ED Korea outpaces Japan
Strenuous efforts needed to catch up with Japan in science and technology
Korea has outpaced Japan in many economic indicators, though the neighboring country has so far been regarded here as an “insurmountable wall.” Yet, Seoul still lags behind Tokyo in terms of technological competitiveness, according to the Federation of Korean Industries (FKI), Thursday. The FKI came up with these and other facts in its report titled “Changes in rankings of economic competitiveness between Korea and Japan since 1990.”
The FKI cited figures released by the Institute for Management Development (IMD), based in Switzerland, which placed Korea at 23rd among 64 countries surveyed in terms of overall performance in 2020, while ranking Japan at 34th. This compares with 1995 when Japan ranked fourth, far surpassing Korea at 26th. The IMD released its annual report on national competitiveness, based on assessments of macroeconomic indices, efficiency of governments and corporations, the health environment, education, infrastructure facilities etc., in June.
Of particular note, the FKI said, in the category of competitive industrial performance as regarded by the United Nations Industrial Development Organization (UNIDO), Korea ranked third, while Japan retreated to fifth in 2018, though they came in 17th, and second in 1990, respectively. In gross domestic product (GDP), Korea finished 10th in 2020, narrowing the gap with third-paced Japan. This is remarkable growth compared to 1990 when Korea came in 17th.
Korea enjoys higher credit than Japan in ratings by major international organizations such as S&P, Moody's and Pitch. S&P raised Korea's credit rating to AA this year, two notches higher than Japan's A+, though in 1990 it rated Korea at A+, four notches lower than Japan's AAA. This means in theory Korea can borrow money from overseas at lower interest rates than Japan.
In terms of purchasing power parity (PPP), reflecting both commodity prices and exchange rates, Korea registered $43,100, surpassing Japan's $42,725 in 2018. This means Korean people have more purchasing power on average than their Japanese peers, due mainly to higher inflationary rates in Japan.
Yet, the FKI pointed out that Korea still has a long way to go to catch up with Japan in the areas of science and technology especially in basic technology. In terms of the number of 1,000 major enterprises in global research and development area, Japan had five times that of Korea in 2020. Though Korea has yet to produce a single Nobel laureate, Japan has produced 24 prize winners.
Against this backdrop, Korea's deficit in the trade of materials, parts and equipment with Japan surged to $15.4 billion in 2020, up from $8.3 billion in 1994. The FKI came up with the report ahead of the Liberation Day which falls Aug. 15. We fully understand the organization's intention that we need to make more efforts to win over Japan.
Yet, we need to admit that the situation between the two countries has also been due to the weakened competitiveness of Japan as well as Korea's steady growth. Japan has failed to make strenuous efforts toward digital innovation, for one thing. We need to ponder about how to strengthen the competitiveness in basic technology and science coupled with efficient investment for research and development.