Why are South Korea and Taiwan so different economically?

I feel like this is a big puzzle for me to solve and still I can’t think of why Korea has a much more robust economy than Taiwan.

My initial theories are the following:

  1. Korea has a lot more innovation than Taiwan, with big companies dishing amazing products and distributing it around the world.
  2. Korea has a population that’s almost twice the size of Taiwan and also more landmass than Taiwan.
  3. Korea’s labour force works longer hours.
  4. Korea is surrounded by China and Japan and can also trade with the United States of America.
  5. Taiwan has the threat of China which reduces its safety as a sovereign entity.

Yet, the more I think about it the more these ideas seem less acceptable, for example:

  1. Taiwan has plenty of innovation too.
  2. Taiwan may have half the population of Korea but that shouldn’t account for the significant difference in wage/GDP per capita.
  3. Taiwan’s employees also work long hours and usually do not spend their working hours drinking unlike their Korean cousins(as much).
  4. China and Taiwan’s trade has increased significantly.
  5. Taiwan’s threat from China is not as worrisome as before (on the economic side at least). Not to mention Korea has the crazies to their North and even that doesn’t have a huge effect on their own economy.

Perhaps some of you have thought this a bit better than I have. But why do I still feel that Korea is a step ahead of Taiwan in most things?

Korea went through a massive crises in 97 and responded by pumping money and political and business will into upgrading its economic structure. It also has strong unions that kept manufacturing in the country (as opposed to going to China) thus helped wages to rise and industry to invest in higher value products made in Korea.

Taiwan has been pursuing the same model of cheap labor and OEM manufacturing for decades. China’s rise allowed taiwanese to forgo restructuring and pursuing higher end manufacturing for a repeat of the same model that had worked for 30 years. But you simply can’t have the bulk of your investment go somewhere else and still have a robust economy.

Simply put, Korea upgraded. Taiwan did not, or did so very imperfectly.

This also applies to to the environment. Korea is where it should be environmentally at its stage of gdp per capita (there is a clear rise after gdp hits US5000 per year). Taiwan is a decade behind. Korea started serious judicial reform a decade ago and has a much improved and impartial system. Taiwan is still tinkering with a fucked up system.

It goes back farther than that, MM, but your points are nonetheless correct. The ROK started from ground zero in 1953. Only Pusan and Jejudo escaped the NK invasion. Taiwan was bombed a bit in 1945, but came through WWII mostly intact, and therefore had less recovery.

My answer: better ROK leadership during the “planned capitalism” post-war era, more homogeneous and more Confucian workforce, a drive to outdo the Oppressor (…Japan. Japan was not seen (and is still not seen) as the Oppressor of Taiwan), and most important of all … heavy U.S. influence, esp. through radio/TV and USAID, an influence that was universally welcomed until the mid-80s, and by the majority after that. From personal and professional experience in both countries, they both had the same “feel” in the Asian Tiger days of the 80s, then POSCO gained momentum, ate the lunch of Japanese steelmakers, and the chaebol turned the afterburners on. Perhaps the strongest US influence was less tolerance of graft.

Re: 1997 currency meltdown. ROK’s response was to install fiberoptic cable to every town, govt building, and school in the country. Absolutely every one. The technocracy forsaw eCommerce, and even set up several govt agencies to promote it. I taught seminars at several agencies in ROK on eCommerce, law, and technology in the late 90s and early 00s.

Korea has also pursued free trade agreements, despite opposition from agriculture and other sectors, quite aggressively with some pretty important blocs/countries:

United States (US) (pending)
en.wikipedia.org/wiki/List_of_bi … agreements [/quote]

Taiwan, on the other hand, partly because of its international status, other than the ECFA with China (which was opposed by large segments of Taiwan’s population and many foreign DPP-loving cheerleaders), has only negotiated with Latin American countries. With Taiwan’s economy consisting primarily of SMEs rather than the big-business Chaebol of South Korea (e.g., Samsung or Hyundai) how can they ever hope to grow into big businesses from small businesses without open markets? That is something that small-minded farmers, ivory tower university academics, and rabid pro-green foreigners often forget.

