Small-Scale Enterprises ;- Public Disclosure Authorized...

Small-Scale Enterprises ;-Korea and Taiwan

World Bank Staff Working Paper No. 384

April 1980

Prepared by: Sam P. S. Ho (Consultant)Development Economics DepartmentDevelopment Policy Staff

Copyright © 1980The World Bank1818 H Street, N.W.Washington. D.C. 20433, U.S.A.

The views and interpretations in this document are those of theauthors and should not be attributed to the World Bank, to itsaffiliated organizations, or to any individual acting in their behalf.

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Note on Units of Measurement and Abbreviations

SSEs = Small-scale enterprises

LSEs = Large-scale enterprises

VA = Value-added

W = Won

NT$ = New Taiwan Dollar

US$ = U.S. Dollar

WWII = World War II

One US$ was equivalent to approximately NT$40 at officialexchange rates prevailing in the 1960s and early 1970s.

The prevailing official exchange rate was approximately 1 US$ =

W 130 during 1961-63, 1 US$ = W 214 in 1964, 1 US$ = W 270during 1965-69, 1 US$ = W 310 in 1970, 1 US$ = W 346 in1971, 1 US$ = W 395 in 1972-73, 1 US$ = W 406 in 1974,and 1 US$ = W 484 in 1975.

The views and interpretations in this document are those of the authorand should not be attributed to the World Bank, to its affiliatedorganizations, or to any individual acting in their behalf.

WORLD BANK

Staff Working Paper No. 384

April 1980

SMALL-SCALE ENTERPRISES IN KOREA AND TAIWAN

This study reviews the existing evidence from censuses andsurveys on small enterprises in Korea and Taiwan. Its purpose isdescriptive in that it seeks to provide clarifications on the changingsize structure of industrial and some tertiary activities as theeconomies developed; on the efficiency, labor intensities, product marketsand other characteristics of small enterprises; and on how small scaleproduction is influenced by growth and by changes in development policies.A summary of findings is provided in Chapter VII. The study is one of aseries of "desk-reviews" as part of the World Bank's research project onsmall enterprise development (RPO 671-59).

Prepared by; Sam P. S. Ho (Consultant)Development Economics DepartmentDevelopment Policy Staff

Copyright Q 1980The World Bank1818 H. Street, N.W.Washington, D.C. 20433, U.S.A.

TABLE OF CONTENTS

Page No.

I. INTRODUCTION I

II. THE SMALL-ENTERPRISE SECTOR: SIZE AND STRUCTURE 3

III. DYNAMIC CHANGES IN SMALL-FACTORY MANUFACTURING .25

IV. RELATIVE EFFICIENCY AND CAPITAL INTENSITY IN SSEs 50

V. CAPITAL, LABOR, AND ENTREPRENEURS IN THESMALL-ENTERPRISE SECTOR .71

VI. ECONOMIC POLICIES AND THE SMALL-ENTERPRISE SECTOR 86

VII. SUMMARY AND CONCLUSIONS .100

APPENDIX A THE SURVIVOR TECHNIQUE ............................. 105

APPENDIX B TYPES OF SMALL-SCALE INDUSTRIES ..... ............... 108

APPENDIX C CENSUS MEASUREMENTS OF CAPITAL, LABOR,AND VALUE-ADDED IN KOREA AND TAIWAN .... .......... 122

APPENDIX D SUPPORTING TABLES ....... ........................... 124

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LIST OF TABLES

Page Noe

2.1 The Relative Position of SSEs in Manufacturing,Korea and Taiwan ...................................... 5

2.2 Estimated Non-Factory Manufacturing Employment,Taiwan, 1915, 1920, 1930, 1940. 9

2.3 Year-End Employment in Selected Non-ManufacturingIndustries by Size of Enterprise, Taiwan,Selected Years ....................................... 12

2.4 Small-Scale Manufacturing: Employment and Value-AddedDistributed by Industry .............. . 14

2.5 Total Sale of Small-Medium Manufacturing EnterprisesDistributed by Major Outlet and by Size ofEnterprise, Korea, 1975 ............................... 16

2.6 Sources of Raw Materials and Parts Used by Small-MediumManufacturing Enterprises by Size of Enterprise,Korea, 1969 ............. 20

2.7 Manufacturing Employment Distributed by Locationand Type of Establishment .................. ...... 21

3.1 Distribution of Factory Employment in Manufacturing bySize of Plant, Taiwan and Korea. . . 27

3.2 Factory Employment in Manufacturing by Industry,Korea and Taiwan ............................... 28

3.3 Age of Small-Scale Manufacturing Enterprises by Sizeof Enterprise, Korea, 1973 ...................... 31

3.4 Birth, Death and Growth of ManufacturingEnterprises, Taiwan, 1961-66 ...... . ................... 33

3.5 Efficient Plant Size According to Survivor Criterion .... 36

3.6 Share of Small Enterprises in Employment and Value-Added, by Four-Digit Industries, Taiwan, 1971 ......... 39

3.7 Share of Small Establishments in Employment and Value-Added by Five-Digit Industries, Korea, 1975 ........... 40

3.8 Relative Importance of Types of Industry in Which SmallEstablishments Predominate, Korea, 1968 and 1975 ...... 42

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LIST OF TABLES(Continued)

Page No.

