Figure 1. Profits of Japan's top five electronics companies
Source: Nomura Research Institute
Figure 2. Telecommunications carriers in Japan, U.S., Germany, France, U.K. and Canada
* Regional Bell Operating Company, i.e., U.S. “Baby Bell”
Source: MPT (1995)
Table 1. NTT’s share of domestic telecommunications segments
Telephone service 93.3% ¥ 4,865 billion
Leased circuits 82.8% 574
Cellular phone† 60.7 873
Paging† 61.8 273
† Service by NTT DoCoMo affiliate
All revenues for fiscal year ending March 31, 1994
Source: MPT (1995)
Table 2. Japanese comparison to U.S. on PC and telecommunications measures
PC’s shipped (1994) 18.6 million 3.0 million
PC’s per 100 employees (1994) 55.1 14.7
Computer use by managers (1994) 64% 8%
Systems on Internet (Jan. 1995) 3.2 million 97 thousand
Charge for leased lines (1994)) ¥0.4 million ¥2.7 million
CATV households (1993) 61.5% 4.7%
Source: JIPDEC (1995), p. 10
KOREA’S NATIONAL INFORMATION INFRASTRUCTURE
Kuk-Hwan Jeong & John Leslie King
The history of using voice communications in Korea goes back to the beginning of this century. Basic telephone service diffused in subsequent years, to the point that the goal of universal access had been achieved through the 80’s. In contrast, computer technologies have been used for less than 30 years in Korea. The first computer used in Korea was an IBM 1401 installed by Economic Planning Board in 1967 for the purpose of national census. The 1980's marked the beginning of the recognition by the Korean government that information technology(IT) and its applications as infrastructure required attention at the national level.
By the 1980's IT use was promoted by government and some segments of the private sector through the national computerization project, called NBIS (National Basic Information System) project. This project resulted in successful implementations, but also suffered from several weaknesses, including lack of adequate funding, lack of strong industry capability, weakening of government support and failure to stimulate domestic demand. These weaknesses generated a widespread consensus for need to put refreshed efforts on the NBIS project, and a second stage of the project was begun in 1992. Nevertheless, problems remained. In particular, inadequate funding led to shortfalls in benefits. This led to further reconsideration and a demand for new policy actions. The result was a new policy initiative for a national information infrastructure (NII), which was arose in response to plans developed by the U.S. and Japan.
The Korea NII arose from fear that a failure by Korea in building information infrastructure would hurt basic industries to the point that the might not be able to compete in the global marketplace, leaving the nation farther behind developed countries. This concern extended to production industries such as computers, telecoms, components, and semiconductors, which might be left behind by the global production system, with a subsequent loss of export and import substitution opportunities. In addition, there was concern that user service industries would not be able to gain quick access to the latest technologies and become less competitive. The new NII initiative in Korea resembles the NBIS project, and at least in potential will repeat many of the same mistakes of following a centrally coordinated plan in a field where more decentralized strategies would make more sense.
This paper presents the Korea’s NII initiative as an evolution of the NBIS project, identifying similarities and differences, strengths and weaknesses. We will argue that the new NII initiative should emphasize both demand and supply strategies that reinforce one another for maximum leverage and synergy. The NII is seen as a part of national economic policy. The initiatives provide the tools for competitiveness, and thus economic development, in a globalized economy. This view is based on the assumption that competitiveness will arise from the ability of each entity in the economy to develop, acquire and adapt new and state-of-the-art information and communication technologies as tools that will be available on and through information networks.
Section II describes a brief history of policies for economic development in the past three decades in Korea. These centrally coordinated economic plans performed well since the early 60’s, and the tradition of centrally coordinated economic plans has been transplanted to NII initiatives. Section III reviews the NBIS project, focusing on visions and goals of the project, its accomplishments, and the implications of the project for policy issues facing the NII initiative. Section IV reviews the current structure of the computer and communications industries and users that are the building blocks for Korea’s NII, and Korea’s plan for the NII described in the document “National Information SuperHighway” of April, 1994, as subsequently amended to become the Korea Information Infrastructure (KII). We review the detailed programs of the KII and the way they are being implemented. Section V analyzes critical factors that should lead to the successful implementation of programs in the KII Plan. Section VI discusses the future development of KII.
Economic Development Strategies
The NII efforts in Korea have their policy origin in the NBIS project, but they are more broadly a response to the NII initiatives in the developed countries, particularly the U.S. and Japan. Korea, like other countries, is eager to achieve competitive advantages through use of IT, and NII policies is an important part of economic policy in Korea. The relationship of technology policy to economic development, however, has not been clear. There have been ongoing debates regarding the establishment of technology policy as economic policy. Some argue that market forces should determine what technologies are developed and applied; others believe that government should take a leadership in planning the technology development and its applications. The leadership envisioned in the Korean context involves centralized, coordinated strategy concentrating on given policy goals, which in turn serve broader transformative objectives for the country.
