Knowledge Key To Sustaining Growth In Korea

March 13, 2001

WASHINGTON, DC — Pressured by a competitive global environment where it is being squeezed between the OECD countries and the developing countries of East Asia, Korea must ratchet up its pursuit of the knowledge economy, says a new joint World Bank- Organization for Economic Co-Operation and Development (OECD) study.

Korea is a country with limited natural resources which has developed mainly through an outward-oriented industry-led strategy based on large firms and economies of scale, says Korea and the Knowledge-based Economy: Making the Transition. But now this industrial paradigm is being challenged by the rapid rise of knowledge as the principal driver of competitiveness.

The challenge for Korea is to increase its productivity and the efficiency of its investments in both physical capital and knowledge, especially through more effective investments in education, information infrastructure, and research and development. Korea and the Knowledge-based Economy recommends further opening the economy up to trade and foreign investment, and fully integrating into the global system. The study breaks new ground by presenting a comprehensive set of national policy responses to the knowledge revolution.

To maintain its impressive rate of development, the study says Korea will need to:

  • increase its overall productivity while raising the effectiveness of investments in education, information infrastructure and Research and Development (R&D);

  • become more international in an increasingly globalized and interdependent world; and

  • redefine the role of the government to unleash the creative power of competition and markets while providing proper legal and regulatory supports and guarding against the digital divide between those with and without access to knowledge and information technologies.

At the dawn of the new millennium, knowledge and information are key factors of development. Increasing scientific understanding and advances in information and communication technologies are changing the way knowledge is produced and disseminated. Developing countries can exploit this knowledge revolution to become more competitive in world markets, reduce poverty at home, and promote sustainable development.

At the World Bank Institute, the World Bank’s learning arm, the Knowledge for Development program helps client countries achieve these objectives through courses and seminars, knowledge networks, and policy advice. “The program prepares government staff, the private sector, and civil society to make better use of knowledge for economic and social development,” says the World Bank’s Carl Dahlman, Knowledge Program Manager and co-author of Korea and the Knowledge-based Economy. “It provides them with a methodology to assess their country’s preparedness for the knowledge economy.”

Defining a knowledge-based economy as one where knowledge is created, acquired, transmitted, and used effectively by enterprises, organizations, individuals, and communities, the study does not focus narrowly on high technology industries or on information and communications technologies, but emphasize the need to make effective use of knowledge for economic and social development.

Korea and the Knowledge-based Economy presents a framework for analyzing policy options which includes

  • updating the economic incentive and institutional regime to foster a flexible, adaptive, market-based economy;

  • developing educated and skilled people to create, share, and use knowledge well,

  • fostering a dynamic information infrastructure to facilitate the effective communication, dissemination, and processing of information, and

  • creating an efficient innovation system of firms, research centers, universities, consultants and other organizations to tap into the growing stock of global knowledge, assimilate and adapt it to local needs, and create new technology.

The book provides useful lessons for other countries as they move away from old paradigms and toward new models of development, and will be of interest to students and teachers of economics and international studies as well as to planners and policymakers.

For a copy of the study, please contact Sunetra Puri at (202) 473-2049 or e-mail spuri1@worldbank.org