(EDITORIAL from the Korea Herald on Jan. 16)

Engines of growth

In an age of unbound global competition, it is only natural for the government to
take on additional responsibility, not just for research but for its industrial
application. By doing so, the government will be able to help speed up the
transition from evanescent industries to high-tech ones.

In this regard, the government has done well to select 17 business areas, most of
them set to employ cutting-edge technologies, as new engines of growth. Work on
such a grand vision is a job that cannot be undertaken by the private sector. It
is the government alone that can map out the future course of industrial
advancement for the nation.
But this is not to say that the government will have to finance the entire
project - it cannot be done in a free market economy. All that the government can
do is to provide seed money to launch research and development projects, either
alone or together with consortiums of private enterprises. When new technologies
are developed in this manner, the government may provide tax and other benefits
to corporations that use them.
The business areas targeted for development include those in which Korea has
competitive advantages, such as telecommunications, broadcasting, information
technology and their convergence. They also include "green technologies" such as
renewable energy, rechargeable batteries and other eco-friendly devices and
processes.
If all the projects are completed by 2018 as envisioned, the government expects
they will generate 700 trillion won ($517 billion) in added value and $900
billion in exports in that year. The government also says they will create 3.5
million new jobs during the next 10 years.
But the most crucial and difficult job concerning the projects is securing the
funds to finance them. The government, which has earmarked 1.3 trillion won for
this year, will have to spend 1.5 trillion won to 2 trillion won each year during
the next decade. It will not be easy to secure huge sums of money in times of
economic hardship such as now.
But a much more difficult problem lies with investments that need to be made by
the private sector. According to an estimate by the government, corporations will
have to invest a total of 18 trillion won to 20 trillion won each year if the
government-set goal is to be attained. Economists in private think tanks have
voiced doubts that such an amount is feasible.
Another problem is the projected number of jobs to be created - an annual average
of 350,000. Simply put, that is an unattainable goal. A 1 percent increase in
gross domestic product usually translates into an additional 60,000 to 70,000
jobs. In other words, the 17 new business areas alone will have to account for
more than 5 percent growth in GDP.
An economist from the Samsung Economic Research Institute says GDP would grow 8
percent to 9 percent annually if the new business areas could contribute as much
as projected by the government. Few would believe the Korean economy could grow
at such a pace for the next 10 years.
The December job figures, released on Wednesday, should serve as a sobering
reminder to the economic policymakers that drafted the blueprint for the new
engines of growth. The number of people employed declined for the first time in
five years.
The government will do well to be more realistic about corporate investments and
job creation when it fleshes out the blueprint with action programs in April as
scheduled. The more closely ideal and reality are aligned, the better it will be.
(END)