20080701-060-korea industry vision 2020
TRANSCRIPT
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Korea Industry Vision 2020
Byoung Jun Song, Ph.D
Senior Reaserch Fellow
August 3, 2006
KoreaInstitute for Industrial Economics & Trade (KIET)
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Contents
Introduction and Outline
2020 Mega-Trends and Industry Environment of Korea
Industry Vision 2020s of Major Countries and Its Implications
Structural Changes and Competitiveness of Korean Industries
Korea Industry Vision 2020
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Introduction and Outline
What will lead the Korean Economy and Industry in 2020?
Changes in the world industry environment in 2020?
What will be the most promising sector in 2020?
Where should we invest now?
Impact of 15 Mega-Trends on Korean industries
Various Industry Vision 2020s of major countries and its implications
Prospects of the world economy and industries for 2020
Competitiveness of Korean industries
Past and present of Korean industries
Forecast of the Korean industries and promising sectors in 2020
Korea industry vision for 2020
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2020 Mega-Trends and Industry Environment of Korea
15 Mega-Trends: the key factors for developing business environment
How will Mega-Trends influence the future of Korean industries?
Through which mechanism will the Mega-Trends work?
Positive Mega-Trends
Negative Mega-Trends
Labor Input
Capital Input
Total Factor Productivity
- Maturation of Digital and Network Technology
- Fusion Technology: IT, BT, NT, new Materials
- Progress in South-North Korean Economic Cooperation
- Aging: Change in Demographic Structure
- Degradation of Environment and Natural Resources
- Hegemony of Technology: Standardization and Intellectual Property Rights
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2020 Mega-Trends and Industry Environment in Korea
15) Regional Innovation and Balanced NationalDevelopment
14) Progress in South-North Korean Economic Cooperation
13) Evolution of New Culture
12) New Consumption Pattern
11) Hegemony of Technology : Standardization and
Intellectual Property Rights
10) Challenge to New Technology : Rise of NationalStrategic Technology
9) Fusion Technology: ITBTNTNew Materials
8) Advent of Bio-economy
7) Maturation of Digital and Network Technology
6) New Wave in Management : Knowledge-based and CSR
5) Paradigm Shift in Financial Markets
4) Degradation of Environment and Natural Resources
3) Aging : Change in Demographic Structure
2) Power Shift in World Economic Order and Change inComparative Advantage
1) Integration of the World Economy
15 Mega-Trends
Korea-specific Situation
Evolution of New Cultureand Consumption Pattern
Acceleration inTechnology Innovation
Labor, Resources, andManagement
Change in WorldEconomic Order
Fields of Mega-Trends
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Industry Vision 2020s of Major Countries and Its Implications
The industry vision of major developed countries: highly dependenton population growth rates
U.S. will remain the global superpower in 2020 due to the high populationgrowth rates.
Aging will weaken the potential for growth in Japan and EU.
Forecast of Potential GDP growth rates for the next 20 years(estimated by Shell): U.S. 3.1%, EU 2.1%, Japan 1.1%
The declining portion of manufacturing sectors for developedcountries will continue in the future
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Industry Vision 2020s of Major Countries and Its Implications
24.5
27.3
29.4
27.1
25.2
27.125.9
21.2
18.6
15
26.1
22.4
17.3
13.2
11
0
5
10
15
20
25
30
35
1980 1990 2000 2010 2020
KoreaJapan
UK
US
Source: KIETGlobal Insight (2005)
Note: The shares are on the basis of norminal value added
Forecasts for the proportion of manufacturing in major countries
in percent
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Industry Vision 2020s of Major Countries and Its Implications
Despite of the declining proportion of manufacturing, developed countries
will always value the manufacturing industry.
Leading innovation and productivity improvement
Creating high paying jobs
Strengthening intellectual property rights and standardization of technologyand educating/training related experts
Government policies of developed countries focused on improvingfree market environment and providing enlarged infrastructure forindustries.
