The primacy of Seoul and the capital region

Concentrated growth: A recent trend

Population

In spite of government efforts at decentralization in Seoul and the Capital region, its population has quadrupled during the past three decades. The population growth rate in Seoul and the Capital region peaked during the period 1966-1970 at a rate of 9.4 per cent in Seoul and 6.1 per cent in the Capital region per annum. Population growth in Seoul declined to 2 per cent in the period 1985-1990, while that in Incheon and Kyunggi province increased at a rate of 5.2 per cent. During the period 1970-1979, about 3 million rural immigrants moved into Seoul. But in the period 1980-1989 this fell to 2.3 million. Also net out-migration from Seoul to Incheon and Kyunggi province increased by 120,000 (see fig. 5.4).

Fig. 5.3 Population growth by region, 1960-1990 (Source: Economic Planning Board, Population and Housing Census, 1960-1990)

Table 5.4 Population concentration in the Capital region, 1985 and 1990 ('000 and %)

	1985	1990	Increment
South Korea (A)	40,448	43,520	3,072
Capital region (B)	15,820	18,60()	2,780
Concentration (B/A)	39.1	42.7	90.5

Source: Economic Planning Board, Population and Housing Census, 1985-1990.

Fig. 5.4 Migration to and from Seoul, 1970-1979 and 1980-1989 (Source: Economic Planning Board, Annual Report on the Internal Migration Statistics, 1970, 1979, 1980, and 1989)

Manufacturing and services

With rising domestic labour costs and competition from China and the ASEAN nations, the South Korean manufacturing sector has been readjusting its structure from labour-intensive manufacturing to assembly-type production activities such as machine assembly, machinery, electronic equipment, and furniture. The share of employment in the labour-intensive sector (e.g. textiles, apparel, footwear, and rubber products) decreased from 38.8 per cent in 1980 to 29.9 per cent in 1990, while the share of assembly products increased from 33.1 per cent to 45.2 per cent during the same period (table 5.5). In the Capital region as a whole, the pattern of industrial adjustment is not much different from the national trend. However, in Seoul, the share of labour-intensive manufacturing employment is still relatively high.

Table 5.5 Distribution of workers by industry, 1980-1990 (%)

	South Korea			Capital region
Industry	1980	1985	1990	1980	1985	1990
Food	5.5	5.8	5.5	5.4	5.9	5.1
Wood	2.4	1.5	1.3	3.5	1.6	1.4
Paper	2.3	2.0	1.9	1.5	2.2	2.0
Petroleum & coal	0.5	0.4	0.4	0.5	03	04
Non-metal	2.8	2.9	2.8	1.7	2.6	2.1
Non-ferrous	0.8	0.5	0.8	1.5	0.5	0.7
Resource products	14.4	13.2	12.8	14.0	13.1	11.7
Leather products	1.3	1.4	1.5	1.7	1.7	2.0
Furniture	0.8	1.1	1.1	1.1	1.7	1.9
Plastics	2.0	3.1	3.5	2.3	3.6	4.1
Fabricated metal	6.0	8.2	7.8	6.5	7.7	7.4
Machinery	4.8	5.4	7.5	5.1	5.5	8.3
Electrical machinery	11.7	12.5	15.2	14.4	16.6	19.4
Transport equipment	5.1	5.4	7.3	3.3	3.0	5.5
Measuring instruments	1.4	1.3	1.3	2.2	1.5	1.4
Assembly products	33.1	38.4	45.2	36.6	41.2	50.0
Textiles	19.1	15.8	12.4	10.1	9.9	7.8
Apparel	10.0	10.0	7.8	14.6	13.8	10.8
Footwear	2.2	3.0	4.5	1.4	1.3	1.0
Rubber	4.0	3.7	2.2	1.2	0.8	1.0
Other manufacturing	3.5	4.0	3.1	5.7	5.8	4.6
Labour-intensive products	38.8	36.4	29.9	33.0	31.7	25.2
Industrial chemicals	2.0	1.7	1.6	1.3	1.4	1.3
Petroleum refineries	0.3	0.3	0.4	0.5	0.3	0.3
Iron & steel	2.8	2.2	2.2	1.8	1.2	1.1
Capital-intensive products	5.1	4.2	4.2	3.6	2.9	2.6
Beverages	1.3	0.8	0.7	1.5	0.6	0.5
Printing	2.5	2.5	2.8	4.8	4.1	4.6
Other chemicals	3.3	3.0	3.0	4.9	4.7	4.0
Pottery & china	0.9	0.6	0.5	0.5	0.5	0.3
Glass	0.8	0.9	0.8	1.0	1.2	1.1
Other special products	8.8	7.8	7.8	12.8	11.1	10.5
Manufacturing	100.0	100.0	100.0	100.0	100.0	100.0
(No. of workers, '000)	1,998	2,397	3,138	779	1,199	1,591

