The vision of the Korean NII is a vision for information and communication infrastructure that will be a key factor in Korea’s successful transition to an advanced economy. In this advanced economy economic growth and market competition will be based on the creation, movement, and application of information. The infrastructure will also play a substantial role in achieving the national goal of the transparent society, free from political and bureaucratic corruption, by enabling open processes of public administrations. The NII, through transparent decision making and simple, speedy processes of delivering public services, is expected to contribute to the vision of small and efficient government.
The goal of Korea’s Information Infrastructure initiative (KII) is the construction of an advanced national information infrastructure consisting not merely of communication networks but of Internet services, application software, computers and operating systems, and information products and services. The KII of the 21st century is expected to enable all Koreans to access information and communicate with any body, any time and any where. Furthermore, the KII vision is that all information and communication services in voice, data, and video will be provided easily, reliably, securely, in a timely manner, and cost effectively.
The establishment of the KII involves more than a plan to put additional cable in the ground and more computers into offices and homes. It incorporates the notion of new social infrastructure, ranging from the establishment of a rich social and cultural environment to the development of hardware and software facilities which are conducive to seamless flow of information. In order to achieve this, the strategy involves preparing the general public to use the new technologies and services so they can benefit from the enhanced capabilities. It also involves reviewing and updating legislation that might unintentionally impede the use of new technologies to conduct business. The government is expected to be a leading user of the infrastructure to conduct administrative operations and deliver public services more effectively and efficiently, thus demonstrating the capabilities of IT applications. The government is also expected to create favorable environment for financing that encourages investment and innovation.
The KII vision contains drafts of R&D for the technology development. It also contains two high-speed government and public information networks. The New Korea Net-Government (NKN-G) funded by the government, will be constructed to provide government agencies and public institutions, including research organizations and universities, with information and communications services at a low cost. Application services and key technologies will be developed in collaboration with industry, universities, and government labs. When these technologies and their applications have been tested and deployed over NKN-G, they will be commercialized on the New Korea Net-Public(NKN-P).
The NKN-G is to improve the efficiency of government operation and delivery of public services. It connects central and local government agencies and various public organizations, including schools and libraries by the year 2015, mainly through optical fibers. In the process, the current facilities of service providers are to be utilized to the maximum degree, and standards for interconnectivity and interoperability with the existing computer networks created by the NBIS project will be developed to create an integrated network. Construction and operation of the NKN-G will follow the three steps: a ground stage(1995-1997), a diffusion stage(1998-2002), and a completion stage(2003-2015). In each stage, the target of network capabilities and switching technology is specified and the services to be made available with contemporary technology are identified, in light of the ongoing development of service demand. These are summarized in box 1.
[Insert Box 1 here.]
The objective of the NKN-P is to provide interactive broadband multimedia information services to users in the private sector by wiring offices and homes with optical fiber cables. At the early stage of the plan, the NKN-P will target the urban area of offices and apartments that are likely to have heavy traffic. The existing networks such as PSTN, PSDN, N-ISDN, and the mobile communication networks will be integrated into the NKN-P. As in the NKN-G, the NKN-P will be implemented step by step following the three stages summarized in box 2.
[Insert Box 2 here.]
Technology development and test-bed
The overall development plan for technology supporting the KII is to be drafted stage by stage on the basis of analysis of technology trends and the forecast of technology demands. The government is responsible for creating an environment for R&D investment and for conducting certain pilot projects to demonstrate or generate initial demand. Private industries will carry out most major R&D projects that have commercial prospects. The in-transfer of high technologies from the advanced countries is key to the plan, so private companies are encouraged to collaborate with foreign partners and to take part in joint research ventures. A test-bed is to be established to evaluate various aspects of technology development and to put the R&D outcomes for KII to test. As part of the test-bed, an optical fiber backbone network of 2.5 Gbps had been laid out in 1995 between Seoul and Daejon, and will be gradually extended from there.
The KII Plan was a reaction to the NII initiatives of developed countries, but it also reflects the belief of government and industry that the key technologies for the NII would be powerful forces of competitive advantage in the developing global information economy. This focus is important. The Korean people have seen signals of a continuous degrading of Korea's competitive position in the world market. For example, there was a decrease in the production and export of IT products in the early 90’s (see tables 1 and 2). Domestic and overseas reports suggest the Korea’s weakening competitive position (Dedrick and Kraemer, 1995; WEF & IMD, 1994 and 1995).69 The current government has put great effort into catching up in competitiveness in the global market. IT and its applications have become regarded as main tools in these efforts.