Increasing R&D investment
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Industry Vision 2020s of Major Countries and Its Implications
As a manufacturing hub, the proportion of the manufacturing
industry in China will increase.
In China, increased income will lead to boosted demands for serviceindustries, such as entertainment, tourism, and recreation.
Especially, high demands are expected for business services, such as design,consulting, logistic, and financial services.
Ambitious Industry Vision 2020 of India to become a developed country
The 4th largest GDP country in the world in 2020
Strategically targeted industries: materials, chemicals, pharmaceutical,
biotechnology, and ICT Dual-use technology: driving force for upgrading industries and technologicalinnovation
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Forecasts for the portion of manufacturing in China
10.3
15.2
12.2
10
17.5
15.6
8.9
19.2
15
0
5
10
15
20
25
3035
40
45
2000 2010 2020
capital goods
intermediate goods
consumer goods
37.7
43.1 43.2
in percent
Source: (2005)
Industry Vision 2020s of Major Countries and Its Implications
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Structural Changes and Competitiveness of Korean Industries
Current status of the Korean economy and industries
Per capita income: $14,100 in 2004 (24th among OECD member countries)
Labor productivity in manufacturing: 42.7% of the U.S.
Total trade volume: 480 billion dollars in 2004 (12th in the world)
Proportion of manufacturing exports in the world market:3.5% and 8th largest country
Technology competitiveness (2003):5th largest country in terms of patents registered in the U.S.
Evolution and structural change of the Korean industries
Rapid development of manufacturing industry has driven the economic growth ofKorea for the past 4 decades.
The proportion of the service industry is continuously increasing.
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55.4954.3951.8049.4947.2844.73Services
11.7410.9213.6313.4710.166.47SOC
(15.8)(20.7)(23.4)(29.0)(41.9)(59.4)(light industry)
(84.2)(79.3)(76.6)(71.0)(58.1)(40.6)(heavy industry)
28.7429.4227.6327.2624.4517.79Manufacturing
4.035.276.949.7818.1131.01Agriculture & Fishery
200420001995199019801970
Structural Change of the Korean Industry
Notes: 1) Nominal value added2) ( ) indicates percentage of total manufacturing.
(unit: percent)
Structural Changes and Competitiveness of Korean Industries
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Cross country comparison of manufacture shares(unit: percent)
2004
28.729.11978
21.820.82002
Germany
23.928.81980
21.520.32002Japan
22.724.31970
17.813.92002
U.S.
31.728.7Korea
realnominal
Notes: 1) value added2) real for Korea is at 2000 prices, and for other countries, at 1990 prices.3) 1970 for U.S., 1980 for Japan and 1978 for Germany are the years when their
per capita incomes were at the same level as Korea in 2004
Structural Changes and Competitiveness of Korean Industries
High proportion of manufacturing in Korea
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41.2
20.5 20.8
8.3
65.2
32.6
17.1
10.1
73
39.6
0
10
20
30
40
50
60
70
80
World U.S. EMU Japan Korea
Trade dependence
Export ratio
Cross countries comparison of trade dependence degree(2000)
in percent
Notes: 1) Trade dependence degree = (total exports + total imports) / total value added
Structural Changes and Competitiveness of Korean Industries
Korean economy is highly dependent on trade.
2) Export ratio = total exports / total value added
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Transition of top export items
Structural Changes and Competitiveness of Korean Industries
1970 1980 1990 2000
textile
automobileSemiconductor and electronic parts
ICT and
related components
Manufacturing industry has driven labor productivity improvementsin Korea.
High productivity improvement in leading industries: automobile,shipbuilding, machinery, textiles, iron & steel, petrochemical, electronics, etc.
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Transition of labor productivity growth rates in Koreas major industries
4.7
8.7
11.4
1.7
3.6
10.4
12.7
0.9
2.9
6.6
10.4
0.9
0 2 4 6 8 10 12 14
1991~1995
1996~2000
2001~2004
service industries
leading industries
manufacture
total industry
in percent
Notes: Labor productivity = Value added at 2000 prices / employed person
Source: The Bank of Korea(2005), National Income Account;The National Statistical Office,Annual Report on the Economically ActivePopulation Survey
Structural Changes and Competitiveness of Korean Industries
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Structural Changes and Competitiveness of Korean Industries
Competitiveness improvement in trade is sustaining in Korea.
