Korea Lags Behind In Research and Development

Toyota Motors has released the first car equipped with an automatic parking function.

Relieving the driver of the effort to operating the steering wheel when parking in a narrow space, this car utilizes its cameras and computer sensors to park by itself. Toyota has also taken initiative in hybrid vehicle development, one of the future types of vehicles.

The reason Toyota maintains its leading spot in car technology can be attributed to its continuing and high levels of investment in research and development (R&D). The amount of investment which Toyota paid out during the last Japanese fiscal year, April 2004 to March 2003, was approximately 672 billion won, seven times more than that of Hyundai Motors’ expenditure, 91.5 billion won, in 2002.

Falling behind other automakers in advanced countries, Korean automakers have tended to be stingy in R&D activities in recent times.

On April 13, the report of the Korea Chamber of Commerce showed that Korean products, which once secured the number one spot in market share, have continuously decreased to total no more than one-fourteenth of the share enjoyed by Chinese products, proving that negligence on the R&D front can create a hazardous situation.

The experts indicate that in order to guarantee future competitiveness,increased investment into R&D and the sustained support of the government are indispensable.

--Unstable future competitiveness

In accordance with the Korea Development Institution (KDI), companies which occupy the number one spots in 11 industrial categories in Korea, invest on average only 30 percent of what the world’s 500 leading companies invest in R&D.

Excluding Samsung Electronics, which is regarded as one of the world best companies, that figure plunged down to the 15 percent level, explained KDI.

In particular, the pharmaceutical and chemical, food manufacturing, auto parts, and IT service industries invest only one, three, six and six percent of their budget on R&D respectively, far short of the ten percent mark.

According to a survey conducted by the Korea Industry and Technology Promotion Committee, the total amount of investment implemented by the top 20 Korean companies such as Samsung Electronics and Hyundai Motors in 2001 was 623 billion won, which is less than the total investment, 636 billion won, made by Pfizer alone, the fourth-ranking company in terms of R&D in the U.S.

--Amount of R&D investment is on the decline

In the field of total sales, the scale of R&D investment in Korea is placed in an absolutely inferior position compared with that of the other foreign companies.

According to the Samsung Economy Research Center, the R&D investment ratio of Korean companies, in contrast to their total sales levels over the last year, reached only the 2.8 percent level, which is only half that of the advanced global companies’ average: 5.5 percent.

Worse, the scale of R&D investment is continuously dwindling. The growth rate of R&D investment was 16.2 percent in 2000, 16.3 percent in 2001, and 7.5 percent in 2002, showing a heavy decline.

--Lack of R&D is a nationwide problem

Because sales for Korean companies are less than those of foreign advanced companies, experts say that the strategy of “selection and concentration” may be the most favorable route to take for the future.

“The R&D departments of Korean companies carry out tens of R&D projects simultaneously, but fail to deliver their outcomes in time,” remarked Song Ki-hong, the vice-president of Monitor Company, a U.S. based consulting company, adding, “Most foreign companies centralize their power in several industrial fields, which possess higher priorities.”

The industrial world also states that governmental support should be increased on a large scale for R&D.

“The scale of tax deductions for R&D investment and R&D related facilities should also be expanded,” remarked Ko Young-man, the chief of the trade promotion department of the Trade Committee.

Chi-Young Shin Jong sik Kong higgledy@donga.com kong@donga.com