Many of the strategy and action programs in the KII Plan convey and reinforce a sense of importance and priority for information infrastructure. They focus the what and the why: motivations for developing information infrastructures are fully represented in the goals and objectives of the Plan. As with most countries focusing on the NII initiatives, the KII is concerned with far-reaching economic and social ramifications of information infrastructure. Some of the planning is quite detailed; for example, the plans for the NKN-G and NKN-P identify the key enabling technologies required to achieve the desired services.70 But overall, the KII plan leaves vague issues of how, when, and by whom implementation will occur. Development of the KII must be guided by an understanding of how networks are to be designed, constructed, and maintained in balance with existing infrastructure. Development should also be guided by an understanding of how changing environmental factors must evolve for products and network services of the infrastructure to be efficiently utilized. Institutions such as the legal system must be properly configured for effective deployment of the infrastructure, and for efficient utilization of the services. In addition there is the need to establish a funding schedule over the long term of the KII project. These issues have thus far been unclearly addressed in the KII Plan.
Perhaps the greatest challenge is achieving coordination among the parties at stake in the process of network deployment and service provision. Various parties have varying levels and kinds of risk and incentive to consider, and it is doubtful that any one scheme will meet all parties' needs. The KII will require coordination between the government and the private sector, among governmental agencies, between conduit owners and content providers, etc. NII activities also have international scope, a fact that the label “NII” tends to obscure. Coordination of NII issues will require smooth communication and interaction among countries whose welfare is dependent on effective interoperability of global information infrastructures.
The policy issues surrounding implementation of KII are already known from the experiences of the NBIS project. These include:
· Development and availability of relevant technologies
Design, construction, and maintenance of networks in an efficient way
Provision of applied services on demand and development of applications for potential human needs
Promotion of environmental factors leading to the active utilization of services
Promotion of active cooperation among domestic and international partners.
In addressing these factors, we begin by analyzing the KII in terms of demand-pull and supply-push orientations toward policy for technological development.
Demand-pull vs. supply-push
It has been generally and intuitively agreed that demand-pull policy interventions are more important than the supply-push interventions in stimulating industrial technology innovation and its application. Nevertheless, it is important to address supply side issues when technical projects require central coordination. The risk of misallocation of government funds or private sectors’ scarce resources is high when the demand side is not considered. Critics of the NBIS project pointed out that the planning had focused on the supply-side, without considering sufficiently the established or potential needs (see footnote 2). The resulting developments did not meet with active use. This the key question on the demand-side of the KII is this: what kinds of services and products will be worth the huge investments required by the KII programs? This question can be difficult to answer, given that a number of IT-related industries such as computers and consumer electronics appear to have created their own demand.71 In such cases, forecasting demand is essentially impossible until the supply is available.
Both supply and demand forces are operating together in the adoption and diffusion process of IT innovation, and the dynamics of interaction between the forces themselves change depending on circumstances such as the relative state of technical knowledge, the availability of complementary and substitutive factors, the character of the needs of society at any one time, and the effectiveness of the market at translating needs into clear demands (King et al., 1994). The Korean government has experienced the failure of trying to force active utilization of a system provided by public funding in the NBIS project. It has attempted to take into account the potential and actual needs of users in the process of drafting the KII Plan. Nevertheless, the information on potential needs for IT innovations is so limited that it is impossible for the Plan to cover the whole of possible needs the infrastructure might meet its time span. It is simply assumed in the Plan that the IT trend of rapidly advancing and expanding the area of its surprise applications continues.
Technologies and standards
The process of preparing the technologies required for the KII is not simple, stretching from basic and applied R&D, through the assembly and demonstration of prototypes and market testing, to final production. To a large extent, the future information infrastructure will be a transformation and extension of today’s computing and communication infrastructure. While trends in each of the component areas of computing and communications can be predicted in the world market, the outcome of all these trends taken together and interacting with one another is far from predictable.
