Korean Cluster Policies : Retrospect & Prospect for smart Specialization Strategies

1. Korean Cluster Policies : Retrospect & Prospect for smart Specialization Strategies OutreachWorkshopon Smart Specialization Strategy Dongsoo Kim Korea Institute for Industrial Economics & Trade (KIET) 2013. 4. 4

2. Contents • Cluster Theory • Cluster Policies in Korea • Retrospect of Regional Industrial Policies in Korea • Current Korean Regional Industrial Policies • Regional Industrial Policies and Smart Specialization Strategies Source • Industrial Policy and Territorial Development : lessons from Korea, OECD 2011 • White Paper on Regional Industry Development Policies, MKE 2013 • Innovative Cluster Policies for Turkey, KDI KSP 2012

3. Cluster Theory • Scope of Physical Clusters - Type I : Industrial Complexes - Type II : R&D Zones, Science Park - Type III : R&D Zones - Type IV : Free Economic Zones • Components of Innovative Clusters - Enterprises - Universities - Research institutes - Efficient administration Industrial Policy (Ⅱ) (Ⅰ) (Ⅳ) Science Technology Policy Regional Policy (Ⅲ)

4. Cluster Theory 1980s 1990s 2000s Miller & Morris Marshall Porter Theoretical Evolution & Needs Industrial Parks: Production Concentration R&BD Clusters Clusters: Network New Industries Integrated Value Added Practical R&D Regional Industries Accumulation of Human Cap Specialization Collaboration Innovative Investment Policy Tools Innovative Infra Networking Governance Industrial Infra Industrial Complex Skilled Labor Tech Transfer Venture Business Ecology Global Networking

5. Cluster Theory • Scope of Research for Innovative Clusters - Building an innovative environment from physical industrial complexes - Establishing components of clusters - Region-oriented from nation-oriented • Korean regional industrial development policies as the policies for innovative clusters

6. Retrospect of Economic Development in Korea Phase I 1960-1979 Phase II 1980-1997 Phase III 1998- Economic Dev Distance Network Industrial Parks with Infrastructure Economic Density Costal Cities with Industrial Parks Division Regional Competitiveness by Hub & Spoke Selection & Concentration full fledged Autonomy(‘94) Rhoadmin(‘03-’08) ParkAdmin(‘61-’79) Time Oil shock Financial Crisis(‘97) Factor Intensive National Dev Infra (Gyeongbu HWY,’70) Light to Heavy Industries Technology National Dev Human Cap (KAIST,’78) Heavy to Strategic Mfg Innovation & Creativity Regional Dev New Growth Engine Strategic, Leading, Green Industries

7. Source: White Paper on Regional Industrial Policies Retrospect of Regional Industrial Policies (‘08) Establishment of Regional Industrial Dev (‘03) Special Act for Balanced National Development (‘09) Economic Region based Regional Industrial Dev Project (‘03) Industrial Tech Establishment Project (‘99) Regional Industrial Promotion Project (‘94) Full fledged autonomy (‘95) Industrial Tech Establishment Project (‘84) Capital Region Reshuffling Plan (‘67) Economic Dev Plan (‘72) National Land Dev Plan Distribution of small & medium industrial Complexes (‘70) Free Export Zones (‘74) Science Park (‘62) Industrial Complexes

8. Retrospect of Regional Industrial Policies • Economic Development Plan : 1960s – 1970s - Strong Leadership with Grand National Plan Rebuilding Industries - Laborintensive industries Light Industries (Textile, etc) Heavy Industries (Shipbuilding, Steel, Chemicals etc) Special Economic Zone Policies Industrial Parks, Free Export Zones, Science Park Infrastructure (Highways and Railroads) Export oriented development

9. Retrospect of Regional Industrial Policies • Restructuring Industries for Advanced Country : 1980s – 1990s - Light Industries to Heavy Industries - Selection & Concentration Automobile IT industries Semiconductor Telecommunications, etc) - Regional disparity between capital region and non-capital regions has been widening Gini Index

10. Retrospect of Regional Industrial Policies • Four reasons behind the upsurge of the regional issue in the late 1990s - Regional disparities and social conflicts - Consolidation of democracy (Civilian government(’92), Autonomy(’94)) - Asian financial crisis (’97) - The knowledge economy required the broadening of the technology-centered focus of industrial policy to incorporate innovation

11. Retrospect of Regional Industrial Policies • Full Fledged Local Autonomy since 1994 - National support for Regional Industries Promotion Projects from four local governments in 1997 - Building capacities with regional infrastructure such as Technoparks, etc • Establishment of Regional Development System in Rho Admin (‘03-’08) - System for Regional Industrial Development basedon Regional Innovation System - Focus more on R&D in tech development • Introduction of Economic Region in Lee Admin (‘09- ) - Scale Economy and Collaborative Network - Focus more on collaborative networking with

