Page 75 - AEI Insights 2019 - Vol. 5, Issue 1

Kamaruddin, 2019

unlike Taiwan’s integration of SMEs with larger companies, the South Korean chaebols
continue to crowd out SMEs particularly in the manufacturing sector (Chiang 2018, pp.57-58).
One of the important lessons from the book is the impact of SMEs in the manufacturing and
service sector in both Taiwan and South Korea. Although the service sector now makes up a
larger portion of the employment opportunities in South Korea, the manufacturing sector
continues to be the largest contributor.
However, the high need for increased research and development (R&D) which generally only
large corporations can afford means that SMEs are increasingly losing space in the
manufacturing sector. Conversely, SMEs in the service sector accounts for a high portion of
the domestic employment (p.50). This means that although SMEs might not be the biggest
economic growth contributor in Taiwan and South Korea, they are the biggest contributor to
social and income security for a large part of the population.
The governments of both Taiwan and South Korea focuses much of the industrial upgrading
effort on the manufacturing sector in order to improve export despite the growing service sector
in both countries. A large part of this is because the service sector of both countries is too weak
to stimulate economic growth (p.74). Competition from Chinese firms as well as the growing
reliance on large corporations for research and innovation also contributes to the declining
competitiveness of the SMEs (p.76 & 84).
The role played by the government in both countries have also changed particularly in the wake
of increasing trade liberalization. In this case, the author focused on two roles that the
government plays – efforts for industrial upgrading and the effort to further trade liberalisation
through bilateral and multilateral trade agreements. As Taiwan and South Korea are strongly
dependent on international trade in driving their economic growth, the emphasis has also been
given to diversifying trade relationships. South Korea, in particular, has been much more
successful than Taiwan in establishing free trade agreement as it doesn’t face the same political
constraints as Taiwan (pp.97-98).

The author also links these issues (China’s growth, the manufacturing sector decline and SME
competitiveness) among others, to the social economic challenges that Taiwan and South Korea
face; namely the income gap. The author argues that although Taiwan and South Korea’s Gini
coefficient rations are” not high by international standards’, this is not adequate to explain the
problem of income inequality (p.128). Taiwan’s and South Korea’s development and labour
structure will also face severe challenges as both countries become ageing societies.
The author points to the governments’ past population control measures as one of the root cause
of the ageing society (pp.137-138). However, the author’s claim that “both societies may not
be fully aware of the significance of a shrinking youth population” is not quite true as the issue
is extensively covered by local media and the issue regularly creates political pressure on the
government. Still, the author rightly points out that policies to increase the fertility rate has not
been successful (p.139).
This book provides an enlightening continuity to the development experience of South Korea
and Taiwan by structuring her analysis based on the contributing factors that have been
established in earlier academic discourse. In doing so, it presents readers with an opportunity
to understand how the changing economic environment affects Taiwan and South Korea. Its
abundant use of data provides a detailed analysis of the difference not only between the two
countries but also the changing trends experience by Taiwan and South Korea individually. On
the other hand, readers will also need to look elsewhere to find a richer discussion on the
contemporary political, social and security issues that impact the economies of both countries.

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