[Book| 한류외전] The Story Behind the Success of the Korean Wave

A critical turning point occurred with the release of Steven Spielberg's "Jurassic Park" in 1993, marking a pivotal moment in Korea's cultural and industrial policy. Recognizing the film's substantial box office success—equivalent to the export revenue of 1.5 million Hyundai cars


Author : Kim yoon zi (Senior Researcher, The Export-Import Bank of Korea)

[Editor’s Copmments] From movies and dramas to the phenomenon of K-pop, the Korean Wave is making waves across the globe. K-pop idol groups, spearheaded by BTS, are actively touring worldwide, while Korean dramas and movies are garnering international acclaim through OTT platforms. Amidst the global Hallyu craze, Dr. Kim Yoon zi, from the Overseas Economic Research Institute of the Korea Export-Import Bank, reflects on Korea's cultural industry spanning the last 30 years. During a 100-minute book talk on October 30, hosted by the Center for Hallyu Studies at the Asia Research Institute of Seoul National University, Dr. Kim, also the author of "Outside the Korean Wave," delved into an analysis of how changes in institutions, government policies, and cultural industries have shaped the current Korean Wave phenomenon.
Under the moderation of Hong Seok-kyung, a professor specializing in media and information at Seoul National University (SNU), a panel comprising Kang Hye-won, a senior researcher from Sungkyunkwan University's Center for Culture and Media Convergence, and Cho Young-shin, the head of SK Broadband's Business Strategy Group, engaged in a discussion about the trajectory of the Korean Wave.

The Evolution of Korea's Film Industry

Dr. Kim yoon zi emphasizes the significance of the "opening shock" as a pivotal factor in the industrialization of Korean popular culture. This shock prompted robust government policies and proactive involvement from companies, laying the groundwork for the success of Hallyu today. Various factors, including shifts in technology, finance, and capital-raising methods, have played a role in shaping the current landscape. The movie industry, particularly influenced by the Uruguay Round negotiations that commenced in 1986, faced a transformative period. The negotiations significantly opened up South Korea's film industry, triggering a crisis as Hollywood studios started distributing movies directly, sidelining local film companies. Faced with challenges in importing Hollywood films, Korean studios turned to Hong Kong films, sparking a craze in the late 1980s and early 1990s. Dr. Kim underscores that this acceleration of opening up heightened the urgency for the survival of the Korean film industry.

A critical turning point occurred with the release of Steven Spielberg's "Jurassic Park" in 1993, marking a pivotal moment in Korea's cultural and industrial policy. Recognizing the film's substantial box office success—equivalent to the export revenue of 1.5 million Hyundai cars in a year—the government identified culture as a new growth engine. Driven by active governmental efforts to nurture the cultural industry and policies promoting venture investment introduced in 1997 to overcome the IMF financial crisis, the foundation for the film industry's development was solidified, according to Dr. Kim yoon zi.


Competition system of Korean broadcasting companies

The term "Korean Wave" gained prominence in 1997 when the drama "What is Love?" captivated audiences on China Central Television (CCTV). Dr. Kim yoon zi attributes the rise of Hallyu to shifts in the production landscape following the establishment of the civilian government and the ensuing three-way competition among broadcasters. Prior to this, broadcasters grappled with creative constraints due to censorship and regulations. However, the post-civilized government era ushered in a more liberated drama production environment as various restrictions were lifted. The launch of SBS in 1991 intensified competition among broadcasters, driving improvements in Korean drama quality as they vied for viewership to expand their share of the advertising market.The Asian financial crisis in 1997 prompted a shift from importing Japanese dramas to more affordable Korean dramas. The widespread success of the 2003 drama "Winter Sonata" underscored the potential for commercial success. The advent of high-speed internet in the mid-to-late 2000s facilitated the global distribution of Korean dramas in pirated forms.

The entry of global OTT platforms, notably Netflix in Korea in 2016, accelerated the international export of Korean dramas by addressing issues like subtitling and distribution. Dr. Kim yoon zi highlights that these platforms empower the Korean drama industry to produce high-quality content, benefiting from substantial capital investment and liberation from material constraints, a departure from traditional broadcasters. This shift has contributed to the success of productions like "The Squid Game."The discussion also delved into broader questions surrounding Korean cultural content and K-Pop's reception beyond Korea. Works like the drama "Pachinko," which was a result of a partnership between Korean experts and foreign producers, raised concerns about the consumption of Korean-based content on a global scale. Additionally, the conversation touched upon challenges faced by the Korean film industry and the commercialization dynamics in the K-Pop industry.*

Dr. Kim yoon ziwrote the following article

Hallyu: Is It a Result of Government Policy or an 'Unplanned Success'?

"The earnings generated by the film <Jurassic Park> within a single year were tantamount to exporting 1.5 million cars overseas."

This iconic statement, originating in 1994, is recognized for its transformative impact on the trajectory of Korea's cultural industry policy. It marked the inception of a shift in the perception of popular culture, previously viewed merely as entertainment, into a recognized "industry" with economic viability.

In light of the remarkable global achievements of the K-pop sensation BTS and the Netflix hit drama series "Squid Game," this particular expression has surfaced prominently in Western media assessments of Hallyu. In October 2021, The Times featured an article titled "Hallyu! How Korean Culture Conquered the World," underscoring the viewpoint that Hallyu has evolved into Korea's flagship product, shaped by decades of ambitious initiatives by the Korean government.

Assigning Economic Viability to Culture

The perspective attributing Hallyu's success to a policy of wholehearted support is not confined to Korea alone; it resonates widely in other countries. Many observers draw parallels, likening the Korean government's past endeavors in fostering industries like electronics, shipbuilding, and automobiles to the meticulous cultural industry policies that have propelled Hallyu into a prominent position as a leading export product.