Source: Ministry of Labour, Survey Report on Establishment Labour Conditions, 1991.

With strict controls on industrial location since 1964, the share of secondary industry in the Capital region and Seoul decreased during the period 1980-1990. On the other hand, service industries grew much faster than other sectors of the economy. At the national level, the share of tertiary industry employment in establishments with more than five employees increased from 35.2 per cent in 1980 to 40.1 per cent in 1990. In the Capital region, the share increased from 38.1 per cent to 41.8 per cent, while in Seoul the increase was from 48.7 to 58.1 per cent. Meanwhile, the share of secondary industry decreased from 61.3 to 56.5 per cent in the Capital region and from 50.7 to 41.6 per cent in Seoul (Park, 1992). In 1990, 44.7 per cent of the nation's service industry employment was concentrated in Seoul and 10.3 per cent in Kyunggi province.

Producer services

The growth of producer services, including wholesale, finance, insurance, and real estate, was very conspicuous in the South Korean economy during the 1980s. At the national level, the employment share of producer services increased from 20.7 per cent in 1980 to 30.7 per cent of the service industry as a whole in 1986. In the Capital region, the share of producer services increased more rapidly than the national average. During the period 1981-1986, producer services in the Capital region (including Seoul, Incheon, and Kyunggi province) accounted for 49.7 per cent of the national total. In business services, the region's share was 62.1 per cent of the national total (Lee, 1990). Producer services are concentrated in Seoul, with 59.8 per cent of the nation's employment, with an additional 8.2 per cent in Kyunggi province, which made producer services in the Capital region 68 per cent of the national total in 1990. The rapid increase in producer services is mainly attributable to the growth of business services and wholesale in Seoul and of finance and business services in Incheon.

High-tech and R&D

The number of high-tech industries grew at an annual rate of 9.5 per cent, 1.4 per cent faster than the manufacturing sector as a whole during the period 1980-1984. According to one projection, high-tech industry is expected to grow at the rate of 10 per cent per annum until the year 2000 in South Korea (KRIHS, 1986). The government was aiming to raise the share of R&D investment to 2.5 per cent of GNP by 1991. The semi-conductor, computer, fine ceramics, and auto industries are expected to be the leading sectors in high-tech in the coming years.

The high-tech industries, classified by R&D investment and technological content, have concentrated in Seoul and its satellite cities. Over 60 per cent of semi-conductors are produced in Seoul alone and more than 50 per cent of all high-tech items are produced in the Capital region.

The concentration of high-tech industries in Seoul and the Capital region is paralleled by a concentration of higher education institutions and research institutes operated by manufacturing industries. According to an industrial survey undertaken by the Korea Research Institute for Human Settlements, proximity to a research institution was singled out as one of the more important locational factors for high-tech industry (KRIHS, 1986). The other important locational factors for high-tech industries are proximity to Seoul and existing agglomerations (see table 5.6). It is noteworthy that six locational factors chosen out of 20 factors point to the irrefutable attraction of the Seoul area for high-tech industries. In 1989, more than two-thirds of industry's research institutions were located in the Capital region and one-quarter in Seoul (see table 5.7).

Including 22 research institutions located in Pusan in 1989, 136 research institutions were located in the South-east region. Most of those were affiliated to manufacturing establishments located in Taegu and the neighbouring city of Pusan.

