Korea needs more proactive policies supporting disruptive new technologies

“Korea faces a dual challenge: becoming a global leader in innovation and helping other countries achieve high-income status, just as Korea has.”

World Bank Vice President and Chief Economist Indermit Gill made this statement in an interview with The Dong-A Ilbo last Monday (local time). Vice President Gill is a prominent economist known for his work on economic growth theory and for coining the term "middle-income trap," which describes the phenomenon where middle-income countries struggle to transition to high-income status, often stagnating or even regressing to low-income levels.

Deputy Governor Gill, who praised Korea as a "superstar of economic growth" in the ‘2024 World Development Report,’ identified innovation as the biggest challenge for the Korean economy, rather than issues such as the low birth rate or the rise of protectionism ahead of the U.S. presidential election.

Korea is not particularly lagging in investing in key emerging technologies such as artificial intelligence (AI) and quantum computing. "I don't think Korea is unprepared for new technologies such as AI and machine learning," he said. "Korea has a very strong environment for technology and innovation."

He identified innovation as Korea's biggest challenge due to issues with policy-making and regulations. "Korea reformed regulations favoring large corporations during the 1997 Asian financial crisis, achieved balance, and spurred IT innovation," he noted. "But innovation is an ongoing battle." He emphasized that as the global economic environment becomes more challenging and openness declines, policy decisions grow more complex, and regulations must become more sophisticated. With the rise of disruptive technologies such as AI reshaping industries and the increasing wave of protectionism driven by U.S.-China strategic competition, it is crucial for Korea to enhance the competitiveness of its public sector, including politics and administration, to support private-sector innovation. This is essential for Korea to sustain its economic growth trajectory.

Though delayed, the government's recent launch of the National AI Committee is a welcome development. However, concerns remain as the ‘K-Chips Act,’ which primarily focuses on expanding tax credits to support the semiconductor industry, has yet to pass the National Assembly. “The U.S. private sector is highly resilient, thanks to effective regulations and public policies,” Vice Governor Gill remarked. “This is an important lesson for Korea as well.” His advice is something Korea should take seriously.