South Korea overtook Taiwan in per capita GDP for the first time in 2004 and is expected to become the seventh full member of the "20-50 Club" of developed countries later this month.
The "20-50 Club" groups countries with per capita GDP of more than US$20,000 and a population of over 50 million. It now has six member states -- the United States, Japan, Germany, France, Britain and Italy.
South Korea's per capita GDP exceeded US$20,000 in 2007 for the first time, but fell below that benchmark during the 2008-2009 global financial crunch.
Its per capita GDP rebounded to above that pivot again in 2010, while Taiwan did not surmount that barrier until 2011, according to local media reports.
South Korea has outstripped Taiwan in another developmental milestone -- the manufacturing sector's value-added ratio, the reports said.
Nevertheless, some local economists and business executives said the endgame is yet to come in the Taiwan-South Korea economic race.
The following are excerpts from local media coverage of relevant issues:
Chiu Ta-sheng, a researcher at the Taiwan Institute of Economic Research, said both Taiwan and South Korea lack natural resources and heavily rely on foreign trade for economic development.
Against this backdrop, upgrading technology or cutting product prices could be the most direct strategy to boost competitiveness in the global market, Chiu said.
Taiwan lags behind South Korea on both fronts. In 2010, Chiu said, South Korea's research and development (GDP) funding accounted for 3.74 percent of its GDP, a ratio that outpaced all other advanced countries.
In the past five years, South Korea's R&D spending also reached an average of 3.38 percent of its GDP, higher than Taiwan's 2.74 percent.
"This is why South Korean companies have managed to upgrade their products' value-added ratio and beat their Taiwanese competitors in the global market," Chiu said.
South Korea also outshone Taiwan in removing trade barriers to enhance its competitive edge in the world market as its has signed free trade agreements (FTAs) with the European Union and the United States.
"South Korea's FTA coverage rate has already hit 36 percent of its overseas markets, far exceeding Taiwan's less than 5 percent ratio," Chiu said.
Taiwan's failure to conclude FTAs with the EU and the U.S. has made it increasingly reliant on the Chinese market for its export growth, Chiu warned.
He further said South Korea has its weak spots, too. First, annual sales of South Korea's top 10 companies account for nearly 90 percent of the country's GDP, which makes its economy vulnerable to any financial problems of its big enterprises.
In contrast, he said, a large number of small- and medium-size enterprises form the backbone of the Taiwan's economy, which makes the local economy more stable.
Second, South Korea's population is aging faster than Taiwan's, which would eventually have negative impact on the country's finance and net savings and overall national competitiveness, Chiu said.
All told, he said that although Taiwan has lost several rounds to South Korea in the bilateral economic race in recent years, the game is not over yet.
"We still stand a chance to win so long as we step up R&D investment to boost innovation," he forecast optimistically. (June 6, 2012).
United Evening News:
Acer Inc. founder Stan Shih said Wednesday at a forum on new thinking for economic development in the era of globalization that Taiwan remains the world's top electronics manufacturing service provider.
"We remains No. 1 in terms of ODM capability. Nobody can beat us in this field. Eventually, Taiwan will emerge as the final winner if we continue to develop new business models and innovate management and production," Shih said. (June 6, 2012).
(By Sofia Wu)