Table 5.6 Major locational factors for high-tech industries

Factor	Response
1. Proximity to research facility	28.8
2. Proximity to Capital region	15.0
3. Agglomeration	17.5
4. Airport and expressway	10.0
5. Skilled personnel	36.3
6. Others	3.8

Source: KRIHS (1986).

Table 5.7 The regional distribution of research institutes, 1989

	Capital region				South-east region				Central region	South-west region	Taebaeg region
	Total	Seoul	Incheon	Kyunggi province	Pusan	Kyungnam province	Taegu	Kyungbuk province	Chung Chong provinces	Chula provinces	Kangwon province
All industry	674	177	53	222	22	62	19	33	46	23	17
Large firm	329	69	32	107	10	40	3	24	21	15	8
Small firm	344	108	21	114	12	22	16	9	25	8	9

Source: Industrial Research Institute Survey, Data 49, 87-3.

Centrality and global attributes

The centrality of Seoul

Being the capital city for over 500 years since the Yi Dynasty, Seoul has been the nation's centre of politics and culture. The city also has 24 per cent of nation's population, abundant economic opportunities, and quality education. About 41 per cent of nation's population, 47 per cent of manufacturing employees, and 44 per cent of the tangible capital assets of the nation are centred in the Capital region. Above all, Seoul and the Capital region attract skilled workers and professionals from the rest of the country. About 61 per cent of managerial personnel in business and 96 per cent of the top 50 corporations' headquarters are located in Seoul. Seoul has been taking a commanding role in the nation's planning, and in managing and controlling business activities. Seoul is also the centre of academic and industrial research. About 64 per cent of research scientists are associated with private and public research institutions in Seoul. The centrality of Seoul is depicted in figure 5.5.

International exposure

Seoul attracts the majority of international organizations such as communications media, banks, investment consultants, and diplomatic corps (see table 5.8). In 1987, all foreign embassies were in Seoul except one in Pusan, and 15 out of 22 foreign consulates were also located in Seoul. All of 7 stock brokerage offices and 66 foreign bank offices were located in Seoul. All 25 of the offices of foreign media and 8 broadcasting networks were in Seoul. It is no surprise that in 1988, the year of the Seoul Olympics, 92 per cent of all international cultural events and exhibitions were held in Seoul.

In 1985, about 29,000 foreign citizens were resident in South Korea, nearly half of them in Seoul (see table 5.9). The share of foreigners residing in the cities of the Capital region amounted to 54 per cent, including Incheon (6.9 per cent), Bucheon (0.5 per cent), and Sungnam (0.2 per cent). In particular, Seoul dominates the rest of the nation by holding 70.9 per cent of overseas-originated service industries. More specifically, 33 of 37 foreign financial institutions, 22 of 43 hotels, 76 of 114 trading companies, and 25 of 30 communications services were located in Seoul. The proportion of 1.4 foreign residents per 1,000 natives in Seoul was much lower than that of Tokyo (18 per 1,000).

Fig. 5.5 Indicators of the centrality of Seoul (Notes: (1) household excluded; (2) firms with over 5 workers; (3) science and engineering research institute and researchers; (4) science and engineering research institute and researchers; (5) top 50 firms by sales. Source: KRIHS, Basic Strategies for Balanced Development in the Age of Decentralization, 1990, p. 19)

FOREIGN DIRECT INVESTMENT. Currently, there are 3,170 cases of inward foreign direct investment (FDI) totalling US$7.0 billion in South Korea. As of the end of 1989, two-thirds of the cases were from Asian countries, amounting to US$3.8 billion, with Japan standing out (1,922 cases and US$3.5 billion). The United States was the second-largest investor next to Japan, with 717 cases totalling US$1.9 billion. West Germany, Hong Kong, and the United Kingdom were next in order.

About three-quarters of the FDIs are invested in the manufacturing sector. Although only 16.1 per cent of the FDIs in the manufacturing sector are located in Seoul, the satellite cities and suburbs of Seoul have 35.7 per cent of the entire inward FDI in the nation. Thus, 56.4 per cent of FDI projects in manufacturing are located in the Capital region. In terms of the value of FDI in manufacturing, Kyungnam province has the largest share (26.7 per cent), and Kyunggi and Jeonnam provinces are the next in order. In the service sector, however, Seoul has the dominant share in both the number of cases and the amount of investment, with 82.9 per cent and 90.9 per cent, respectively (see table 5.10).

