Chosun Ilbo: Entered the era of $20,000 through semiconductors and the era of $30,000 through automobiles... cannot see the "engine for $40,000 [highly developed countries]."
The International Monetary Fund (IMF) predicts that South Korea's per capita GDP will not break through the $40,000 mark until 2029. Six months ago, the IMF had set 2027 as the year to surpass this milestone, but this time it has postponed the target by two years. While high exchange rates are a superficial reason, many point out that the main cause lies in the loss of growth momentum.
The IMF's "World Economic Outlook," released on the 28th, forecasts that South Korea's per capita GDP will reach $43,410 in 2029, breaking through the $40,000 mark. South Korea surpassed $30,000 in 2014 and took 15 years to rise to $40,000. Considering that the average time for major countries such as the United States, the United Kingdom, Germany, France, and Japan to move from $30,000 to $40,000 is six years, South Korea's growth rate is clearly lagging behind.
In its report last October, the IMF predicted that South Korea's per capita GDP would reach $41,031 in 2027, but six months later, it significantly downgraded its economic forecast for South Korea. Over the past six months, political instability in South Korea, combined with the threat of global trade protectionism against an export-oriented economy, has highlighted the decline in South Korea's economic foundation. Over the past six months, the won-to-dollar exchange rate has risen by 125 won (9.4%), which has reduced the GDP measured in dollars.
Many argue that the lack of clear new growth drivers is a structural issue in South Korea's economy. When South Korea entered the $20,000 era, it relied on semiconductors; when it moved into the $30,000 era, industries like automobiles, chemicals, and oil refining were firmly established as pillars. Professor Lee Yoon-soo of Sogang University said, "During the period when semiconductors became the mainstay of South Korea's economy, the whole society had a spirit of 'willingness to try.' However, now, even though new industries such as artificial intelligence (AI) and robotics have emerged, there is a growing belief that these are 'industries that only the U.S. can do well.' Only when there is a clear new growth industry can related industries achieve common development, and overall economic growth will be achieved."
Entered the $20,000 era through semiconductors and the $30,000 era through automobiles... cannot see the "engine for $40,000."
$17,291 [1994] → $21,620 [2005] → $36,667 [2014].
Every time South Korea's per capita GDP crossed the $10,000 threshold, there was substantial momentum. In 1994, when per capita GDP exceeded $10,000, the country's confidence, bolstered by the "three lows" of low interest rates, low oil prices, and low dollar exchange rates, as well as the success of the 1988 Seoul Olympics, provided the impetus. In 2005, when per capita GDP reached $20,000, South Korea's market share of DRAM semiconductors worldwide reached 28%, ranking first, and its market share of NAND flash memory was 50%, also ranking first, solidifying South Korea's position as a semiconductor powerhouse. Around 2014, when per capita GDP broke through $30,000, the automotive, chemical, oil refining [car-chem-oil], and semiconductor industries became the twin engines driving the economy.
Lack of Revolutionary Growth Drivers in South Korea
If calculated mathematically, it seems easier to achieve a 1.33-fold increase from $30,000 to $40,000 compared to the doubling from $10,000 to $20,000. During the period when the per capita GDP rose from $20,000 to $30,000, South Korea's annual economic growth rate was close to 4%, taking nine years. If the same growth rate were maintained, it should have taken only 6-7 years to reach $40,000. However, after breaking through the $30,000 barrier, South Korea's economic growth rate halved, taking 15 years to reach $40,000.
Some argue that this is due to a lack of innovation. That is to say, South Korea's export structure, which has not changed over the past 20 years, has accelerated the country's economic difficulties. Comparing South Korea's top 10 exported products in 2005 with those of last year, apart from computers, household appliances have seen no changes except for newly listed categories. The semiconductor industry, which currently ranks first, was also ranked first in 2005, and the automobile industry, which ranked second in 2005, still ranks second today. Professor Anton Hyun of Seoul National University said, "South Korea's five major key industries are semiconductors, automobiles, petrochemicals, shipbuilding, and steel. Except for semiconductors, all belong to the heavy chemical industrialization policies of the 1960s and 1970s. Only in the semiconductor field has a 'Lee Kun-hee' figure emerged, developing since the late 1980s."
It is suggested that limited funds should be concentrated on new technology enterprises. Professor Kim Sang-peak of Hanyang University said, "Recently, when I asked students, they said they wouldn't want to work for manufacturing companies, but even if a company only has two or three employees and pays low salaries, as long as it's an AI company, they would be willing to join. This is because the future looks promising."
Other Countries Break Through Bottlenecks Through Innovation and Reform
The United States' per capita GDP exceeded $30,000 in 1997 and broke through $40,000 in 2004, seven years later. In 2023, the United States was the first among major countries to enter the $80,000 era. America's strength comes from continuous innovation. In the United States, where the threshold for innovative enterprises is not high, new startups in IT, biotechnology, and internet content sectors continuously challenge the status quo. The United Kingdom's per capita GDP exceeded $30,000 in 2002 and broke through $40,000 two years later. The UK successfully created new high-value-added knowledge-intensive jobs in finance and services, replacing lost manufacturing positions. London remains Europe's financial center and leads in high-value-added service industries such as law and consulting.
Germany, whose per capita GDP exceeded $30,000 in 1995, fell back to around $20,000 two years later due to increased costs of national unification and pension burdens. Germany chose to implement structural reforms. In 2002, Gerhard Schröder's left-leaning government introduced the "Agenda 2010," including measures such as introducing contract-based employment and shortening unemployment benefit periods. Germany lowered corporate tax rates and focused on restructuring, eventually breaking through the $40,000 per capita GDP threshold in 2007.
There are many pessimistic predictions suggesting that without innovation or reform like developed Western countries, South Korea may follow Japan's path. Japan cleared the $30,000 and $40,000 thresholds in 1992 and 1995, respectively. Although Japan was the first among major countries to achieve this, it stopped progressing further. Japanese companies failed to enhance competitiveness in response to changing times, and the Japanese government exacerbated stagnant economic growth, leading to "30 years of lost opportunities." The IMF predicts that Japan's per capita GDP will re-enter the $40,000 range in 2029, but it will still fall short of South Korea.
Professor Kim Jeong-shik, honorary professor at Yonsei University, said, "If South Korea cannot achieve industrial innovation and fails to break through resistance from entrenched interest groups such as strong unions to push for reforms, it risks following the gradual decline of Japan."
Original Source: https://www.toutiao.com/article/7500385059619226150/
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