Technologically less developed nations such as Korea feel it is very important to catch up in advanced technologies. One way to do this is through international cooperation in technology transfer, and the Korean government is very encouraging of the private sectors’ collaborative research projects with foreign counterparts. Technology transfer used to be a very effective way of assuring the assimilation of advanced technology, but international competition for technology hegemony has become so intensive that improving the level of technology consistent with the needs of KII could be very difficult. Thus, there is also the goal of new technology development in order to satisfy the demand for services and products planned in the KII. The key from a policy perspective is how Korean industries involved in the KII can be encouraged to take part in the process of developing technologies, and how accurately the trend and direction of technology development and its application can be predicted. Considering the rapidly changing characteristics of IT, technology development programs cannot be identified beyond the first stage of the Plan, with the second and third stages undetermined (KIITF, 1995).
The adoption of technical standards will be one key element in ensuring the interconnection of existing and planned networks and the interoperability of information systems and services.72 The Korean government has set the policy of developing original standards that are internationally compatible, in addition to acceptance of standards formulated in other countries. Korea is a free trade environment under the WTO system, and standards are an important tool to foster economic growth and take advantage in competing for a share of world market. However, the processes for establishing standards are complex and involve many organizations at the domestic and international level. The policy issues are sophisticated and hard to address, especially regarding the appropriate role of government in establishing standards. Government enforcement of standards can foster coordination among the parties at stake, but only at the risk of misallocating resources through pursuit of standards that do not work well.73
The Korean government will play a key role in shaping future network standards74. The KII will succeed only if the government finds ways to represent the broad interests of society in the standards-setting process. The groups involved in the network development recognize the importance of coordination in reaching standards agreements, but they also wish to protect their vested interests. The current capability for establishing technical standards is in its infancy, but substantial investment has been put into the process since the beginning of the NBIS project.75 Several organizations are involved in standards activities for the KII, but NCA has played the dominant role in setting standards for computer networks through research leading to guidelines for network standards. These guidelines have provided technical specifications for products and network services as well as network devices. NCA has also helped identify technical specifications for government procurement. These activities will be continued in the process of implementing the KII Plan by standards-related organizations including NCA.76
Another important policy issue is the degree to which standards are domestically developed vs. imported. One approach is to adopt external standards as soon as possible they have been internationally accepted, and to try to have domestically developed standards adopted in the world market. Korean government and industry looks at standards developed by ISO/ITC/JTC1, as well as recommendations drafted by ITU-T, that can be directly adopted or customized to become domestic standards. Korean industries are also encouraged to develop their own standards for situations where international organizations do not provide adequate specifications or when those standards play an important role in protecting domestic markets. Of course, Korea wishes also to make significant contributions to international standards development.
A useful tool for establishing standards in Korea is identifying technical specifications created by users’ groups, especially in the public sector. For instance, the NBIS project developed technical criteria for several machines and network devices, such as multifunctional workstation, minicomputers(TICOM), printers, and LANs. The procurement guidelines set by the users’ groups provide an effective way to set standards in the KII, and users’ groups are encouraged to participate actively in generating ideas for the direction of technology standards development.
There is a potential conflict in standard setting with respect to IPRs (Intellectual Property Rights).77 Korean industries have become interested in IPRs as a result of developed countries' efforts to protect their own industries’ R&D benefits. IPRs have become a critical issue, and concern grows as the owners of intellectual property realize that they can increase their gains by manipulating the timing and outcome of the formal standard process. In such cases, especially when there is more than one such player, consensus becomes impossible or difficult and slow. The importance of IPRs in protecting producers’ R&D investments in network devices and software is likely to grow as the convergence of technologies accelerates.
The physical networks for the KII must be designed and constructed in an effective way, in considering the balance with the existing networks, and operated and maintained in an efficient way. The networks are scheduled to be constructed each in three stages through the year 2015. The fiber backbone networks will be deployed initially to connect five metropolitan areas, each of which will be wired to nearby large and small cities. The capacity of the backbones as well as local connections to the small cities will be expanded at each stage . The fiber network deployment is scheduled to be extended to individual homes (fiber-to-the-home, FTTH) in the final stage. Deployment efficiency is ultimately related to how fast the demand for network services increases. Lack of network capacity will obstruct deployment necessary to support the information economy, but over-capacity will generate inefficiencies.