Table 5.8 Foreign agencies in major cities, 1987 and 1990

	1987			1990
	Seoul	Pusan	Taegu	Seoul	Pusan	Taegu
Embassy	48	1	0	60	0	0
News agency	25	0	0	27	0	0
Communications	9	0	0	13	0	0
Broadcasting	8	0	0	12	6	0
Bank	66	8	0	77	11	0
Major branch office	374	4	0	595	7	0
Convention and sports event	146	4	2	189	4	5

Source: Y. H. Park, "Policy for Global Functions," mimeo, 1991.

Table 5.9 Foreign residents in South Korea, 1980 and 1985

	1980				1985
City	Populationa	Per cent	Foreign citizens	Per cent	Populationa	Per cent	Foreign citizens	Per cent
Seoul	8,364,379	22.3	13,763	46.7	9,639,110	23.8	13,355	46.3
Pusan	3,159,766	8.4	2,835	9.6	3,514,798	8.7	2,685	9.3
Taegu	1,604,934	4.3	1,153	3.9	2,029,853	5.0	1,483	5.1
Incheon	1,083,906	2.9	2,075	7.0	1,386,911	3.4	1,995	6.9
Kwangiu	727,600	1.9	341	1.2	905,896	2.2	223	0.8
Taejeon	651,792	1.7	434	1.5	866,148	2.1	461	1.6
Ulsan	418,326	1.1	478	1.6	551,014	1.4	807	2.8
Bucheon	221,463	0.6	66	0.2	456,292	1.1	144	0.5
Masan	386,751	1.0	255	0.9	448,746	1.1	248	0.9
Sungnam	376,840	1.0	18	0.1	447,692	1.1	45	0.2
Total population	37,436,315	29,500			40,448,486	28,834

Source: Economic Planning Board, Population and Housing Census, 1980, 1985.
a. Includes foreign citizens.

Table 5.10 Direct foreign investment (inbound) by region

	Cases				Value
	Manufacturing		Service		Manufacturing		Service
Region	No.	%	No.	%	US$'000	%	US$'000	%
Total	1,301	100.0	321	100.0	3,184,917	100.0	2,215,369	100.0
Seoul	209	16.1	266	82.9	297,590	9.3	2,014,503	90.9
Pusan	70	5.4	18	5.6	55,029	1.7	103,066	4.7
Taegu	26	2.0	2	0.6	14,041	0.4	2,030	0.1
Incheon	120	9.2	7	2.2	176,610	5.5	10,852	0.5
Kwangju	1	0.1	-	-	125	0.0	-	-
Kyunggi	405	31.1	5	1.6	751,197	23.6	7,446	0.3
Kangwon	9	0.7	-	-	20,726	0.7
Chungbuk	52	4.0	1	0.3	173,827	5.5	3,000	0.1
Chungnam	49	3.8	-	-	90,900	2.9	-	-
Jeonbuk	39	3.0	-	-	77,494	2.4	-	-
Jeonnam	29	2.2	-	-	409,738	12.9	-	-
Kyungbuk	95	7.3	3	0.9	266,429	8.4	2,088	0.1
Kyungnam	195	15.0	8	2.5	849,302	26.7	18,420	0.8
Jeju	2	0.2	11	3.4	1,909	0.1	53,964	2.4

Source: Department of Finance, Foreign Investment Data, 1989, reproduced with the permission of the government.

TOURISM. The number of foreign visitors more than doubled during the 1980s. Although the Seoul Olympics had some isolated effects on tourism, the number of foreign visitors has been increasing steadily (see table 5.11). The purpose of the majority of trips is still sightseeing. However, the share of sightseeing trips has been declining. Even in the Olympic year of 1988, the proportion declined by 4 per cent. According to a 1989 survey, about 93 per cent of foreign visitors come to the Capital region during their trip to South Korea. Most foreign visitors use tourist hotels and about 60 per cent of customers registering at tourist hotels are foreign tourists (KTDI, 1989).

