Democratization, globalization, and institutional adaptation: the developmental states of South Korea and Taiwan

Abstract

This paper concurs with Hamilton-Hart and Yeung that in South Korea and Taiwan, the predominance of global production networks, growth of private enterprises, and democratization have placed developmental state institutions under pressure. However, despite the reorganization of the pilot agency and state bureaucracy, new institutions have emerged to take on the functions of policy consultation and coordination. These institutions continue to control ample financial and regulatory resources, which allow state elites to coordinate industrial transformation and mediate global engagement. South Korea and Taiwan, however, differ in their ability to appease sociopolitical conflict and find common ground to defy neoliberal tendency. Moreover, they differ in their preexisting industrial structures, modes of engaging with the global market, and security considerations with respect to mainland China. Given path dependency, the two cases differ in their success in launching new industries and facilitating defensive globalization. Due to this divergence, the two economies hold disparate positions in the global division of labor: lead firms in South Korea, contract manufacturers in Taiwan, and aspiring platform leaders in both cases. Enterprises from these two economies also weave disparate types of production networks, with those from South Korea exhibiting a higher level of functional diversity and geographical expansion.

Keywords:

• Developmental state
• global production networks
• democratization
• institutional adaptation
• path dependency

Acknowledgments

The author thanks the editors and reviewers of the Review of International Political Economy for their incisive comments and suggestions. Natasha Hamilton–Hart, Henry Yeung, and other participants in the Workshop on ‘Institutions, Governance and Economic Performance in East Asia’, organized by the University of Auckland and the National University of Singapore, also rendered much needed encouragements and suggestions. These comments and suggestions have helped to strengthen the arguments made in this paper.

Notes

1 The analogy was made by Kim Hyun-chong, Roh Moo-hyun’s Minister of Trade, who also serves in the same capacity under Moon Jae-in.

2 Before 1993, Taiwanese enterprises were not allowed to invest directly in China. The ban was lifted partly because it was impractical – Taiwanese firms had long been making such investments indirectly through Hong Kong and elsewhere.

3 The CEPD’s function of economic planning was reinstated under Tsai Ing-wen.

4 In 2016, Samsung Electronics’ R&D expenditure was 28% of South Korea’s national total and it was larger than that of the country’s entire public sector. In turn, TSMC’s R&D expenditure was 13% of Taiwan’s national total or 60% of Taiwan’s public research budget.

5 Spectrums allocated to telecommunication service providers is another such resource.

6 A South Korean official told me in 2005 that urban planning can go a long way in gaining cooperation from business corporations. However, as there is a lack of hard evidence, this point will not be pursued.

7 The penalty would be to disallow Formosa Plastic from listing its stock in the Taiwan Stock Exchange.

8 Only in 1999 did Hon Hai Precision become one of the ‘top 10 computer and peripheral companies’ (Amsden and Chu, 2003, p. 42; Wang, 2008, p. 39).

Additional information

Funding

This work was supported by the Research Grants Council of Hong Kong GRF [grant number 241308].

This work was supported in part by the General Research Fund (HKBU 241308) provided by the Research Grants Council of the University Grants Committee of the Hong Kong SAR Government.

Notes on contributors

Yin-wah Chu

Yin-wah Chu is an associate professor of sociology at the Hong Kong Baptist University. Her researches focus on the political economy of development and political movements in China, South Korea, and Taiwan. She has published with Asian Survey, Critique Internationale, Economy and Society, International Journal of Urban and Rural Research, Journal of Contemporary Asia, Urban Studies, among others, and is editor of Chinese Capitalisms (Palgrave Macmillan, 2010), The Asian Developmental State (Palgrave Macmillan, 2016), co-editor of East Asia’s New Democracies (Routledge, 2010, co-editor: Siu-lun Wong), and co-author of The Global Rise of China (Polity, 2016, co-author: Alvin Y. So).