The question arises whether the supply-push model works in the context of information infrastructures.78 The demand-side view sees the Plan as too optimistic with respect to potential demand, generating excess capacity in the networks. They argue that FTTH could will produce over-capacity if the current low use of Internet in home in Korea is any guide. Supply-side proponents claim that immediate adoption and deployment of digital fiber optics will encourage consumers to find new applications. The KII Plan is based on the supply-side view. The debate on this issue is directly related to investment priorities of industries as well as government. The capacity of networks is a function not only of currently available services but potential services.
The construction of the networks must be balanced with existing networks. The KII guidelines state that existing networks will be evolved into advanced networks, and eventually, into the NKN-G and NKN-P. At the same time, they will be integrated with the existing PSTN, PSDN, N-ISDN and mobile communication networks. As an example of this approach, a number of public networks developed under the NBIS project will be constructed to transmit and switch a variety of text, audio and video to be integrated into the NKN-G. This guideline looks very reasonable and simple, but deploying the high-speed networks based on the existing ones will not be successfully implemented without problems of costs, currently available technologies and their future development paths, the size of current and potential network demand, and so on. For the KII Plan to proceed smoothly, these challenges must be met.79
Questions have been raised about the usefulness of the high-speed networks envisioned in the Plan. What justifies the investments required to construct the information highway? What benefits will customers receive? The vast majority of identifiable consumer needs are readily met by existing capacities and technologies. What is urgent demand for extending network capacity? Throughout the 1980’s, the Korean government conducted an ambitious telecommunications investment plan to make up the shortage of capacity in telecommunication services. Korea's infamous excess demand for the telephone lines disappeared, and advanced information services such as data communications and VANs began to become available. This could be seen as a supply-push strategy, but the demand for basic services was clear already in Korea, and the demand for data communications was evident elsewhere and generalizable to Korea.
The KII is a more ambitious undertaking, and the demand for advanced services on it is less obvious. Some critics point out that the Plan is mostly supply-driven, while demand is unclear. Will rapid advances in digital technologies and fiber optic transmission systems, along with basic control software, provide a platform on which applications will flourish? The KII thus depends on the creation of application services; in fact, it is the most critical factor leading to the KII's success.80 The strategies and policies necessary to encourage the private sector to invest in and create these new services are not clear. At this point, the government sees a necessary leadership role for itself in the development of application services. The government will focus on encouraging private sectors investments through deregulation, privatization of public enterprises, legislation, etc.
The government has been very active in the generation of service application for NKN-G since 1994, the year the initial version of the Plan designed. Two directions are evident. One lies in developing pilot projects that demonstrate the feasibility of applying technologies to provide services to customers in remote areas. Three demo projects initiated in 1994 provide public medical diagnosis service, education at the elementary level, and agricultural skills advice to remote areas. The remote elementary education system has since been extended to the college level.81 In 1995, five more pilot projects were launched: telecommunication services for the handicapped, remote trading of agricultural products, remote system retraining industry workers using university facilities, teleconferencing system among cabinet members, and remote court system. These projects are to show how the state-of-the-art technologies can be applied to the existing activities of users and well as service providers, and to test the feasibility of applications running on the technology. The pilot projects also are intended to promote the efficiency of administrative operations and convenience in delivering services to the general public.
The Korean government is also involved in developing applications for governmental agencies over the NKN-G. The KIITF collected 94 proposals on potential technology applications from various government agencies, and selected 36 projects for funding of about $20 million (16.2 billion won) during the initiation period in 1995. Planning is underway to support the development of application services in a systematic way so each application can be successful in promoting efficient agency operation, and thereby stimulate further demand for applications on the NKN-G.
Two main laws cover the information infrastructure in Korea. The basic law governing the communication services until the early 1980’s was the Telecommunications Act of 1961. This was broken down into the Telecommunications Basic Act and the Telecommunications Business Act in 1983 to separate the functions of policy formulation and business operations, and to take a step toward privatization. As the technology convergence among computers and communications rapidly progressed in the 1980’s, the government initiated the NBIS project, for which the Computer Networks Law was enacted in 1986. Telecommunications law has been revised several times to reflect the rapidly changing environment in technology and applications, as well as world market structures. The Computer Networks Law has made substantial contributions to promotion of IT applications. Nevertheless, the need for another legislation was proposed at early 90’s in order to establish the efficient framework for policy formulation preparing upcoming information society, and to effectively support R&D activities and information industries.