12. Current Regional Industrial Policies

13. Current Regional Industrial Policies - Spatial scope of the regional industrial policy

14. Current Regional Industrial Policies - regional industrial development projects • Leading Industry Promotion Projects in 7 Economic Regions - The purpose of the Leading Industry Program in 5+2 Economic Regions is to foster into world-class industries to improve the industrial competitiveness of promising products to expand the foundation for value creation - The purpose of the Collaborative Program in 5+2 Economic Regions is to encourage collaborative cooperation across Provinces

15. Current Regional Industrial Policies - regional industrial development projects • Strategic Industry Promotion Projects in 16 Provinces - Establishment Program for Local Industrial Foundations Comprehensively support tech development and commercialization through joint-establishment and use of equipment and facilities by building local strategic industry complexes or innovation bases - R&D for Local Industry, Innovative Tech Program Develop core tech for strategic industries to promote balanced development - Business Service, HR Dev Program for Local Industry Provide technical instruction, advice, marketing and knowledge support services using local infrastructure

16. Current Regional Industrial Policies - regional industrial development projects - Regional Strategic Industry Planning Board Grogram Establish industrial integration planning bodies to efficiently promote local strategic industry promotion projects - Promotion Program for Local Innovation Base (Technopark) Enhance the function of regional innovation bases centering on established Technoparks and provide comprehensive services for company support

17. Current Regional Industrial Policies - governance • Ministry of Knowledge Economy(MKE) • KIAT : window agency of MKE • KIET : research institutes • Leading Industry Office (7) anchor agency • Technoparks (18) & Specialized Centers : anchor agency • RRIs and RICs in Local Universities Nation Presidential Committee on Regional Dev (PCRD) Ministry of Knowledge Economy (MKE) Other Ministries Ministry of EducSci & Tech (MEST) KIET Nat. Research Foundation (NRF) KOR Institute for Advancement of Tech (KIAT) Region Economic Region Dev Committees (ERDCs) Leading Industry Offices HR Dev Centers Technoparks, Specialized Centers, RRIs & RICs Local Govt’s Province County

18. Current Regional Industrial Policies - central governance • KIAT (Korea Institute for Advancement of Technology) : a window agency - The Regional Industry Division studies regional industrial development policies manages and evaluates regional industrial promotion projects disseminates successful projects

19. Current Regional Industrial Policies - local governance Regional Industry and Policy Planning • Technoparksin 16 Provinces : anchor agencies for Strategic Industry Promotion Projects - nurture local industries by forming organic cooperative networks with the regions’ innovative institutions including industry, academy, researches and governments - create strategies and plans that fit the regions’ circumstances and characteristics through discovering knowledge-based and small but technologically capable businesses. Strengthen Regional & National Competitiveness Technoparks as Basis for Nurturing Regional Industry Business Supports Stronger Cooperation Among Related Parties Fostering Small-bul-Strong Businesses Business Creation Tech Innovation