Export-specialized industries in Korea: automobile, petrochemical, shipbuilding,textiles, and ICT, etc.
Import specialized industries: pharmaceutical, aircraft, parts and components,and materials, etc.
Improving terms of trade: export unit price changed from 43% of the German's
export unit price in 1990 to 60% of that in 2004.
The share of mid-tech or high-tech products in exports is continuously increasing.
Large benefits from trading with China
Contributed to the Korean economic growth by 0.66% annually from 2000 to 2004.
The Korean heavy industries benefited the most.
Light industries and agricultural products were negatively affected.
This trend will continue until 2010s and aggravate the bi-polarization of theKorean industries between light industries and heavy industries.
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Structural Changes and Competitiveness of Korean Industries
'Hollowing-out' may not be critical in Korea, yet.
The current state of 'hollowing-out' in Korea is at the same level as in Japan inthe early 1990s.
Policy measure may be needed for the specific sector where 'hollowing-out' isabnormally accelerated.
Bi-polarization between manufacturing and service may gradually
be alleviated, but bi-polarization between heavy industries and light
industries are not likely to be.
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1.6(21.6)
4.8(64.5)
1.0(13.9)
7.5(100.0)
1981~1990
2.8(44.8)
2.9(45.9)
0.6(9.2)
6.2(100.0)
1991~2004
2.5(51.7)
1.8(37.7)
0.5(10.7)
4.9(100.0)
2005~2010
2.4(60.3)
1.3(33.0)
0.3(6.7)
4.0(100.0)
2011~2020
2.4(56.6)
1.5(35.0)
0.4(8.4)
4.3(100.0)
2005~2020
Total Factor Productivity
Capital
Labor
Potential growth rate
Potential GDP will grow at 4.3% annually by 2020
Because of sluggish growth of inputs, potential GDP growth rate will decline forthe next 15 years
note: Data in parenthesis implies degree contributed to growth.
Growth factors and potential GDP growth rates forecast
(unit: percent)
Korea Industry Vision 2020
1. Forecast of the Korean Economy for 2020
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48.8
5.1
Upper-bound(Active policies)
45.2
4.6
Baseline(BAU policies)
42.0
4.1
Lower-bound(Passive policies)
Per capita income(1,000 dollars)
Annual GDP growth rates(2005~2020)
According to baseline forecasts, Koreas GDP growth rate for 2005-2020
will be 4.6% and per capita income will be $45,000 in 2020.
Source: KIETGlobal Insight (2005)
note: Assume fixed 1,000 won/1 dollar exchange rate
Forecast for GDP growth rates and per capita incomes by scenario
(unit: percent)
Korea Industry Vision 2020
Based on the upper-bound forecast, annual GDP growth rate will be 5.1%and Korea will become the global top 10 country in terms of GDP.
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World GDP and ranking forecast (upper-bound scenario)
CanadaSpain
India
Korea
Italy
France
Germany
U.K.
Japan
China
U.S.
nation
2020 (won appreciation)
22,77526,082
29,331
32,375
35,258
45,060
51,591
51,632
95,494
102,858
276,858
GDP
1110
9
8
7
6
5
4
3
2
1
rank
CanadaKorea
Spain
India
Italy
France
Germany
U.K.
Japan
China
U.S.
nation
2020 (fixed exchange rate)
22,77524,377
26,082
29,331
35,258
45,060
51,591
51,632
95,494
102,858
276,858
GDP
1110
9
8
7
6
5
4
3
2
1
rank
116,797Korea106,919India
99,788Canada
89,914Spain
716,493China
616,723Italy
520,026France
421,409U.K.
