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Countering Japan with business

Aug 02,2019
SOHN HAE-YONG

On August 29, 1994, Samsung Electronics announced it successfully developed the world’s first 256M DRAM. It was also the 84th anniversary of the Korea-Japan Annexation Treaty. The choice of the date signifies Korea’s triumph over Japan in technology. Samsung Electronics ran a newspaper advertisement announcing the achievement. At the top of the ad was the Korean flag from the late Joseon period (1392-1910). Then Samsung Electronics president Kim Kwang-ho said, “at least in DRAM technology, I want to imply that Korea-Japan relations have return to the pre-late-Joseon period, when the two were equal.” President Moon Jae-in said, “Korea has overcome and surpassed Japan’s dominance in various industrial fields — such as home appliances, electronics, semiconductors and shipbuilding — and Korea can do it.” As a matter of fact, Korean businesses played a central role at the forefront of resistance against Japan.

Japan is still ahead of Korea according to major economic indicators. Per-capita GDP, which shows a country’s economic size, is an example. According to the International Monetary Fund (IMF), Japan’s per-capita GDP broke $10,000 in 1981, when Korea’s was $1,870 — 18 percent of Japan’s. But Korea continued to close the gap. In the 2000s, the ratio went over 50 percent, and last year, Korea’s per-capita GDP reached $31,346 dollars — 79.7 percent of Japan’s $39,306.

Korea’s economic growth chasing Japan was possible thanks to the efforts and enthusiasm of businesses. Samsung, LG, Hyundai Motors, SK, Posco and Hyundai Heavy Industries have all become global makers that have surpassed — or on par with — Japan’s. Korea is perceived as a well-to-do country thanks to their aggressive expansion in the overseas market.

But now, companies are losing vitality. Minimum wage increased by a whopping 29.1 percent over the last two years, and the corporate tax rate is high. Militant unions go on violent strikes, various regulations are restricting investment and politicians are not respecting businesses. In sharp contrast, Japan is dramatically removing regulations and lowering the corporate tax rate, while President Moon Jae-in named Japan as something to overcome. Coincidentally, the IMF predicts that Korea’s GDP versus Japan’s peaked in 2018 and will to fall to 73.3 percent by 2024.

The only way to defeat Japan is to nurture Korean companies. Anti-corporate, anti-market policies should be stopped. Fortunately, there are signs of changing as the government increases corporate tax benefits and removes, albeit slowly, chemical substance-related regulations. Creating an environment to help companies through more regulatory reform will enable Korea to truly surpass Japan.

JoongAng Ilbo, Aug. 1, Page 28