State Support and Competitiveness of Industry: Case of Shipbuilding Industry in Korea

Abstract

The competitive advantage of the industry includes access to new technology, availability of highly skilled labour, geographic location, capital outlay, and a business-friendly environment. In the development process, the government plays a significant role in creating a favourable environment to encourage companies to grow. In many cases of the East Asian countries, particularly Japan, South Korea and China, state support is one of the major forces in fostering technology-intensive industries. The East Asian development experiences are totally different from those of the Western nations; a large number of great Western companies were born under the individualistic free-market system, but many giant companies in Japan and South Korea grew big under the state-led economic system.  For the East Asian countries, particularly China, Japan and South Korea, state support is a principal tool of economic management.  With soft loans from the state banks, favourable tax deductions, and various types of incentives from the government, industrialists in East Asia enjoy a plethora of advantages and benefits. One very good example is the East Asian shipbuilders, which have achieved remarkable success by dominating the world shipbuilding market.  Under the state-led development strategy, the world shipbuilding centre was shifted from the West to the East, where South Korea, China and Japan accounting for more than 85% of the global production today. There are many reasons behind this success story, but this study focuses on the government’s role and examine how state support has helped the development of the shipbuilding industry, with South Korea as an example.