The time of the proposal for new legislation coincided with the opening of the second stage of the NBIS project, when the project was downgraded due to dwindling support from the government. The proposal also coincided with a maturing of the government's views of the coming information society. Three ministries including MIC, MOTIE (Ministry of Trade, Industry, and Energy), and MOST (Ministry of Science and Technology) drafted their own version of legislation. They had agreed to produce an integrated law, but years of bureaucratic competition delayed progress. The Informatization Promotion Act finally passed the National Assembly as late as July, 1995.
In the process of finalizing the law, heated discussions centered on ultimate responsibility for the KII Plan and the sources, amounts and management of funding for KII projects. Although many of the issues had settled down in the process of enacting the law, potential disagreement among governmental officials raises questions about future enforcement of the KII Plan.82
The Informatization Promotion Act requires the government to prepare action plan for informatization on an annual basis, and specifies detailed items to be contained in the plan. It also prescribes the organization of the top-decision making committee and its subsidiary body. It specifies missions of the public sector for the development of core technologies and their applications, and the promotion of information technology industries. It establishes the informatization promotion fund, along with its sources, uses and the main body of its management. Since its passage, several weaknesses have been identified. There is concern expressed by leaders of business associations that it does not provide enough incentives for private sectors informatization and focuses excessively on the public sector. Furthermore, past experience of operating similar funds suggests that fund establishment is just the beginning, and sophisticated management of the fund will be required to lead to the successful implementation of whole process of the project.
The Act was initiated without regard to the KII Plan, but it has evolved a clear cut relation to the Plan. The law has to be accompanied by detailed regulations in order to enforce relevant policy decisions regarding the KII initiatives. Without these, the Act cannot play a role in promoting informatization. Furthermore, the Act is supposed to take over driving the computerization projects, replacing the Computer Networks Law of 1986. The Informatization Promotion Act is to the KII what the Computer Networks Law was to the NBIS. In dealing with the new business opportunities, the Act may not be harmonized with the Telecommunications Basic and Business Acts. These potentially conflicting issues must be solved in the process of promoting the informatization.
Costs and funding mechanisms
Cost estimation of IT projects is difficult because technologies advance continuously, enabling services to be provided over networks cheaper than today. Network-related costs decrease owing to rapid developments in enabling technologies such as fiber-optic facilities and ATM devices. Information service-related costs go down due to increasing competition, deregulation, and economies of scale. Nevertheless, the estimation of costs is a prerequisite step for the government, both to fix the size of investments required as part of establishing public consensus for the national project, and to help the parties at stake to prepare their financing schedules. The establishment of the KII for the next 20 years is expected to cost 45 trillion Korean Won ($56 billion). Only a small portion of the total, 1.8 trillion Korean Won, or $2.25 billion, will depend on the public sector. This covers the establishment of test-bed and pilot projects, increasing public awareness on information infrastructure, supporting development of core technologies as well as the construction of the NKN-G along with multimedia services delivered to the public over the networks. Application service providers and other private sectors will be responsible for financing the balance.
The NBIS project experience showed that preassigned fund for the National Administrations Information System was a major source of success in its first stage, while the forced return to the normal budget process signaled weakening government support led to the delayed implementation of the government computerization projects in the second stage. Research was begun to show the payoffs from IT investments in quantitative terms. This led to discussion of the so-called productivity paradox . The government has sought to refute the hypothesis. The direct funding mechanism arranged in the Informatization Promotion Act is an example of its success. The Act provides a strong legal basis for making public IT investment as necessary to the success of the KII Plan. The Act prescribes the establishment of a Fund large enough to support public IT investments, along specification of uses and sources. Nevertheless, there is still a great chance for conflict over how to raise the Fund, what activities are to be financed, and who will manage the Fund. The MIC is explicitly stipulated to operate it. Despite years of effort to consolidate funding, there are several sources of the Fund listed in the law83. It is not yet clear whether a Fund big enough to finance the public activities will come out of the law.