20. Current Regional Industrial Policies - local governance Gyeonggi Daejin TP( ‘05) (IT Telecommunications, Bio, Contents,Logistics) Acceleration & Plasma Association Cheorwon Plasma Research Institute Technoparks Seoul TP(’05) (Digital Contents,Bio, IT Communications, Finance) Gangneung Science Industry Foundation (Wonju Medical Industry Techno Valley (Chuncheon Bio Industry Foundation Specialized Centers under TP Gyeonggi TP(‘98) (IT Communications, Bio, Contents, Logistics) • 80 Specialized Centers : R&D and specialized business support Independent Centers Ceramic Material Cluster Center Disaster Prevention Center Songdo TP(‘98) (Logistics, Auto, Machineries, IT) Misc Centers Gangwon TP(‘03) (Medical Device, Bio, Materials, Tourism) Bio Industry Institute (Vehicle Embedded Tech Center (Hybrid Component Institute Marine Bio Institute (Gumi Electronics & Info Tech Institute (Pohang Institute of Metal Industry IT Convergence Tech Center Chungbuk TP(‘03) (Semiconductor, Batteries, IT, IT Convergence) Semi-Conductor Center ITConvergence Center Bio Center Gyeongbuk TP(‘98) (Electronics, Materials, Oriental Medicals, Tourism Bio Info Center Bio Center Display Center Media Center Auto Parts R&D Center Chungnam TP(‘98) (IT, Auto Parts, Culture, Agri-Bio) Nano Application Center Mobile Convergence Center Bio Health Convergence Center Oriental Medical Center Gyeongbuk Univ Center Daegu TP(‘98) (Fiber,Bio, Mechatronics, IT) Mechatronics & Material Institute Dye Tech Institute Sewing Tech Institute Textile Development Institute Daejeon TP(‘08) (IT, Bio, Mechatronics, Parts) Bio Center Robot Center Radio Engineering Center Nano Material Center Nano Fab Center at KAIST Pohang TP(‘00) (Steel, Nano Materials, Robots) Foundation of Automotive Parts Promotion Jeonbuk TP(‘03) (Auto Parts, Bio, RFT, Culture) Ulsan TP(‘04) (Auto, Refined Chemicals, Marine, Environments) Auto Parts Center Fine Chemical Center Radiation Imaging Tech Center (Institute for Bio Industry (Institute for Automobile Tech (Mechanical Carbon Institute Testing Research Institute Institute for Chemistry Institute for Indus Tech Gwangju TP(’98) (Photonics, Auto Parts, Electronics) Auto Parts Center Association for Photonics Electrical Tech Institute Photonics Tech Institute Institute for Indus Tech Busan TP(‘00) (Machineries, Image IT, Marine, MICE) Machine Component Tech Center Auto Component Tech Center Marine Life Industry Promotion Center MEMS/NANO Component Center Heat Exchange Center Logistics Managementt Tech Center Smart Electronic Component Center Jeonnam TP(‘03) (Bio, Materials, Logistics, Tourism) New Material Industry Center Polymer Material Center Gyeongnam TP(‘04) (Machineries, Robots, Home Appliances, Bio) Jeju TP(‘10) (Bio, Digital Contents, Tourism, Agri-Bio) (Bio Foundation Bio Food Tech Center Bio Pharmaceutical Research Center Nano Bio Research Center Biological Control Center Natural Resource Research Center Institute for Leather & Footwear Marine Equipment Association (Marine Equipment Research Institute Institute for Medium & Small Shipbuilding Institute for Indus Tech Home Appliance Center KnowledgedMachineries Center Refined Device Center Aero Center Bio Center Mobile Telecommunication Center Volcanic Seawater Center Gimhae Medical Bio Center Bio21 Center Industrial Complex Corporation

21. Current Regional Industrial Policies - local governance • Regional Innovation Centers in Specialized Local Industry Promotion Projects at universities - established as a collaborative project between enterprises and universities since 1995 • Regional Research Institutes in County govt’s for independent industrialization based on small R&D monitor project with DB plan & evaluate projects Research Facilities R&D Project Human Resource Business Incubating support local govt’s in planning network (workshop etc) R&D support Tech Commercialization Marketing Network Tech Transfer

22. Current Regional Industrial Policies - summary • Zoning to ecology building - industrial location policy to support programming • Selection & Concentration - sectoral targeting (e.g. phonics in Gwangju, medical device in Gangwon, etc) - smart specialization and tailor made support • Paradigm Shifts : Decentralization since 2003 - national clusters to local clusters • Infrastructure ▷▷R&D support▷▷Networking & Ecology

23. Current Regional Industrial Policies - LeadingIndustries in Economic Regions Jeju Economic Region Honam Economic Region Dongnam Economic Region Daegyeong Economic Region Gangwon Economic Region Chungcheng Economic Region Sudo Economic Region International Free City Green Area Korean Silicon Valley Logistic Hub Frontier Well-Being Knowledge Industry Area Global Business Hub Water Leisure • Solar Energy Green Tech Industry • Mobile Green Energy • Medical Bio Semiconductor Medical Bio Tourism Financial Business Advanced Manufacturing • Machineries Materials

24. Bio Medical Devices New Materials Tourism Electronics New Materials Bio Cultures Seoul Digitals IT Bio Finance Logistics Automobile Machineries IT IT Bio Software Logistics Machineries Robot Knowledge Home Bio Bio Semi Conductor Mobile Phone 2nd Battery Electronics Auto Parts Culture Bio IT Bio Hitech Materials Mechatronics Automobiles Maritime Fine Chemicals Environments Mechatronics Electronics Textile Bio Auto Parts Bio New Energy Tourism Photovoltaics Electronics Auto Parts Design Logistics Parts Tourism Film Bio Shipbuilding Logistics Tourism Tourism Health Bio Environments Digitals Current Regional Industrial Policies - Strategic Industries in Provinces Gyeonggi Incheon Gangwon Chungnam Daejeon Gyeongbuk Chungbuk Jeonbuk Gyeongnam Daegu Gwangju Ulsan Jeonnam Busan Jeju

25. Prospect of Regional Industrial Policies • Industrial Ecology based on specialized regional industries - entities own role : enterprises, universities, research institutes & governments - active & productive networking based on open innovation

26. Prospect of Regional Industrial Policies • Sustainable Consistent Policies - long-term planning under stable policies - trial & error over time due to frequent changes in policy • Wariness of Complexity & Inefficiencies - governance (& Quango) problem from multi layers of policies