Seoul and Pusan have Kimpo and Kimhae international airports, respectively. Seoul has 76 tourist hotels with 15,725 rooms, which represents 47 per cent of all rooms in tourist hotels. Pusan, next to Seoul, has 12.4 per cent of total room capacity with 4,113 rooms (see table 5.12). In 1987, about 2 million tourists visited South Korea. Most of those tourists visited Seoul and close to half of the tourists visited Pusan. According to a survey, Seoul appears to be the most attractive place for the tourists because of its historical heritage and cultural activities; Pusan and Kyunggi province are the next most popular.

Table 5.11 Number of foreign visitors by purpose, 1980-1988

Year	Sightseeing	Business	Official	Visiting &observation	Other	Total
1980
No.	665,973	83,240	42,992	152,474	31,736	976,415
Per cent	68.2	8.5	4.4	15.6	3.3	100.0
1985
No.	877,800	230,195	64,725	202,322	51,003	1,426,045
Per cent	61.6	16.1	4.5	14.2	3.6	100.0
1988
No.	1,320,405	378,017	71,022	299,846	271,172	2,340,462
Per cent	56.4	16.2	3.0	12.8	11.6	100.0

Source: Ministry of Transportation, Annual Report on Tourism, 1989, p. 49.

Table 5.12 Registered hotels by province

	Hotels		Hostels		Condos
Province	No.	No. of rooms	No.	No. of rooms	No.	No. of rooms
Seoul	76	15,725	2	194	-	-
Pusan	43	4,113	2	60	2	436
Taegu	14	952	-	-	-	-
Incheon	6	548	-	-	-	-
Kwangju	4	249	-	-	-	-
Kyunggi	15	867	1	42	1	250
Kangwon	11	1,019	3	188	4	1,083
Chungbuk	7	477	2	185	-	-
Chungnam	14	1,110	1	61	1	107
Chonbuk	5	440	-	-	-	-
Chonnam	10	525	-	-	-	-
Kyungbuk	16	1,910	-	-	2	352
Kyungnam	22	2,261	-	-	-	-
Jeju	23	2,997	-	-	1	116

Source: KTDI (1989:231).

AIR TRANSPORT. Overseas trade had been growing since the early 1960s and reached 84.9 per cent of GNP in 1981. Owing to the recent expansion of the domestic market, the share of trade in GNP has slightly decreased, but it was still in the range of 65.5 to 76.9 per cent during the period 1985-1990. Because of the concentration of manufacturing activities and producer service industries in Seoul and the

Table 5.13 Domestic vs. overseas telephone calls by region (%)

	Overseas calls	Domestic long- distance calls	Share of population
Region	(A)	(B)	(C)	(A)/(C)	(B)/(C)
Seoul	64.4	27.9	24.4	2.6	1.1
Kyunggi/Incheon	11.9	18.8	18.3	0.7	1.0
Pusan/Kyungnam	11.0	16.8	17.2	0.6	1.0
Taegu/Kyungbuk	3.8	10.6	11.7	0.3	0.9
Chungchong/Taejeon	2.9	9.9	10.3	0.3	1.0
Jeonnam/Kwangju	1.9	7.3	8.4	0.2	0.9
Jeonbook	1.1	3.8	4.8	0.2	0.8
Kangwon	0.9	4.1	3.7	0.2	1.1
Jeju	1.6	1.1	1.2	1.3	0.9

Sources: National Statistical Office, Major Statistics of the Korean Economy, 1991; Ministry of Communications, Statistical Yearbook of Communications, 1991.

Capital region, a large proportion of manufactured products produced in Seoul and the Capital region are exported. The share of air passengers and cargoes handled at Kimpo Airport, located in the vicinity of Seoul, constituted 86.6 per cent and 95.7 per cent of total passengers and cargoes, respectively, in 1989.

