By Michael Freedman and B. J. Lee
It's a common strategy of smart multinationals: invest heavily in new markets and products while competitors retrench in a recession. But South Korea may be the first country to pull it off, a coup probably made possible by the fact that it has a real CEO in charge. Lee Myung-bak once ran Hyundai, one of South Korea's largest companies, where he invested aggressively in opening new markets abroad, even through the recession in the early '80s. Now, as president, he has pushed a similarly aggressive long-term view, which helped South Korea weather the global downturn perhaps better than any other developed nation.
In January 2009, Lee encouraged South Korean companies to continue investing, reminding them in the depths of the recession that rough economies always improve and it was never too early to think about post-crisis strategy. "I am confident," he told business leaders, "that this crisis can advance our dream of becoming an advanced first-class nation." As part of this plan, he later promised to increase government R&D spending from 3.4 percent of GDP in 2007--already one of the highest in the world--to 5 percent. The government has also announced a plan to expand tax deductions for business investments in R&D.
One result is that South Korea's GDP growth hit 3.2 percent by the third quarter of 2009, making it the first wealthy country to emerge from the recession. South Korea's exporters of phone handsets, LCD-TVs, and cars picked up market share in the crisis, according to Morgan Stanley. But, no, Lee is not in line for a performance bonus.