “Very much so” – was the answer from its joint report with Booz Allen & Hamilton, Vision Korea Report, Revitalizing the Korean Economy Towards the 21st Century. The report was published in October 1997, coinciding with the crisis it was warning against.
The report identified several key challenges: (i) wide-ranging systemic impediments, particularly in the financial and labor markets; (ii) a managerial and technical knowledge gap; and (iii) the need for a strategic response to the tightening competitive nutcracker – being caught between China’s low costs and Japan’s technical excellence. While the government response to crisis was focused mainly on effectively addressing immediate systemic issues, such as strengthening anti-corruption and competition policies, the Vision called for a strategic shift – for Korea to become knowledge-based and globally connected economy.
Reaching for the “Global Knowledge”
The MBN designated several reporters to create the Knowledge Project Team (KPT) to cover the KE issues on a regular basis. The KPT proposed to the representatives of the global media and knowledge intensive companies in Korea to cooperate. The objective was to develop “smart and actable” strategies that could be introduced to the opinion leaders and CEOs. Remarkably, most of the partners were willing to work on a pro bono basis. It was a win-win strategy. The MBN as well as Korean society would get access to Global Knowledge, while the companies got the influential marketing channel.
Building the National Consensus
A key report was published in 1998 with the Monitor Company: Knowledge for Action - Transforming Korea into a Knowledge-driven Economy. To help change the country’s focus from large scale, capital intensive industries to knowledge-based economy, the report presented detailed agendas for the government, companies, and individuals. The MBN then hosted a series of National Conventions and invited business, academia and government leaders to share the results and to hasten the implementation of change. There has emerged a broad consensus that old Korean development model, focused largely on copying and reverse engineering, became obsolete, especially as economic importance of intangible knowledge became increasingly important. This is when the government became interested, which is to say – very committed.
From Vision to Action Plan
Resources
The World Bank recommendations report
PdfRepublic of Korea: Transition to a Knowledge-Based Economy (PDF, 12.3Mb)
The government started by creating a special task force of 10 think-tanks, headed by the Korean Development Institute (KDI). The Ministry of Finance and Economy also requested the World Bank’s assistance on the matter, starting a fruitful cooperation that has lasted to this day. Carl Dahlman, the first manager of the K4D Program, led the team of international experts, in collaboration with the Organization for Economic Co-operation and Development (OECD).
The WB team focused on providing continuous input into strategy being developed by KDI-led task force. Knowledge Economy was a controversial issue at the time. “There was Washington Consensus in finances, but in other policies such as education, there were many competing models and ideas,” says Dr. Cheonsik Woo, Vice President of KDI. “We felt we needed more authority to resolve these issues, so we “borrowed” some of it from OECD and the World Bank.”
Mass Mobilization – Knowledge Economy Style
In January 2000, President Kim Dae-jung announced his intention for Korea to become an advanced, knowledge-based economy. Only three months later, the country put into effect a three-year action plan for implementing the KE strategy. It consisted of 83 associated action plans in the five main areas of information infrastructure, human resource development, development of knowledge-based industry, science and technology, and elimination of the digital divide. The plan was led by five working groups that involved 19 ministries and 17 research institutes.
Thanks to support from Korea’s highest leadership and a strong buy-in from the business elite, the knowledge strategy was able to attract vast resources from both public and private sectors. The scale and pace of programs were tremendous. For example, MBN offered a million of free Internet connections. A special Informatization Promotion Fund supported ICT training classes for housewives, elderly, farmers, and other groups – many conducted in stadiums, no less.
Lessons Learned
Media matters. MBN newspaper played crucial role in attracting government attention to the Knowledge Economy issues, as well as building broad national consensus. Together with KDI, it has established annual International Knowledge Forum for the Asia and Pacific region to support mindset change and dynamic response to ever evolving global competitive environment.
Variable cost of knowledge. MBN was able to tap into vast global knowledge of leading private institutions using non-financial incentives and win-win arrangements.
Engaging the private sector. Korea KE effort was driven from the top, at the highest level of government, and from the bottom, by the business community. Companies are the engine of a Knowledge-driven Economy, their participation in these efforts is absolutely essential. The implementation of the strategy was monitored by the National Economic Advisory Council that includes representatives of the private sector.
Proper financing mechanisms. A powerful Ministry of Finance and Economy was responsible for the overall coordination of KE program implementation. In 2000, for example, the total budget growth rate was 4.7 percent, but growth rates in the information and research and development sectors were 12.9 percent and 13.4 percent.
Broad application of external knowledge. Cooperation with organizations such as World Bank allows learning from international best practices, but also has a very important “side effect” – empowering ideas already emerging in the country. For example, WB team actively supported local experts in promoting innovative solutions to give boost to availability of high-speed internet.
Looking Into the Future
Knowledge Revolution stopped being a policy buzzword in Korea, it is mainstreamed into government thinking. Not to allow complacency to set in, the Government in 2005 introduced new National Vision and Long-Term Fiscal Strategy. Its goals include leapfrogging to top 10 knowledge-information leaders in the globe, upgrading the educational environments to OECD standard and harnessing Science and Technology base to reach G-7 standard.
The new plan tries to address some of the issues where the previous government efforts claimed only limited or moderate success, most notably the educational reform. It also puts high emphasis on “innovation” in a very broad understanding of the term. Korea’s new concept of innovation endeavors to give a balancing weight to "equality and participation" to fight against polarization trends throughout the Korean society, as opposed to focusing solely on efficiency in the value spectrum.
Having rapidly developed in very recent years, Korea showed strong interest in sharing its experience with developing and transitional economies. The Ministry of Planning and Budget has sent several specialists to the K4D team to work on Knowledge Economy issues in the global context. Korea financed a special “Knowledge Partnership” that funded K4D programs in other countries. A comprehensive report is being prepared by the K4D team to summarize lessons learned from Korea’s remarkable transition towards Knowledge Economy. Stay tuned.