Millennium Post

On top against all odds

Few countries can match the Republic of Korea’s grit when it comes to the show of the will to win over what it would normally appear to be insurmountable odds. If the history of the country’s successive war defeats against neighbours in the last century, the split of the nation after the last world war, its bitter past with Japan, constant belligerent postures of nuclear and missiles-armed North Korea since 1953 and lack of natural resources have failed to dampen the spirit of some 48-million South Koreans (four per cent of India’s population), it is because of the nation’s sheer will power to make it emerge as one of the world’s top 15 economic powers. In terms of geographical area, South Korea would barely be the three percent of India’s size. But, the country is fast catching up with India’s gross domestic product (GDP). It is the world’s seventh largest merchandise exporter. It is also emerging as one of India’s leading economic partners, making large investments in the country’s manufacturing industry, the mainstay of Korean economy.

Behind Korea’s rapid economic growth and high living standards of its people, comparable with any Organisation for Economic Co-operation and Development (OECD) country, is its focus on exports. This serves two purposes. First, the economy remains constantly under pressure to be globally price and quality competitive. Second, exports push domestic economic growth, improve employment and boost individual income. In a way, it has been following the model that made Japan the world’s second largest economy in the post-World War II era until China overtook it last year. Both Japan and Korea are badly short of natural resources such as coal, iron ore, bauxite, copper, rare earths and hydrocarbon. The two countries conquered these odds with technological innovations and high productivity converting imported raw materials into globally competitive finished products. In fact, all the three top east-Asian economies – China, Japan and South Korea – chose the export-led growth route. In contrast, India’s import-obsessed economy has living on the edge with growing current account deficits and external borrowing ever since it embraced the western brand of economic reform in 1991-92.

Ironically, almost half the South Korea’s GDP came from exports, which topped the $556-billion mark in 2011. South Korea’s top two export markets are China and Japan, themselves being the two of the world’s top exporting nations. Nearly 25 per cent of Korean exports are China bound.  The export-led growth has helped South Korea earn a per capita GDP of $31,700 calculated as per the purchasing power parity (PPP) norm, last year. In stark contrast, the per capita GDP in India was only $3,694, making it the poorest among the G-20 nations. India’s economic reform has only raised its dependence on foreign suppliers – for capital, capital goods, intermediaries as well as finished products. The performance of the manufacturing sector is the weakest link of the so-called India growth story while it plays a pivotal role in South Korea’s economy. The contribution from the manufacturing sector accounts for nearly 30 per cent of South Korea’s GDP.

If the building of high-powered global brands is a hallmark of a truly successful globalised economy, South Korea’s Samsung and Hyundai ranked among the top 100 in the list of the Interbrand survey of Best Global Brands, 2011. The only other Asian country to feature in the Interbrand survey was Japan with such powerful global brands as Toyota, Sony, Honda, Nintendo, Nissan, Canon and Panasonic. Samsung also features in the latest Millward’s Brown’s BrandZ study, 2012, of the world’s 100 most valuable brands. The only Chinese firm to be ranked in the BrandZ list is China Mobile. 'We are very proud of our brands. Several of them are global leaders in their respective industries,' says Kim So-hye, a South Korean businessman. Koreans are most proud of their cars such as Hyundai, Kia and Daewoo. American and European cars are a rare sight on Seoul roads and Korean motorways.

In the Japanese Keidenran style, Korea built its Chaebols, a kind of interconnected business enterprises with international network. Samsung, Hyundai, LG, Daewoo, Lotte, Hanjin, Hanwha, Kumho Asiana, SK Energy, Doosan, Dongbu, Daelin and Ssangyong are among Korea’s 45 most powerful Chaebols. As in India, most large Korean conglomerates are family controlled. They work closely with the government and influence the country’s industry and trade policies to promote Korean industry, trade and external investment. However, individual business-government deals are mostly transparent. Corruption at political and bureaucratic levels is treated with heavy hands. The recent prosecution and jail of the boss of Samsung on charges of corruption bears the testimony of Korea’s resolve to fight domestic corruption. In 2010, Korea’s 40 super-rich were collectively worth $ 66 billion. The richest of them is 70-year-old Lee Kun-Hee, alone worth $10.8 billion. Among the top five South Korean billionaires, three are under 45 years of age. Their combined worth is $11.2 billion. This is understandable considering the country’s large GDP and small population. Interestingly, Tadashi Yanai’s family, the richest in Japan, is worth only $10.6 billion.

In comparison, India’s super-rich are much richer than those in Korea and Japan. Reliance Industries Limited’s Mukesh Ambani alone is worth $22.3 billion. Arcellor-Mittal’s London-based Laxmi Mittal is worth over $24 billion, Vedanta’s Anil Agarwal’s wealth is said to be fast catching up with Ambanis. Both Mittal and Agarwal are first generation non-resident Indians. Unlike many rich Indians, rich Koreans abhor non-resident status. Last year’s Forbes list of global billionaires contains as many as 48 business tycoons from India, which is highly disproportionate to the country’s per capita income or GDP. Yet, India has not been able to produce a single high-value global brand. It does not have a single industry of the status of Korea’s shipbuilding, electronics and automobile as global leaders. For years, shipbuilding acted as Korea’s flag ship industry represented by four of Korea’s powerful Chaebols – Hyundai heavy industries, Samsung, Daewoo and STX Offshore.

Like Japan, Korea too is keen to expand its trade and industrial manufacturing ties with India. The country is keen to invest in large industrial and construction projects. Korean investors look at India as a long-term business opportunity. Hard working Koreans are quick to adjust with India’s weather, semi-urban and rural living conditions, culture, political system and bureaucratic hurdles compared to other expatriate workforce in the country. LG, Samsung and Hyundai are household names in India. Many top Korean business executives such as Seoul-based Lee Jung-ju think India’s current economic slow-down is temporary. 'The consumer base is vast. The logistics need improvement for industry to reach there to the last point. In fact, logistics is the next big area of growth in India,' pointed out the construction engineer.

According to unconfirmed reports, there are some 300 Korean companies, mostly medium sized, are operating in India with combined (FDI) investment of close to $4 billion, engaging nearly 10,000 Koreans in their local operations. Only major Indian investment in Korea took place nearly eight years ago, when the Tatas acquired a sick commercial vehicles company of Daewoo for $102 million. The company is known as Tata-Daewoo Commercial Vehicles Company. Under the Tata management, the company recovered fast. Tata-Daewoo’s turnover jumped seven times, profit by 10 times, local employment strength by over 50 per cent to nearly 1,500 persons and export of over $200 million annually. The Indo-Korean trade has shown exponential growth in recent years. The bilateral trade target for 2015 is $40 billion. Unfortunately, Korean visa rules continue to be very unfriendly to Indian visitors.
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