327,144Germany
246,234Japan
1116,675U.S.
rankGDPnation
2004
(unit: billion dollars)
Source: KIETGlobal Insight (2005)
note: 1) nominal GDP
Korea Industry Vision 2020
2) 'Fixed exchange rate' implies that current exchange rate will be maintained until2020, while 'won appreciation' means that won will appreciate to 770 won per1 dollar, which is the PPP exchange rate.
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Global trade volume ranking in 2020
Trade volume will increase to over 1,400 billion dollars, ranking Korea as
the 7th largest trading country in the world
(unit: 1 billion dollars)
BaselineUpper-bound
81,220Italy
71,39671,583Korea
61,725France
51,753Japan
41,826United Kingdom
32,959Germany
25,281China
16,380United States of America
RankTrade volume1)
note: 1) Trade volume is only for goods.
Korea Industry Vision 2020
Source: KIETGlobal Insight (2005)
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Growth rate forecasts by expenditure item (baseline scenario)
Balanced growth of domestic demand and exports
Increase in income will substantially boost demands and the imbalance betweenexports
and domestic demand will be moderated.
Korea Industry Vision 2020
8.16.88.19.18.5Imports
4.6
11.1
3.1
2.7
2001~2004
5.3
7.8
6.0
5.7
2005~2010
4.7
6.9
5.2
5.5
2010~2015
3.6
5.7
3.5
4.7
2016~2020
4.6
6.9
5.0
5.3
2005~2020
GDP
Exports
Investment
Consumption
Real growth rate (%)
Source: KIET
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Forecast of job creation and employment rate
Over 3.6 million jobs will be created by 2020, and employment rate will
increase to 67%, reaching the level of developed countries.
Korea Industry Vision 2020
66.663.961.959.83,530Lower-bound
3,780
3.620
Job creation(2005~2020)
59.8
59.8
2004
Employment rate
62.3
62.1
2010
64.4
64.0
2015
67.2
66.8
2020
Upper-bound
Baseline
Source: KIET
(unit: thousand jobs, percent)
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2. Fourteen Most Promising Sectors
Korea Industry Vision 2020
Why do we need to select the most promising sectors?
For a continuously growing and upgrading industry, new technology and newproducts are needed.
Solid information for the future industry will induce rational investments andlessen risks and uncertainty for investors.
Rationale for selecting promising sectors
Potential for growth (A): high growth rates in 2020
Profitability (B): large market size, and high technological competitiveness ofKorea in 2020
Externality and public interest (C): large technological side effects andstrategically important items
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Korea Industry Vision 2020
Dynamic and analytical screening process
Process of selecting promising sectors in 2020
Lists of Promising Items
Technology Road Map
List of Promising items
Selected by public institute
Promising items of
Foreign Countries
Potential for Growth
Profitability
Externality and
Public Interest
2nd Selection
85 Items Selected
Strategic Importance
Possibility of
Commercialization
by 2020
Competitiveness in
Technology
1st Selection
Add Your Title41 Items Selected
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2020 promising sectors(14 sectors, 41 items)
Korea Industry Vision 2020
Intelligent Flexible Manufacturing Systems , High Functional Environmental
Equipment, High-Efficiency Power Generation PlantsHigh-Tech Machinery and System
Ultra-Micro Process Machinery, MEMS, High-Tech Sensor, Heat Sensor, Elder Caring
Medical Machinery, Bio-ChipHyper-Precision Equipment components
High-Value Added Shipping, the next generation of Air and SpaceAdvanced Air/Marine Transportation
Artificial Intelligence Polymer, Fine Chemicals for Electronic Information, Green
Chemical Material, Nano-TextileHigh-tech Chemical Material
Industrial Robot, Service RobotRobot
