23 November, 2016

Korea’s Policy For Platform Economy

Science and Technology Policy InstituteByong-Sam CHOI, Byeongwon PARK

Finnish Government Meeting

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Contents

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Korea’s Challenges

Policy for Platform Economy

01 Overview of The Korean Econ-omy

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The Korean Economy: Growth

GDP (1960-2015)

* Source: World Bank national accounts data / CIA The World Factbook

3.9 Billion (1960)

1.4 Trillion (2015)

• GDP (PPP): $1.849 trillion (ranking 14)

• GDP per capita (PPP): $36,500 (ranking 49)

• GDP composition: agriculture 2.3%,

industry 38.0%,

services  59.7%

• Exports: $548.8 billion (ranking 6)

• Imports: $428.5 billion (ranking 10)

Economic Profile (2015)

Miracle On The Han River: Making Something Out of Nothing→ The GDP has increased 354 times Since 1960 (1960-2015 CAGR 11.3%)

(current US $)

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The Korean Economy: Rebound and Crisis Over-comeKorea is the only country that has switched from recipient to donor of ODA.

The Korean economy overcame the Asian Crisis in 4 years.

ODA History

Increasing Contribution

Asian Crisis (1997-98)

Korea implemented deep and wide structural reforms. Hundreds of com-panies were re-structured and thousands of jobs were lost.Korea paid back the IMF bailout loan in 4 years after the crisis.

* ODA: Official Development Assistance

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Korea’s Challenges: Low Growth

How to reinvigorate the economy again?

Per capita income growth rate (1980-2012)

* Exchange rate based on 2005 PPP. Per capita income was smoothed out using Hodrick-Prescott filter. * Kim (2016), 20th Anniversary of Korea's membership to the OECD

Korea is At A Crossroads. Growth rates are decreasing too early, too fast.

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Korea’s Challenges: The Fourth Industrial Revolution• German Government “Industrie 4.0”• World Economic Forum “The 4th Industrial Revolution”

* Source: Industrie 4.0 Working Group (2013.4). Recommendations for implementing the strategic initiative INDUSTRIE 4.0, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

Driver

Role

Steam Power

MechanizeProduction

Electric Power

Create Mass Production

Electronics / IT

AutomateProduction

Create Intelli-gent

Production

Data Analytics, Ar-tificial Intelligence

* Cyber-Physical Systems = Internet of Things (IoT)

1st 2nd 3rd 4th

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Korea’s Challenges: The Fourth Industrial Revolution

Self-Driving Car Voice Recognition (Virtual Assistant)

Predix: Industrial Internet Plat-form Smart Factory

AI in Board Game AI in Healthcare AI in Robot Drone

Sharing Cars Sharing Houses Smart Security Synthetic Biol-ogy

Gather (Internet of Things), Store (Cloud Computing), Analyze and Create value (Big Data Analytics, Artificial Intelligence)

Data is the key !

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Korea’s Challenges: The Fourth Industrial Revolution

Platform is the key !

IoT Technology Stack Creating New Value with Data

* Porter and Heppelmann (2014), Porter and Heppelmann (2015)

DataPlatform

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Korea’s Challenges: The Fourth Industrial RevolutionDominance of Platform Companies:North America has 72% of the Value → “Platform Anxiety”

“This digital infrastructure will be controlled by a handful of American internet companies, which could dominate the economic life of the 21st century.”(Sigmar Gabriel, Vice Chancellor of Germany)

Platform Companies: Gang of Four & Sharing Econ-omy

Platform Companies by Region

* Center for Global Enterprise (2016)

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Policy for Platform EconomyGovernment can support the development of platform economyas Leaders, as Suppliers, as Facilitators, as Market Makers, and as Regulators

Topic RecommendationVision Government needs to foster and promote a clear aspiration and

vision for the Internet of ThingsCommissioning

Government must be an expert and strategic customer for the Internet of Things

Spectrum and networks

Government should work with experts to develop a roadmap for an Internet of Things infrastructure and to maximise connectivity and continuity

StandardsGovernment should support the development of standards that facilitate interoperability, openness to new market entrants and security against cybercrime and terrorism

Skills and research

Government, the education sector and businesses should prioritise efforts to develop a skilled workforce and a supply of capable data scientists

Data Open application programming interfaces should be created for all public bodies and regulated industries

Regulation and legislation

Government should develop a flexible and proportionate model for regulation in domains affected by the Internet of Things, to react quickly and effectively to technological change, and balance the consideration of potential benefits and Harms

Trust Government should work with industry and international partners to agree best practice security and privacy principles

Coordination The Digital Economy Council should create an Internet of Things advisory board, bringing together the private and public sectors

Recommendations to Support Digital Revolution

“Leader”

“Facilitator”

“Market Maker”

“Regulator”

“Supplier”

* UK Government (2014)

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Policy for Platform Economy: Korean GovernmentKorean government supports the development of platform economyas Leaders, as Suppliers, as Facilitators, as Market Makers, and as Regulators

Gov. as Suppliers Gov. as Facilitators Gov. as Marketers

Gov. as Leaders

Gov. as Regulators)

• “9 National Strategic Projects”

Vision

Rule

Input Process Output

• “X Project” (new R&D) • Setup of AI Research Center

• Establishment of Test Beds

• “Regulation –Free Zones”

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Korea’s Policy: “9 National Strategic Projects”

Growth Engine Quality of Life

Precision Medicine

New Drug

Carbon Utilization

Fine Dust

Self-Driving Car

Light Material

Smart City

Artificial Intelligence

Virtual/Augmented Reality

Korean government set national priorities on emerging technologies and ap-plications

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Korea’s Policy: “X Project” (new R&D)Korean government is conducting an experiment of how to maximize the participation of the citizens to national R&D projects

Design philosophy of the plat-form① Every idea should be respected

② Operations should be simple③ All the information should be open to all

④ Every participant should be given rewards⑤ Operations should be scalable⑥ Problems should be solvable and exe-cutable

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Korea’s Policy: Setup of AI Research CenterKorean government help private companies collaborate. Seven companies set up the AI Research Institute (2016.7)

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Korea’s Policy: Establishment of Test Beds

SmartHome

SmartGrid

Smart Healthcare

SmartCar

Korean government established test beds for smart home, smart grid, smart healthcare, and smart car.

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Korea’s Policy: “Regulation–Free Zones”

14 Regulation-free Zones

Korean government is conducting an experiment of relaxing the regulation for boosting new industries while minimizing the risk of side effects

• Choose 2 industries per a region

• Remove virtuall all the existing regulation

• Promote the introduction of new industries

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Q & A