I ain’t no engrish teechur…but shouldn’t this thread be titled…

Why [color=#BF0000]are[/color] South Korea and Taiwan so different economically?

…just askin…:idunno:

South Koreans work more hours than anyone else in the world. I think they average over 2200 hours per year.

Hence the suicide rate:

Work smarter, not harder.

[quote=“TainanCowboy”]I ain’t no engrish teechur…but shouldn’t this thread be titled…

Why [color=#BF0000]are[/color] South Korea and Taiwan so different economically?

…just askin…:idunno:[/quote]

I am not an English teacher either, but I have changed the name of the title in response to your comment. I must have been very tired last night.


It’s an interesting question, given that Taiwan used to compare itself favourably to Korea until relatively recently.

Regarding working hours, I doubt there is much difference between Taiwan and Korea, people working in the tech industry almost all work long hours.

I don’t think that the Koreans have a better e-commerce or software setup than Taiwan, they may have faster broadband but not really more technoliterate or innovative in that regard. Taiwan’s government has extremely efficient online service operations and online banking and internet services are huge here, I just see any real difference. Besides Koreans have not had any Facebooks or Googles launched, it’s all been hardware and product based until now.

I think MM has it mostly right, the migration of industry to China and SE Asia meant they didn’t have to actively upgrade their business model, this in turn resulted in a hollowing out of the local economy. Lack of unions in Taiwan and lack of real affinity to the local society along with the ease of language and cultural links to move to China may also have played a part. Having a smaller land mass and population also means the local economy is not as big. Political and economic isolation has been a major factor, trade agreements have helped Korea forge ahead worldwide with major FTAs while Taiwan has concentrated a lot of it’s business on China over the last decade, that’s fine except that China is still only a minor part of the world’s economy as a whole.

Taiwanese companies have invested big into some industries such as DRAM and LED, but they seem to have then concentrated on cost-down manufacturing process rather than moving to the next technological step, such as the Koreans have done with AMOLED and SSD memory.
There has been a lack of vision and perhaps risk taking among some of the biggest companies , some have run out of steam like Da Tong. On the other hand in Korea the chaebol family run companies seem to have restructured successfully since 1997 and gone from strength to strength , Samsung, LG, Hyundai etc.

The Koreans have integrated foreign operations earlier into their business, companies such as Hyundai have significant manufacturing operations overseas. This has allowed them to become more international facing. Not all Korean companies have succeeded in the automobile space, perhaps they had simply more companies and bigger resources so the strongest fish in the sea was able to survive and eventually prosper.

They also have a broader manufacturing base, Taiwan is lacking in that regard with too many eggs in the electronics sector.

I would say the main problem is lack of investment in customer branding , inability to keep with the truly massive investments in technology and sticking to the OEM/ODM model for far too long. This resulted in their margins getting tighter and tighter , they could still invest in industrial expansion with cheap government backed loans but the ability to pay back these loans is now in question.

On the smaller scale Taiwan’s SMEs compete quite well, I think it’s the large scale operations that have been very slow to change their ways. Too much focus on moving operations to China. We can see some like HTC do have the vision but perhaps are still too small to compete toe to toe with true giants like Samsung and Apple which have already grown so big. Taiwan keeps flogging a dead horse and needs to significantly rethink the way it does things (not simply jiggling around a few pieces) before it can really move ahead economically.

Yeah, but a lot of this time is not spent actually ‘working’. My Korean friends and students would go to work at 7 in the morning and come home at midnight, but much of the time were not actually working too hard (not to blame them - who could actually work for that long?). So when the boss took the boys out for a night drinking at a room salon, that counted as work. Napping on the desk counted as work. One friend, an engineer, complained to me about how busy they had been at work for a few days - “I didn’t have enough time to study TOEFL!” was his complaint, since usually he had plenty of time to do so while at work.
Honestly, it was the same with the students. Yes, they started school before 7 am, and got home after midnight, but a lot of time was wasted. I couldn’t help but think that if they actually studied for 2 hours, and then went out and played, or participated in a sport, they would be better off than what they actually were doing - being forced to sit there ‘studying’ long after any chance of comprehension.