Secondary Battery, Solar Battery, Hydrogen EnergyThe next generation of Energy
Obstinate Disease Prevention and Curing Service, Senile Disease Treatment ServiceMedical Service
Culture Content, GameContents Industry
Intelligent Vehicle, Fuel Cell Vehicle, Eco-VehicleThe next generation of Vehicle
Wearable Computer, High Performance Distributed Intelligence ComputerNew concept Computer
Digital TV ,Hologram Navigator, LCD, OLEDThe new generation of Display
DMB, Telematics, the next generation of Mobile Phone, Home Network, Ubiquitous
ComputingUbiquitous Network
Advanced Biomedicine, Bio-organBio-organ, New Medicine
The next generation of Memory, Non-memory SemiconductorNext generation of Semiconductor41 promis in g p rodu cts / techn ology4 s ector s
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Korea Industry Vision 2020
Assessment of 41 promising products and technologies by selectingrationales
Assessment of Promising Items by Selecting Rationales
(A) Potential for growth (B) Profitability
(C) Externality & Public Interests
A+B+C: Advanced Biomedicine, DMB, Ubiquitous Computing, the nextgeneration of Mobile Phone, Secondary Battery, Eco-Vehicle, Fuel Cell Vehicle,
Culture Contents
A+C: Service Robot, Bio-organ, Senile Disease Treatment Service, ObstinateDisease Prevention and Curing Service, Hydrogen Energy, Green ChemicalMaterial
C: Industrial Robot, Bio-Chip, High-Efficiency Power Generation Plants
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3. Future of the Korean Industry
Korea Industry Vision 2020
The manufacturing sector will grow at 4.9% annually by 2020 and
rank as the 7th largest trading country in the world.
2005~2020 Growth rates of Manufacturing and ranking
7th8th4.0 %Lower-bound
5.6 %
4.9 %
Annual growth rate(2005~2020)
7th
7th
Exchangerate fixed
2020 ranking in the world
5th
6th
Wonappreciation
Upper-bound
Baseline
note: real value added at 2000 prices
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Korea Industry Vision 2020
Balanced growth of manufacturing sector and service sector
Growth rates by sectors (baseline scenario)
4.64.6GDP
3.8
6.6
2001~2004
4.9
4.9
2005~2020
Service
Manufacturing
(unit: percent)
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Korea Industry Vision 2020
Manufacturing sector will lead the productivity growth until 2020.
Productivity growth rate for high-tech industries: 7.9%
Productivity growth rate for ICT industries: 6.0%
Labor productivity growth rates by sectors
6.6
5.1
0.9
3.1
2.9
3.7
0 2 4 6 8
manufacture
services
entire
industries
2005~2020
2001~2004
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Korea Industry Vision 2020
Leading manufacturing industries and knowledge-based service
industries will lead overall industry growth.
Growth rates and contribution degree in service sector (baseline)
100.04.94.9100.0100.0services total
63.83.27.045.232.9knowledgeservices total
5.80.37.83.22.0culture services
14.70.76.39.37.6telecommunition &broadcasting
21.51.17.212.99.0business services
31.61.67.119.814.2financial &insurance
contribution
percent
contribution
degree
growth rates20202004
2005~2020shares
(unit: percent)
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78.8
68
20.622.4
40.937.8
57.860.5
2016.2
71.1
85.5
0
10
20
30
40
50
60
70
80
90
Korea U.S. U.K. Germany Japan China
2004
2020
Korea Industry Vision 2020
Trade dependence will decrease to 68% in 2020
Trade dependence forecast for major countries
According to the baseline forecast in 2020:- Approximately $63 billion surplus in goods and $56 billion deficits in services
note: 1) Trade dependence = (exports + imports)/total value added
Source: KIETGlobal Insight (2005)
2) nominal
in percent
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Korea Industry Vision 2020
The share of leading industry exports among total Korean exports will