Coordination among the public and private sectors
The growth of networking makes for an increasing number of players whose roles are changing. A large number of stakeholders will be affected by the actions of the players that will shape evolution of the information infrastructure. The KII involves many stakeholders, and requires an intensive level of coordination among industries, governmental agencies, research institutes, universities, and the general public. The powerful central government’s coordination makes Korea's case less problematic than in other decentralized countries. However, the environment in which government coordination takes place has greatly changed, A growing number of players have power to influence policy, ignore policy, or site-step policies they do not agree with. Within government itself, power is becoming less centralized. Various governmental agencies are becoming more autonomous and battling for influence over issues. Both coordination between the private and public sectors and coordination within governmental agencies must be considered.
Industries related to the KII Plan must coordinate among themselves in a market shaped by newly developing business settings. Deregulation, for example, is bringing more competition into the market. Strong government leadership in the past provided prompt solutions to serious conflicts among stakeholders. Government set goals, while private industries passively ran their businesses under the rules of regulations. The government was able to enforce its strategies through effective tools such as special financing schedules, granting or withholding permission for particular firms to enter an industry, and establishment of competition rules in the market. This model was intended for the KII Plan, but the trend of liberalization and deregulation changed that. Strong government leadership was very effective in driving the development of industries such as Industrial Machinery, Shipbuilding, Automobiles. Industry products are visible and tangible, suggesting desirable directions of the government interventions. Products and services to be brought into existence in the future are probably best left to market function. Nevertheless, the benefits of direct governmental involvement in network deployment can help accomplish rapid and wide-scale deployment, while the government role in funding key technology research is widely acknowledged.
The government’s role is also indispensable in establishing technical specifications for network standards. Intervention in the standards process, however, does not mean direct control by the government. Direct control proves not only to be inefficient as we can see in the past experience (see footnote 18), but it is not likely to be possible since setting standards for infrastructure involves a broad range of players. They differ in their competencies, constituencies, time scales, and effectiveness, all of which interact in a context in which standards setting is largely voluntary. The role played by the government should take indirect influences through, for example, the establishment of guidelines and procurement.
Government should also help establish a favorable business environment. Removing regulations, facilitating privatization of public corporations, and setting fair rules of market competition are examples of this action. Government’s responsibilities are to maintain a sound economic climate for private investment and a regulatory framework that encourages fair and open competition among equipment and service providers. Instead of being dominated by a single network that provides all services to all users, the information infrastructure includes multiple networks with different functions, capabilities, and patterns of ownership and use. Assuring interconnection and interoperability of these networks is an important role of government at all levels, so that the maximum benefits can be gained from the investments both for NKN-G and NKN-P.
The role of the government in efficiently deploying the information infrastructure should change from the past practices of economic development, but bureaucratic attitudes change slowly. The private sector shows mixed feelings. On the one hand, the private sector prefers liberalized business environments. But at the same time, businesses still tend to seek for the direct government supports. The issue here is how to create harmony between the two sectors, considering the changing nature of their relations regarding the network deployment and IT-related application service development.
Committee and the roles of governmental bodies
Policy-making process in Korea has been frequently interrupted by bureaucratic rivalry among ministries at stake. Moreover, the scope of information infrastructure cuts across several governmental bodies. The KII initiative therefore faces considerable problems of coordination within government, even if the government’s role would be clearly constructed in balance with the private sectors. The process of legislating the Informatization Promotion Act illustrates this problem. The implementation process of the administrations information systems in the NBIS was smooth and effective when the NCB, the coordinating committee of the project, belonged to the Executive Office of the President. Moving the NCB to a lower-status position damaged it.
A high level steering committee has been formed at the interministrial level to resolve potentially controversial issues affecting several governmental agencies simultaneously. Being headed by the Prime Minister, members include the ministers of related ministries and representatives from the National Assembly and the Supreme Court. This committee is legally appointed by the Informatization Promotion Act to be top policy making organization, responsible for driving the KII projects. Its organization and missions are prescribed in details in the Act. One of its missions is to make decisions related with the Computer Networks Law. The Committee takes the role of the NCB in that matter. The KIITF (KII Task Force) is to play a role as the working arm of the Committee.