OVERSEAS TELEPHONE CALLS. The importance of Seoul in international affairs is clearly demonstrated in table 5.13. In comparison with its share of domestic long-distance calls, its share of international calls, originated and destinated, is disproportionately large. Domestic long-distance calls to and from Seoul constitute 27.9 per cent of the national total whereas overseas calls from and to Seoul are 64.4 per cent of the nation's overseas calls. The table also shows domestic and overseas telephone usage per capita. Whereas the share of domestic calls is proportional to the share of population in Seoul, with a quotient of 1.1, the share of overseas calls is 2.6 times larger than the share of the population. The Capital region's share of overseas calls is much smaller than its share of the population and also smaller than manufacturing employment. This seems to indicate the role differentiation between Seoul and the rest of the Capital region. Seoul seems to provide most of the international links not only to the nation but also to the Capital region, which has been gaining importance as the nation's industrial growth centre since the 1980s. The dominance of Seoul seems more pronounced in international central business functions.

Seoul as a world city

As discussed previously, global cities should be defined and evaluated in their national context. Therefore the degree of international exposure in a nation's urban system can provide some insights into the development of a city's competitiveness and the reach of the geographical area in which its residents are active. To gain a general perspective of Seoul in the family of world cities, it is worthwhile to compare some of the global attributes of Seoul in relation to other world cities.

CORPORATE HEADQUARTERS. A disproportionately large share of the top 500 manufacturing corporate headquarters is located in the major cities in the core countries: Tokyo (99), London (43), New York (40), Paris (22), Osaka (21), Chicago (15). Seoul had 5 and ranked 17th among the major cities of the world. In 1991, Seoul had 11 of the Fortune 500 (Fortune, July 1991).

BANKS. In 1991, 14 of the headquarters of the world's top 1,000 banks were located in Seoul, ranking it sixth among the world cities. The largest number of headquarters is located in London (30) followed by Tokyo (23), Paris (21), and Taipei (16) (see table 5.14).

INTERNATIONAL CONFERENCES. According to the Union of International Associations (UIA), in 1990 Paris ranked top with 361 international conventions, followed by London (268), Brussels (194), Vienna (177), and Geneva (166). Seoul ranked 23rd with 60 such events. In Asia, Singapore ranked first with 136 events followed by Tokyo (81) and Hong Kong (74) (see table 5.15).

Table 5.14 Top 1,000 bank headquarters, 1991

Rank	City	No. of HQ
1	London	30
2	Tokyo	23
3	Paris	21
4	Taipei	16
5	Frankfurt	15
6	Madrid	14
6	Seoul	14
8	New York	12
8	Bangkok	12
10	Vienna, Rome, Osaka	11
13	Lisbon	10

Source: The Banker, July 1991.

Table 5.15 International conventions by major cities, 1989 and 1990

1989			1990
Rank	City	No. of conferences	Rank	City	No. of conferences
1	Paris	388	1	Paris	361
2	London	261	2	London	268
3	Geneva	170	3	Brussels	194
4	Brussels	165	4	Vienna	177
5	West Berlin	160	5	Geneva	166
5	Madrid	139	5	West Berlin	166
7	Vienna	129	7	Madrid	151
8	Washington D.C.	120	8	Singapore	136
9	Singapore	111	9	Amsterdam	108
10	Rome	108	10	Washington D.C.	101
11	Amsterdam	101	11	Strasbourg	100
12	Strasbourg	82	12	Rome	91
13	Hong Kong	74	13	New York	87
14	Stockholm	73	14	Copenhagen	85
15	New York	72	15	Hague, The	83
16	Copenhagen	70	16	Tokyo	81
17	Tokyo	69	17	Stockholm	80
18	Helsinki	62	18	Hong Kong	74
18	Buenos Aires	62	19	Barcelona	70
20	Munich	59	20	Budapest	69
20	Rio de Janeiro	59	21	Rio de Janeiro	68
22	Manila	55	22	Helsinki	67
23	Hague, The	54	23	Seoul	60
25	Bangkok	52	24	Manila	58
28	Beijing	49	25	Beijing	53
33	Seoul	45	26	Bangkok	51

Source: Union of International Associations, Yearbook of International Organizations, 1990.

According to UIA figures, Seoul had 17 international organizations, based mostly on UN-related affairs, and ranked 17th. The number could increase gradually in the future since Korea became a member nation of the United Nations in 1991.