South Korea
Internationalization, globalization, and changes to the International Political Economy (IPE) impact on nations’ political and economical environments (Dani 43). It has become easier for corporations and companies to move or invest wherever they want due to the mobile nature of money and of manufacturing of goods.
This implies that national governments are less capable of regulating and controlling the activities of multinational corporations (Banerjee and Duflo 23). Additionally, it also could imply that multinationals are at an advantaged position over national governments to dictate how they would operate within a country. The political implications of globalization and the changes to the IPE therefore focus on creating a power balance between national governments and multinational corporations (Al-Obaidan and Scully 240).
Scholars argue that this scenario forces the national governments to retreat because of the inability to gain full control over the operations of these international businesses (Haberl and Marina 13). Others have argued that the sovereignty of state is slowly shifting away towards the multinational corporations. From a different perspective, one can see that globalization and the changes to IPE created tension between the need for economic prosperity and the need to maintain community values (Harris 144).
The state plays a very important role of protecting communities from the effect of competition by multinationals. Through measures such as tariffs, local industries are protected from such effects. The sovereign power of national governments however can be extended in the face of globalization through signing of international treaties and cooperating with international organizations (Dani 34).
In South Korea, the impact of globalization and changes to the IPE has opened up the country’s market in addition to economic empowerment. There is immense technological advancement in the country which has increased its connection with the rest of the world. Scholars have identified that the country got its taste of globalization for the first time during the 1980s (Thistlethwaite 80).
It was during this time that the economy of the country was opened up to free trade. Even though this has not only been met by positive consequences, the impact it has had on the country’s economy has made it one of the richest nations in the world. Local technology and automotive companies have expanded and operated on a global scale (Keohane 40).
The political and economical sphere of the international economy is slowly being replaced by MNC based economy. The MNCs in South Korea are playing a decisive role in the national government. The same effect is seen in other countries where these multinationals operate. According to statistics, States no longer comprise the largest economic entities in the world today. Instead, companies operating on a global scale are now the largest economic entities.
The case of South Korea is a perfect example of this scenario (Haberl and Marina). The central government in the country only dictates a quarter of GDP spending while the remaining three quarters is dictated by companies and the private sector. Samsung electronics alone contributes to more than 20 percent of South Korea’s GDP. If the three largest South Korean based MNCs (Samsung, Hyundai, and LG) are combined, they contribute an overwhelming 50 percent of the country’s GDP (Raphael and Stokes 917).
These statistics reveal that the financial concerns of multinational corporations are now taking over the diplomatic and political concerns that were once a huge part of international political economy. The dictating power of multinational corporations is fast spreading and evidence of this power can be seen in several other countries in both the developed and the developing world. The multinational corporations now have international responsibilities.
Samsung Electronics
Samsung electronics is one of South Korea’s thriving multinationals. In terms of revenue, it is currently the largest company in the world dealing with information technology. By 2011, it passed Nokia to be the largest mobile phone manufacturer globally. Samsung electronics is also a leading company in the manufacture of television sets, home appliances, and semi conductor chips.
The company has recently established a prominent position in the smart phone market and tablet computer market. Samsung has sales networks in over 61 countries worldwide (Grand mont and McFadden 114).
Samsung electronics alone contributes to almost a quarter of the country’s economy. The government only spends around 20 percent of its GDP. Samsung, as described, has a sprawling network of 80 subsidiary companies which in total produce estimated annual sales of $250 billion.
If the company’s asset is combined with other local based multinationals such as Hyundai and LG, they have a larger share of the country’s total asset than the central government alone. Based on sectors, South Korea’s GDP comprises of agriculture, industry, and service sectors (Keohane 67). Each of these contributes 3.2%, 39.6%, and 57.2% respectively to the country’s GDP. In the industrial sector, electronics and automobile make up more than two thirds of its revenue.
The presence of multinational corporations, such as Samsung electronics, and the existing changes in the IPE has also impacted the trade structure in the country. The country has signed free trade agreements with other like minded states such as the US, European Union, China, Japan, UAE among others.
These states and international organizations are South Korea’s major trading partners. The government has also established an investment and trade promotion agency which has the mandate to enhance competition and national prosperity in the country. The agency works closely with Korean Trade Centers in other countries. As a result, the government has managed to establish business centers in more than 70 countries to enhance trade and promote investments. It is also in these countries that Samsung has a huge market.
Samsung electronics has made South Korea to be a leader within the global IT, semi conductor, and digital display industries surpassing economies such as Japan and the US. The technological developments have made the government to have huge interest in the robotic industry. There are a lot of investments going on in this industry with a goal of becoming a robotic nation by the year 2025.
Samsung electronics is also known to have a policy of attracting the low end market especially in low cost countries in Africa, Latin America, and parts of Asia. Its operation within these host countries has created investment opportunities, job opportunities for both high skilled and low skilled labor, and technological transfer. It produces goods in host countries and provides a ready market in South Korea where the goods are exported.
Because of the free trade agreements it has signed with international organizations and other developed countries, the goods produced in host nations are also sold within the free markets. It has long term commitment to the host nations. The huge amount profit it makes by operating in a host country is not usually transferred for investment in South Korea. Instead, the profit is invested locally within the host nations. This further helps to improve the economy of host nations.
From this point of view, it is apparent that Samsung electronics has almost a similar ability to assist host nations as the central government of South Korea. The position it has in shaping the economy of a country is quite significant compared to that of the central government.
Despite the significant role the company as well as other Korean multinationals play in shaping investments in the country, the central government also has power in creating strategies which shape its future. The focus of the central government has always been on strengthening the economy further to compete with other strong economies such as the US, China, and Japan.
In consequence, there have been a lot of talks with neighbors especially their northern counterpart in the Korean Peninsula to reunite and form a stronger economy. Currently, South Korea’s economy is ranked 13th in the world but if it manages to reunite with North Korea, it would be among the top four largest economies in the world (Haberl and Marina).
There is a lot of corporation between the central government and these multinationals when it comes to future investments strategies. Currently Samsung electronics is known to have the best policies on environmental sustainability. The company as well as the central government makes huge investments on energy saving technologies and on green energy. Due to the magnitude of its manufacturing and industrial sectors, the central government introduced a program to reduce emission of greenhouse gasses (Begg and Ward 29).
The program is considered to be largest of its kind in the world bearing in mind that other developed nations are still yet to make significant steps towards green energy. Additionally, the central government is collaborating with the multinationals to diversify the economy by increasing investments in other sectors and in some low populated regions of the country.
Works Cited
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Dani, Rodrik. One economics. Many recipes. Globalization, institutions, and economic growth. Princeton: Princeton university press, 2007. Print.
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Haberl, Helmut and Marina, Fitscher. “A socio-metabolic transition toward sustainability? Challenges for another great transformation.” Sustainable Development 19: 1, (2011): 11–14. Print.
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Thistlethwaite, Jason. “Counting the environment: the environmental implications of international accounting standards.” Global Environmental Politics 11.2 (2011): pp. 75–97. Print.