Exploring Seoul’s recipe for success

After a long trip across time zones, we reached this clever little East Asian nation for a tour of the LG manufacturing unit. With consolidated sales of USD 14.1 billion and operating profit of USD 1.03 billion for the first quarter of 2018, LG’s Home Appliance & Air Solutions sector alone weighed in with revenues of USD 4.59 billion (operating profits of USD 515.51 million). While the LG company also has four other sections - Home Entertainment, Mobile Communications, Vehicle Components and Business-to-Business - it quickly became apparent that our visit would focus on the cash cow of the LG portfolio: its home appliances segment of washing machines, refrigerators, gas and microwave ovens and air conditioners. Our visit was run against the backdrop of the historic NorthSouth meet of the leaders of the two Koreas which will undoubtedly open up new markets for South Korean manufacturers in the electronics and technology-starved North. I could not help but marvel at how far this beautiful country has come within just one generation. South Korea has managed to transform its economy from being one of the poorest countries in the 1960s to becoming the world’s 13th largest economy in 2014, according to the World Bank. At the heart of this change lies innovation. Competing against China’s low labour costs, and Japan’s hightech, capital-intensive industries, the South Korean government has focussed on buildi n g a c r e a t i v e economy with the emphasis on higher value-added m a n u f a c t u r i n g that thrives on innovation and new, cutting-edge technology. The annual spend on R&D as a share of GDP in S.Korea at 4.24% in 2016, was second-highest among the world’s most advanced nations. “South Korea notched top scores worldwide for manufacturing value-added as well as for tertiary efficiency - a measure that includes enrollment in higher education and the concentration of science and engineering graduates,” said a recent Bloomberg report. Every experience has a deeper meaning if we only look for it. I may not be an expert on microwave ovens and washing machines but the passion and the creativity that LG has invested in these everyday appliances and translated into corporate profits is an eye-opener. It is a lesson that the Arab world too would do well to emulate. We must encourage our brightest minds to think R&D, our governments must fund think-tanks and research projects. The results may not be immediate, but we can no longer afford to be mere consumers – we must remake ourselves in the Korean mould for the millinneum ahead.