Technology policy in Korea exhibits a strong economic policy tradition, characterized by government-driven five-year economic development plans. Several rounds of five-year plans have occurred since the early 60’s. Most have been executed very successfully, producing economic prosperity. These Plans can be summarized as industrial policies targeting specific economic sectors, based on private sector investment and production, with government played decisive roles. Strategic industries to be supported were targeted by specific legislation; for example, the Industrial Machinery Promotion Act(1967), the Shipbuilding Industry Promotion Act(1967), the Electronics Industry Promotion Act(1969), the Steel Industry Promotion Act(1970). The basic thrust of economic policy during the 1960’s and 1970’s was to achieve growth and export targets. Export expansion was the most important goal, and the President of Korea himself presided over the Monthly Export Promotion Meeting. The planning process was directed by the Economic Planning Board (EPB), formerly an independent body which was recently combined with the Ministry of Finance to form the Board of Finance and Economy. The EPB was the coordinating center for the efforts of private investors and companies as well as government ministries working together to implement the plans.
Economic policy focused mainly on support of large businesses. The small-and-medium enterprises (SMEs) were relegated to a disadvantageous position throughout the 60’s and 70’s, resulting in weaknesses in the Korean economic structure. Particularly hard-hit were high technology industries like IT, where changes in technology development and applications take place so rapidly that small companies have advantages over large companies in responding to market opportunities, interacting closely with customers, having timely access to technology and market information, and producing new products. The government realized the importance of SMEs in the 1980's, and made strengthening them a key economic policy goal. The Small and Medium Industry Promotion Act was enacted in 1982 in order to establish a Fund for promoting SMEs and to build an industrial complex for SMEs. In 1986, the Small and Medium Industry Startup Promotion Act was prepared to help entrepreneurs start SMEs through tax incentives and financial support.
Despite all these efforts, SMEs in Korea remain weak, not because legal and administrative provisions of the acts were inadequate, but mainly because the government has not been prepared to pay the short-run cost for structural adjustment. Most policy makers see directly the benefits yielded by a focus on the large businesses; such policies are relatively easy to implement and produce great payoffs. In addition, the conglomerates of large companies (the ‘chaebal’) have persistently opposed to the government policies in favor of SME’s. Policies directed at large numbers of small businesses are more difficult to implement, and the benefits of such policies can be hard to measure. As a result, policies to strengthen SMEs have seldom been effective.
Economic policy in the late 1980’s and early 1990’s began to shift toward economic liberalization and promotion of technology-intensive industries, due to domestic and international pressures facing the country. Internally, the continuous eruption of labor disputes leading to wage increases higher than productivity improvement made it difficult for labor-intensive industries to maintain competitive advantages in the world market. This was followed by a switch to alternative, technology-intensive industries. In addition, the 1985 Plaza Agreement increased the pace of global economic liberalization. A country with a high trade volume such as Korea could not escape the consequences. The Korean government began to pursue qualitative improvements in industry, focusing on technology development rather than the volume-oriented expansion of labor-intensive industries based on low wages. The NBIS project is an example of the government policy shift placing importance on technology, implemented to pursue objectives such as development of information technology and industries, and improvement of nationwide efficiency and competitiveness.
The economic strategy reflected in the seventh five-year economic plan(1992-1997) can be seen as a response to problems accumulated during the decades of tremendous growth. Increasing public demands for a higher standards of living have been joined by radical increases in international technology competition and demands for market liberalization by trade partners. The five-year plan adopted three major strategies: strengthening competitiveness of industry, enhancing equity and balanced development, and pursuing internationalization and liberalization. Industry can no longer rely on low wages, so the plan calls for human resources development, promotion of technological development and innovation to keep pace with the information age. The plan specifically refers to the information industry as a key sector on which special emphasis is needed. This emphasis has been clear since the early stages of the NBIS project planning, where information industry played the key role. Technologies for the information industries were advanced through the public as well as private efforts, while the market for those technologies was expanded by public sector and business computerization, and construction of information networks such as KTNet (a network for trading services).
The policies for economic growth represented by the current five-year development plan are departures from past practice, but they still tend to follow scheme of central coordination. The architects of the NII policy believe that policies will be most effective when coordinated to achieve a clear set of objectives. Information technology cuts across a number of national policy domains, from industrial policy to trade, telecommunications, finance, education, defense and national security. It is important, the policy makers argue, to have a lead agency with an authority and capacity to coordinate policy efforts. It is clear that effective coordination can take place centrally, as in the past. However, there are now many more players involved in policy making for the NII than were involved in policy for specific industries, and these players are able to push for policies they desire or evade policies with which they disagree.