A considerable number of Korean scholars find the perspective to be "half right and half wrong." While acknowledging that since the 1990s, the Korean government has indeed crafted cultural industry policies and enhanced support, they caution against exclusively attributing Hallyu's success to these governmental initiatives. Unlike the manufacturing industry, the cultural sector is inherently creativity-oriented. Additionally, the Korean government encountered challenges in directly applying past support methods, necessitating extensive deliberation and undergoing a process of trial and error.

As a result, Hallyu has been consistently described as an "unplanned success." The triumph of Hallyu can be attributed to a combination of factors, including government support policies, the competitiveness of Korean popular culture, political and economic shifts in East Asia, and the exceptional abilities of individual entrepreneurs. Notably, none of these factors were meticulously orchestrated; rather, they operated independently, each following its own mechanisms, and fortuitously converged to yield diverse successes.

However, it would be overly simplistic to attribute the success of Hallyu primarily to government policy. In the initial stages of Hallyu's success, extensive studies focused on the government's policy-making process. Despite significant changes since then, there persists a tendency to replicate these findings and place excessive emphasis on policy support. Another factor at play is the inertia observed among Western scholars in their perception of Asian countries. In their view, Asia has historically been seen as a region where accomplishments are achieved under strong government leadership, leading them to potentially view the success of Hallyu as an extension of that narrative.

The government's role in the success of Hallyu holds significance in another aspect. It consistently underscored the industry's importance as a driving force for Korea's future. This indicates that the government played a crucial role in shaping the evolving values of society.

Arm's Length Principle: Support Without Interference

The economic perspective on South Korea's cultural industry began to evolve during the Kim Young-sam administration, which commenced in 1993. This period coincided with dynamic changes in the economic landscape, marked by the discourse of a financial crisis and the imperative to thrive in a society characterized by infinite competition amid advancing globalization through market and trade liberalization. This context spurred significant growth in the cultural consumption market, giving rise to a discourse suggesting that developed countries could achieve high added value in the mass culture industry.

In alignment with this trend, the Kim Young-sam administration took a pivotal step by establishing the Cultural Industry Bureau within the Ministry of Culture and Sports in 1994. Policy reports advocating that investment in culture yields substantial socio-economic effects started to emerge. By 1995, support for the cultural industry was mandated. Although systematic support did not immediately materialize, the acknowledgment of culture as an industry represented a noteworthy shift that would define the subsequent era.

The official implementation of cultural industry policy took place during the Kim Dae-jung administration in 1998. Faced with the urgent task of overcoming the financial crisis, the Kim Dae-jung government declared the new millennium as the "Era of Culture" and prioritized the development of cultural and venture industries as key national objectives. During this period, the administration restructured investment systems for the venture industry, established fundamental laws, regulations, and support mechanisms for the cultural industry, and consistently allocated more than 1 percent of the national budget to the cultural sector.

Simultaneously, the government introduced the core operating principle of the cultural industry support system, known as the "arm's length principle." This principle underscores the importance of respecting the freedom and autonomy of the beneficiaries and emphasizes the concept of "support without interference." It implies that while the government takes the lead in policy formulation, it refrains from meddling in the selection of beneficiaries and delegates the actual authority to provide support to other organizations.

The arm's length principle assumes significance due to the distinctive nature of the cultural industry compared to historically capital-intensive sectors like heavy chemicals and semiconductors, where the government concentrated capital. The cultural industry, reliant on individual creativity and imagination, necessitates a democratic atmosphere that ensures freedom of expression and the power of diversity.

Using Hallyu for National Branding

With the escalating success of Hallyu, the Korean government has deemed it crucial not only to support the cultural industry but also to leverage this success as a strategic asset. Particularly under the Lee Myung-bak administration, Hallyu began to be recognized as a tool for enhancing the national brand. The triumph of Hallyu was seen as a contributing factor to national prestige, facilitating the export of other Korean products and drawing in foreign tourists.

However, as these initiatives expanded, unintended consequences surfaced. Foreign media adopted a negative stance, labeling Hallyu as a "government-sponsored propaganda project." Businesses also found it cumbersome that Hallyu was being promoted as a national or propaganda initiative, with some companies questioning the government's role in their individual successes, stating, "What support did the government provide?"

The Park Geun-hye administration approached the cultural industry from an economic perspective, particularly focusing on job creation. While the Lee Myung-bak administration underscored the cultural industry as a means to enhance the national brand, under Park Geun-hye, it shifted to a tool for generating high-quality employment opportunities.

Consequently, major policies were implemented to bolster the industrial ecosystem, epitomized by the construction of the Cultural Creation Convergence Belt. Approximately 700 billion won was allocated for the development of six facilities, including the Cultural Creation Convergence Center, Cultural Creation Academy, K-Culture Valley, K-Pop Arena, and K-Experience. The project envisioned a direct and indirect economic impact of 25 trillion won and the creation of 170,000 jobs over the next decade. Unfortunately, the project faced an early halt due to its entanglement in a massive corruption scandal.

It is notably disheartening that the long-standing "arm's length principle" introduced during the Kim Dae-jung administration has been compromised. Instances such as the creation of a "cultural blacklist" to penalize artists deemed unfriendly to the government have eroded the effectiveness of this principle. As negative incidents linked to the cultural industry policy gained prominence, it was inevitable that the sector would face some decline under the subsequent Moon Jae-in administration. (END)

한류외전(2023) by 김윤지, 한국수출입은행 해외경제연구소

Author : Kim, Yoon zi (Senior Researcher, The Export-Import Bank of Korea)