To avoid possible confusion in the policy processes, the Ministry of Communications (MOC) was reorganized into the Ministry of Information and Communications (MIC) in the 1994 rebuilding of the central administration. The Act stipulates that the Informatization Fund be operated and managed by the MIC minister, providing the MIC with powerful driving force for the KII initiative. MIC is now in a clear position to conduct the KII initiatives, supported by several critical roles legally defined in the Informatization Promotion Act.
In spite of the Committee organization and redefining the roles of the Ministry of Information and Communications, it is expected to take a series of debates within various ministries to end up with a conclusion concerning potentially critical issues in the process of implementing the KII Plan. This is obvious when we consider the roles of the EPB (now, BEF, Board of Economy and Finance) and MOTIE in the past 30 years of economic development. EPB, in control of the nation’s budget office, is very conservative in allocating money for IT projects. By establishing guidelines of budget allocation based on cost-benefit analysis, EPB has tended to put IT projects on low priority, arguing that the impacts of IT investments in the public sector are scarcely visible. In order to escape from the EPB’s point at issue, there have been research efforts to show economic payoffs or productivity impacts of IT investments, without much success. EPB stance would keep the Committee from decision making in favor of the KII Plan, and bring about major blocks to MIC’s management of the Informatization Fund.
MOTIE and MIC have come into a clash around the name of industry representing IT. Industrial policy decisions are under the authority of MOTIE while regulation of communications is governed by MIC. Although it seems that the MIC wins major control over MOTIE in managing the KII Plan with its control supported by the Informatization Promotion Act as well as 1994’s reformulation of the central administrations, the competition for influence still has a large room. For example, a number of equipment for network use and for use in homes and offices have to be specified for the KII. In the course of making development strategies for equipment industries, the MIC puts its emphasis on their network perspectives in order to take influence while the MOTIE insists its established authority in carrying out nation’s industrial policy.
The NII efforts in Korea have their origin in the recognition that IT can play a critical role in stimulating economic growth. The arguments for IT-driven development are based on the notion that investments in IT can accelerate economic growth by enhancing productivity and competitiveness, and increasing the returns to investment in other capital goods. Furthermore, the IT industry itself can be a source of economic growth by creating new products and services. For the past several years in Korea, however, this line of argument has run contrary to people who are in charge of allocating money, especially in the public sector. Since the first national IT project in 1980’s, private sectors have moved quickly toward the IT applications, recognizing their implications on market competitiveness. On the other hand, despite growing realization of the importance of IT applications, the government budget has been very reluctantly allocated for IT projects, pointing out invisibility of impacts of the previous IT investments.
The productivity paradox reported during the late 1980’s has met with a variety of explanations (Baily, 1986; Baily and Gorden, 1988, Brynjolfsson, 1993; NRC, 1994a). Great attention was paid to clarifying the paradox, in order to attain the national consensus on the KII Plan. In the process of drafting the Plan in 1994, several institutes put their efforts in this matter, citing various research publications’ explanations on the paradox such as measurement errors, time lag for diffusion, and mismanagement of IT (Brynjolfsson, 1993; Magnet, 1994; NRC, 1994a).
In addition to measuring the size of realized outcome from the past IT investments, it is also important, for the purpose of justifying proposed investments, to estimate future spreading effects we can expect from the network deployment and development of applications services. Research efforts in this context usually take a form of quantifying the estimated contribution of planned investments to macroeconomic indicators such as GDP and job creation.84 Successful estimation would lead to the right direction of efficient resource use, strengthening driving force of the Plan. However, the precise pictures of the new application services market cannot be predicted because they depend on innovations not yet developed and the details of the Plan to be annually updated to reflect changing environments such as the direction of technology development. Because of these uncertainties, it is more difficult to forecast the economic benefits of planned investments or proposed regulatory reform legislation (see footnote 29), than to predict, as in the established macroeconomic practice, the consequences for GDP of changes in tax rate or the monetary policy.
Despite all these difficulties involved in the estimation of economic benefits of IT investments, those who managed to prepare the KII Plan had been under pressure to present the quantitative benefits of IT investments proposed in the Plan. In 1994, a task force was formed to draft a document for the purpose of enhancing the public awareness on the KII initiatives. The team was made up of specialists from several organizations including NCA, KT, and ETRI. It was the chapter on “Economic Impacts of the KII initiatives” into which the most painstaking efforts had been put. Based on the input-output analysis85, it was estimated that the proposed investment of 45 trillion won would lead to the production of about 100 trillion won and the number of jobs created equal to 560,000 by the year 2015. While the numbers presented here are interpreted in a very restrictive way, they have played a role in advancing the public understanding on the KII initiatives and reducing uncertainties concerning planned investments.
