South Korea Reinvents for Success

Planners in South Korea have a longstanding fetish for economic hubs.

Even so, the southern city of Busan seems to be pushing the obsession a bit far.

As one of the world’s largest container ports, it understandably wants to be a marine and logistics hub for northeast Asia.

But Busan’s slick promotional literature also boasts of its ambitions to be a hub

Planners in South Korea have a longstanding fetish for economic hubs.

Even so, the southern city of Busan seems to be pushing the obsession a bit far.

As one of the world’s largest container ports, it understandably wants to be a marine and logistics hub for northeast Asia.

But Busan’s slick promotional literature also boasts of its ambitions to be a hub

for industry, information technology, finance, trade, tourism and culture by the end of the decade.

Oh, and it is bidding to be host to the 2020 Summer Olympics.

Phew.

This relentless reinventing is typical of a proud country that feels the world has consigned it to the shadows of its big neighbors, China and Japan,

and so feels it must strive ever harder to win recognition for its meteoric rise.

In 1960, the South Korean per capita income was less than $100 a year,

less than that of Mozambique and Senegal, let alone Thailand and the Philippines.

Today, income per head is about $20,000 and the economy is among the largest in the world.

South Korea is No. 1 in shipbuilding, memory chips and display screens.

It rankles with policy makers that financial markets do not give full credit for these achievements,

applying a “Korea discount” in part because of nervousness about the unpredictable behavior of North Korea,

with which Seoul is still technically at war.

Although the economy is enjoying a V-shaped recovery from the global downturn,

markets have been particularly volatile since the sinking in March of a South Korean Navy ship.

Seoul accuses the North of torpedoing the vessel and killing 46 sailors, while Pyongyang rejects the charges.

Scholars put the South Korean success down to an array of factors.

Spending on research and development has jumped to 3 percent of national income today from 0.5 percent in 1970,

helping to explain the country’s strength in technology.

A South Korean consortium beat French and U.S. rivals in December to land a $40 billion contract to build and operate four nuclear reactors in the United Arab Emirates.

South Koreans toil longer — 2,315 hours a year — than anyone else on earth, according to the International Labor Organization.

And the performance of its schoolchildren, measured by the Program for International Student Assessment, is the envy of the world,

especially in science and math, said Klaus Rohland, the World Bank’s country director for South Korea and China.

Above all, perhaps, South Korea has reaped the benefits of the sort of long-term, government-driven economic planning on display in Busan.

“Concerted and conscious efforts on the part of the public and private sector, working together, to discover and upgrade a comparative advantage:

I believe that was key to Korea’s development experience,”

said Wonhyuk Lim, director of policy research at the Korea Development Institute in Seoul.

Danny Leipziger, a former World Bank economist, praised South Korea for its attention to detail

in executing a succession of plans over the years to develop the sinews of the economy — another source of its success.

“It’s one thing to invest a lot in infrastructure. It’s another to make sure that those infrastructure investments actually pay off,”

Mr. Leipziger, now a professor of international business at George Washington University, told the conference.

In Busan, that means ensuring that a new port with 30 berths, backing on to a vast logistics park, is completed on schedule by 2015.

Thirteen of the berths are already in operation.

Busan’s strategy for this new port provides another illustration of long-term planning.

Busan sits astride the many Asian shipping branch routes for North America and Europe.

But with more and more ships going directly to China, the city is marketing itself as a so-called transshipment port.

“In terms of the cost of operations, we cannot compete with Chinese ports, so we’re focusing more on processing,”

said Kim Yunil, director of regional economic policy with the local government.

So containers will be offloaded in Busan and broken up into smaller cargoes that will be dispatched to small ports in Japan.

Because of high inland distribution costs in Japan, that works out more cheaply than sending containers to big ports like Yokohama and Kobe.

“Japanese logistics companies are convinced of the cost efficiency of this kind of business

and so some of them have decided to invest in our new port,” Mr. Kim said.

China looms large in Busan’s economic plans in other ways, according to this article in the New York Times.

Having seen low-cost industries like textiles, footwear and lumber shift to China over the years,

Busan knows it must raise its game to fend off Chinese competition to its big ship-parts and auto-component industries.

“Our main task in the coming years is to promote the competitiveness of our manufacturing business to survive against China,” Mr. Kim said.

China is also a major tourism market for Busan, a city of 3.6 million,

the second largest South Korean city after Seoul, the capital.

About three-quarters of the Asian visitors to Busan are from China, Kim estimates.

Until a few years ago, Japanese made up the bulk.

Japanese women remain an important market for another service sector Busan wants to develop —

medical tourism, or, more precisely, cosmetic surgery.

With about 100 clinics already clustered down a street known as Beauty Town,

the only puzzle is why Busan is not also setting its sights on becoming a plastic surgery hub.