Civil Engineering Reference
In-Depth Information
Fostering Regional Strategic Industries
with Reference to Daejeon Metropolitan
City
Byung-Joo Kang
1 Background of the Research
Growth in national and/or regional economies comes with investment, supported
by the adoption, and generation of new technology. As productivity of land, labor,
and capital increases, the economic competitiveness of a city, region, and nation is
enhanced. The key dynamic is the continuing sequence of the application of new
technologies in both products and processes.
It is best if the private investors decide when specific industries are to be
supported or dropped in order to maximize their profit under the market economy.
Theoretically, a firm is started up when its major commodity is composed of
sunrise industries but it disappears when its major commodity is composed of
sunset industries. Decision making for starting up or closing a firm should be
executed by the investors in the market. Government intervention is allowed only
when there is a market failure. Market failure occurs when there is an external
problem or a problem in providing pure public goods.
We frequently observe that when government intervenes seriously in the
market, a problem of distortion in resources distribution or inefficiency in oper-
ating the national economy occurs. Market-oriented countries such as the US or
Germany do not support any specific industry under the name of national policy.
Even Japan had adopted an indirect industry supporting policy after the 1980s,
which spread into developed countries after World War II with an active industrial
policy by the central government.
However, if local governments select a few industries that seem to have a
promising future and are doing well in their regional economy, the possibility of
success is higher than it would be if the central government did the same job.
Since it is nearly impossible for central government to foster specific industries by
giving them general purpose funding under the WTO contract situation, local
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