International cooperation and APII
As pointed out in the Introduction, Korea’s new policy initiative for the NII was motivated by the corresponding activities developed in the advanced countries, although a national IT project(NBIS) had been already under way. The ideas on the NII developed in the U.S. and Japan hit the nation exactly at the time when the NBIS project was losing its driving force. By the nature of imported idea and by the high-tech characteristics of IT, success of the KII should largely depend on the international trend on technology advancement and individual countries’ driving direction of the NII initiatives. In order to successfully push the NII initiative, therefore, the government and industries need to pay attention to the information infrastructure’s evolution outside the country. For instance, as a technologically underdeveloped nation, international cooperation for technology transfer to catch up is so important that the Korean government is very positive in encouraging private sectors to conduct collaborative research and to make contracts for the transfer of advanced technologies with their foreign counterparts.
In addition, by the nature of technologies and their applications involved, the NII has international implications, even though the term NII contains the word “national” thus giving false impression that problems of developing, implementing, and using the information infrastructure are largely domestic. NII services will clearly operate in a context of international connectivity as can be seen in the use of Internet today. Thus it is important to keep in mind that, while information infrastructures have independently developed at different paces in different countries, the issues involved are global.86 This is the point well commanded by the government and industries in Korea. We can see this, for example, in the context of guidelines set for international standards. The Korean government expressed, from the beginning of the NBIS project, its desire to set standards that are compatible with international standards. This is at best a general guideline for international cooperation for standards area which should be addressed in details to the benefit of Korea.
Issues on standards are not the only problem demanding for cooperation to achieve international connectivity. Any effort to create a high-speed network among nations must consider who pays for the network and how payment is to be made. In addition, the question must be answered on how access to essential technologies, related not only to physical facilities but also to information services, is provided to nations where those technologies are not available. Although consensus has reached among nations that international connectivity must be maintained and expanded as networks are developed worldwide, the problems involved are so complicated that they can be resolved through extensive discussions among nations at stake. Solutions are even more difficult to come by since cooperation for international connectivity centers on the management of technology which is regarded as the most important and strategic measures for competition in the world market.
Because of the reasons such as underdevelopment of technologies, and the nature of IT as network technology implying global connectivity, the Korean government and industries are urged to actively take part in international activities for cooperation. They very well understand the characteristics of IT and its implications on the international relations. Furthermore they also pay attention to implications of technology leadership on the international market share of future network services. In order to improve the position of their leadership in competition among nations, they are not only very willing to make contributions, if any, to GII (Global Information Infrastructure) and AII (Asian Information Infrastructure), but they also proposed their own version of international cooperation, APII (Asia-Pacific Information Infrastructure) in 1994’s APEC summit meeting held in Indonesia. In order to develop a concrete form for the proposed APII, the Korean government sponsored a meeting of top leaders in charge of communications and information industries in the APEC countries in May, 1995. Sponsoring the APEC Ministers’ Meeting of Seoul with regard to the proposed APII adequately reflects strong intention of the Korean government to take proper leadership of its capability in the globalized networks.
The Ministers’ Meeting, in which 17 APEC countries’ top officials participated, produced a document stating the purposes, and principles of carrying out the APII. The purposes of the APII include construction of the information infrastructure enabling interconnectivity and interoperability among member countries, promotion of technology cooperation, free and efficient circulation of information, development and exchange of human resources, and finally improvement of policy and regulatory environment in favor of the APII. The principles of carrying out the APII focus on the individual countries’ uniqueness as well as the established ideas for the NII, for example, promotion of competition and private sectors’ investment, protection of the intellectual property rights, privacy, and security of data.
Given the significant gap among APEC member countries regarding production and use of IT, activities for the APII give rise to serious difficulty on the one hand, and at the same time, if the gap is appropriately taken care of, each country is likely to play in a cooperative way. This is the point why the individual countries’ uniqueness is put on emphasis as an important principle in driving the APII.