2030: Korea Headed Toward Nuclear Reactor Supplier, More
Apr 16, 2010 (Basil and Spice - McClatchy-Tribune Information Services via COMTEX) --
Business Week's April 8, 2010 issue carries an excellent article on current Korean successes, fueled by prior worry that lower-cost Chinese and more experienced Japanese producers would eat away at Korea's economy. That concern, backed up with actions, has helped enable Korea to both boost trade and maintain a positive trade balance with both nations. Korea's Hyundai became the world's third-largest auto producer as its U.S. auto sales rose 7% last year in a down (-24%) market; it is also in second place among international car makers in China, ranks ahead of Toyota on J.D. Power initial ownership surveys, operates the world's largest integrated auto factory at Ulsan, Korea, and was named by Toyota as the automaker it most feared. Hyundai/Kia, together with sister company Hyundai Steel are also building new state-of-the-art eco-friendly steel plants for auto and ship-building that will substantially reduce imports from China and Japan. Together with Kia, Hyundai contributed $25 billion to the nation's 2009 export earnings.
Shipbuilding, however, contributed almost twice as much ($69 billion) to Korea's 2009 export earnings. The small nation dominates shipbuilding, with slightly over half the world's market share, extensive use of prefabrication, and the world's largest shipyard. Korea took over as the world's market leader in 2004 -- from Japan.
Four years ago Samsung lagged Sony in flat-screen TV production -- it now has a 17.2% global market share, compared to 5.9% for Sony, recently introduced lighter, thinner LED TVs with sharper, brighter images, and is planning an 18% volume increase this year. And then there's sister company LG Corp. -- introducing 3D flat-screen TVs to go along with existing TV and appliance products. Total 2009 semiconductor contribution to Korean export earnings -- $31 billion.
Cell phone handsets also contributed $31 billion, but this required Samsung, LG etc. to shift a majority (58%) of production overseas to nations like China, Brazil, Vietnam.
The largest and most surprising contributor to Korea's overseas earnings, however, was construction and engineering. In 2009, Korean companies won half the Abu Dhabi contracts awarded for oil and gas exploration -- about $30 billion worth. Meanwhile, state-owned Korea Electric Power (KEPCO) is building four nuclear reactors in the UAE ($20 billion) and will be operating them for sixty years (another $20 billion). Their successful bid is believed to be $16 billion lower than that of a French consortium, includes seismic and missile protection not usually found in conventional reactors, eliminates many conventional backup systems, and will be completed 9 months faster. Building standard models for over a decade is part of KEPCO's competitive advantage, as well as Asians' reputation for completing projects on time, "unlike Western rivals."
Earlier this year, KEPCO also signed an agreement to cooperate with Turkish electricity producers to build a reactor in Turkey, and is in talks with Finland, Jordan, Malaysia, and Morocco to build more, is expected to export two to the U.S. (Colorado and Idaho), and is building six more within its own borders. (Nuclear power already provides 45% of South Korea's electricity consumption. Korea's nuclear reactors have a much higher operation rate and lower emergency shut-down rate than those built and operated by the U.S., France, Japan.) South Korea plans to become self-sufficient in nuclear reactor technology by 2012 when it opens a graduate training program, and to export 80 power reactors worth $400 billion, by 2030 -- making it the world's third- or fourth-largest nuclear reactor supplier.
As for more conventional construction, Korea is no laggard there either -- Samsung was primary contractor for Dubai's recently completed 162-story Burj Khalifa tower, the world's tallest skyscraper.
Yet, Korea is now fretting about the future -- that some new innovation in China, India, or the U.S. will become the defining business of the next generation. Thus, government and industry are working together to promote R&D in robotics (industrial, education, disaster-fighting, and entertainment), green energy and transportation (Hyundai has developed lithium-polymer batteries said to be 40% smaller and 35% lighter than Toyota's nickel-metal hydride ones, and is also researching hydrogen-fueled cars), biotechnology, and health care. Government is providing goals, $500 million in funding so far, and low-cost loans.
How might we explain this small (about 50 million population) natural resource lacking nation rising from rubble after the Korean War, to economic leadership in many areas, including high-tech? Michael Shuman (The Miracle) offers several theories:
1) Confucianism's stress on social order, hard work, savings, and education.
2) Superior economic planning -- selecting particular industries to promote and in what sequence, backing them with funds, wresting foreign technology assistance, sometimes selecting leaders and forcing them to successfully compete overseas or be replaced, and protecting nascent industries with tariffs.
3) Nationalism -- wanting to be free of foreign dominance, and to impress others.
4) Leaders that were not trained as economists.
5) Strong-man rule that did away with interminable arguments and decision delays. South Korea's strongman Park, most credited with its economic transformation, was posthumously selected in 1996 as the "dictator they'd most like to clone." (Similarly, China's Deng, Indonesia's Suharto, and Japan -- especially at the onset of their transformations.)
Bottom-Line: Where are the new, improved high-tech jobs that our outdated economists and plutocrat CEOs promised would fill the void left by outsourcing manufacturing? Turns out they're all 'pie-in-the-sky.' Many of these desirable jobs also left because we no longer provide management, R&D, environmental upgrades, etc. for those lost industries. We also gave up making old-style glass-blown TVs, and unwittingly lost the development and manufacture of high-tech LCD, plasma, LED, 3D, and possibly solar as well. High-tech semiconductor R&D, management, and production jobs are similarly increasingly moving to Asia, and high-tech software to India. We've stopped building nuclear reactors, and now have to import improved and safer designs developed elsewhere -- from our earlier offerings. Not only have we lost innumerable high-tech jobs to supply Americans in the present and future while instead building enormous trade and government deficits, we've also lost the opportunity to create innumerable additional American jobs supplying others around the globe. We could learn a lot from China, India, Indonesia, Japan, and South Korea -- if we stopped living in dreamland. A good place to start is by emulating their approach to providing health care, education, and defense/homeland security -- saving $2.4 trillion/year with improved outcomes, as well as eliminating another $23 trillion in unfunded Medicare liabilities.i"
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Loyd Eskildson is retired from a life of computer programming, teaching economics and finance, education and health care administration, and cross-country truck driving. He's now a blogger and reviewer at Basil & Spice.
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