KOREAN NET

The International Monetary Fund said the case study of Korea's heavy industry, which saw rapid growth in the 1970s, is an example to refer to when a country devises plans to develop future growth sectors. Shown is the world's methanol-powered ultra-large container ship early last year built by HD Hyundai Heavy Industries. (HD Hyundai Heavy Industries)

By Lee Dasom

The International Monetary Fund (IMF) says government subsidy support led to the rapid growth of Korea's heavy industry in the 1970s, urging other countries to consider this example and consider providing strategic forms of support such as higher tax incentives.

Yonhap News and other domestic media on Jan. 13 quoted the IMF as saying in the report "Industrialization and the Big Push: Theory and Evidence from South Korea" that the Korean government's one-time subsidies from 1973-79 stimulated the adoption of foreign technology to boost the competitiveness of heavy industry.

The report said the government offered tax benefits and financial assistance to research and development (R&D) of technology and improvement of the production process, adding that such direct and indirect support raised corporate adoption of technology and had a positive ripple effect on regional economies.

This policy boosted productivity in core heavy industries, raising the sector's share of GDP from 15% before the subsidies to 23.6%. The industry's intensive margin of exports, or the average value of exports per exporting company, also rose from 30% to 46.2%.

As a result, the report said Korea was able to revamp its industrial structure to one focused on heavy industry, which became the basis for the nation's long-term economic growth.

Amid the global economic slowdown, the IMF said strategic support for future growth industries is needed to set the foundation for sustainable growth, adding that each country must refer to Korea's success story and devise policies to cultivate such sectors.

dlektha0319@korea.kr