continuously increase from 70% in 2004 to 75% in 2020.Forecast of share in total export by industry (baseline scenario)
note: 1) shares of industry in total export
2) real
74.774.072.470.3Leading industry total
20.718.815.510.2Telecommunication Equipments
2.92.92.92.7TV & Communication Equipments
20.820.720.420.0Semiconductor & Electronic Parts
5.95.85.67.4Computer & Office Machinery
4.44.75.15.3Petrochemical
1.61.92.32.8Iron & Steel
1.82.33.24.9Textile6.36.15.74.4General Machinery
2.02.53.55.0Shipbuilding
8.38.38.37.6Automobile
2020201520102004(unit: percent)
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Korea Industry Vision 2020
Korea will advance to become the 7th largest manufacturing country in
the world (baseline scenario)
Status of the Korean manufacturing industry in 2020(baseline)
note: 1) nominal
2) ( ) indicate rankings in the world market
(unit: percent)
Based on upper-bound forecasts, proportion of manufacturing will be 4.6%,placing Korea in 6th place
3.3(8)
4.2(6)
4.7(5)
8.5(3)
5.6(4)
12.7(2)
1.6(9)
14.5(1)
4.0(7)
2020
4.2(7)
4.4(6)
5.2(5)
10.5(2)
7.5(4)
11.7(1)
1.0(9)
7.8(3)
3.5(8)
2004
ItalyU.K.FranceGermanyJapanU.S.IndiaChinaKorea
Source: KIETGlobal Insight (2005)
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Korea Industry Vision 2020
Global market shares of the Korean leading industries will increase
in 2020
Forecast of world market share and ranking by industry
note: 1) shares in terms of dollar
(unit: percent)
Source: KIETGlobal Insight (2005)
7.2(3rd)8.7(3rd)10.1(3rd)8.3(4th)Electronics &
Semiconductor
3.1(8th
)3.8(7th
)4.4(5th
)3.6(7th
)Petrochemical
6.4(4th)7.8(3rd)8.3(3rd)4.4(6th)Iron & Steel
1.7(8th)2.0(8th)2.3(7th)3.5(6th)Textile
3.1(8th)3.7(8th)4.3(8th)2.0(8th)General Machinery
21.4(1st)26.0(1st)30.0(1st)30.5(1st)Shipbuilding
2.9(7th)3.5(7th)4.0(6th)2.8(7th)Automobile
lower-boundbaselineupper-bound
20202004
(unit: percent)
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4. Vision of the Korean Economy and Industry
Korea Industry Vision 2020
Three sectors to fuel the Korean Economy as engines of growth
Growth rates and contribution degrees of three major sectors
approximately 10--New promising sector
1004.64.6GDP
7.0
5.2
2005~2020growth rates
1.8
1.4
contributiondegree
40.0
30.7
contributiondegree rate
Knowledge services
Leading industry
note: real value added at 2000 prices
(unit: percent)
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Korea Industry Vision 2020
Korean economy to rank 10th in the world
Vision of the Korean industry (upper-bound)
note: ( ) indicate market shares.
4th (6.7%)5th (5.0%)leading industry exports
6th (4.6%)8th (3.5%)Manufacturing exports
7th12thTotal trade volume
8~10th11thGDP
2020
2004
status indicators
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Korea Industry Vision 2020
Per capita income approx. $50,000 (upper-bound)
Forecast of Major welfare indices
1,9502,0642,1852,339Working hours/year
66.8(67.2)
64(64.4)
62.1(62.3)
59.8Employment rates(%)
45,202(48,796)
34,398(36,077)
24,583(25,171)
14,144per capita GDP($)
2020201520102004
Note: ( ) implies upper-bound scenario.
Achieving welfare state status
d i i 2020
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Korea Industry Vision 2020
Korea's Industry Vision 2020 5.1% growth (upper-bound)
Leading industry, Knowledge services, Promising new industry:Three sectors as the engine of growth
Innovation in manufacture led productivity growth in Korea Economy
Balanced growth of domestic demands & exports induces balancedgrowth of service & manufacture
Korean Economy
World E conomy
Total trade volume: 7th
GDP: 10th largest
Per capita income: $49,000
15 Mega-TrendsReflecting Industry
Vision 2020sof Major Countries
Active Korea$49,000 Welfare State
Export of leading industry: 4th
41 Promisin g Sectors
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Thank you