3.9 Relative Importance of Types of Industry in Which SmallEnterprises Predominate, Taiwan, 1971 ................ . 43

3.10 Shift in Employment by Size of Establishment and bySmall- and Large-Scale Industries ..................... 46

4.1 Output-Capital and Capital-Labor Ratios of MajorIndustry Groups, Taiwan (1971) and Korea (1968) 51

4.2 Output-Capital and Capital-Labor Ratios for Industriesin Which Small Enterprises Predominate, by Type ofIndustry, Taiwan, 1971. . . 53

4.3 Output-Capital and Capital-Labor Ratios for Industriesin Which Small Establishments Predominate, by Typeof Industry, Korea, 1968 ......... 54

4.4 Number of Cases (Industries) Where Capital-Labor Ratiois Highest in the Size Category Indicated, Korea,1968 .. . . . . . . . . . . . . . . . . . . . . . . . .59

4.5 Number of Cases (Industries) Where Total Productivity(Capital Shadow Priced at 20%) is Greatest in theSize Category Indicated, Korea, 1968 .65

4.6 Total Assets in Operation per Person Employed andValue-Added per Unit of Total Assets in Operationfor Construction, Trade, and Selected ServiceIndustries by Size of Enterprise, Taiwan, 1971. . 68

4.7 Relative Efficiency by Size of Enterprise, A(j)/A,for Construction, Trade, and Selected ServiceIndustries, Taiwan, 1971. ... 69

5.1 Number of Small Manufacturing Enterprises EstablishedDuring 1971-1973 Distributed by Size of InitialInvestment, Size of Enterprise, and Industry, Korea ... 72

5.2 Average Working Capital Required by Size of Enterpriseand Industry, 1973 ..................... .. ...... 74

5.3 Number of Cases (Industries) Where Annual Average Wageper Worker is Highest in the Size Category Indicated,Korea, 1968..................... 79

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Page No.

5.4 Average Wage by Two-Digit Manufacturing Industryand Establishment Size, Korea, 1967 ................... 80

5.5 Characteristics of Small-Scale Industrial Proprietorsand Their Enterprises by Size of Enterprise,Korea, 1973 .................... o.................. ............. 82

6.1 Annual Growth of Manufacturing Employment by Sizeof Plant, Korea and Taiwan ............................ 90

6.2 Net Increase in Manufacturing Employment, 1961-1971,by Size of Enterprise and by Industry, Taiwan .... o..... 92

6.3 Net Increase in Manufacturing Employment, 1958-1963 and1963-1975, by Size of Establishment and by Industry,Korea ............ .. .. # ......... 94

Al Survivor Estimates of Efficient Plant Size for 63 KoreanManufacturing Industries: 1968-1975 ................ .. 106

BI Taiwan Industries in Which Small Enterprises Employed50 Percent or More of the Workers in the ParticularIndustry in 1971, by Type of Industry ................. 111

B2 Korean Industries in Which Small Establishments Employed50 Percent or More of the Workers in the ParticularIndustry in 1975, by Type of Industry .... ............. 112

B3 Korean Industries in Which Small Establishments Employed25 to 49 Percent of the Workers in the ParticularIndustry in 1975 ................................................. 117

B4 Korean Industries in Which Small Establishments EmployedLess Than 25 Percent of the Workers in the ParticularIndustry in 1975 ......... ............................. 119

DI The Importance of Contract Sales to Small-Medium Manu-facturing Enterprises by Industry, Korea, 1975 ........ 125

D2 Manufacturing Employment and Value-Added by Size ofEstablishment and by Industry, 1973, Korea . ........... 126

D3 Manufacturing Employment and Value-Added by Size ofEnterprise and by Industry, 1971, Taiwan .............. 127


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D4 Number of Establishments by Location and by Size ofEstablishment, Taiwan, 1966 and 1971 .............. 128

D5 Manufacturing Establishments and Employment byLocation and by Size of Establishment, Korea,1958 and 1975 ......................................... 129

D6 Capital-Labor Ratios for Industries in Which SmallEstablishments Predominate, by Type of Industryand by Size of Establishment, Korea, 1968 .130

D7 Capital-Labor Ratios for Industries in Which SmallEstablishments Employed 25 to 49 Percent of theWorkers in the Particular Industry in 1968, Korea,by Size of Establishments .134

D8 Capital-Labor Ratios for Industries in Which SmallEstablishments Employed Less Than 25 Percent ofthe Workers in the Particular Industry in 1968,Korea, by Size of Establishments ................... 135

D9 Output-Capital Ratios for Industries in Which SmallEstablishments Predominate, by Type of Industryand by Size of Establishment, Korea, 1968 .136

D10 Output-Capital Ratios for Industries in Which SmallEstablishments Employed 25 to 49 Percent ofthe Workers in the Particular Industry in 1968,Korea, by Size of Establishments .139

Dll Output-Capital Ratios for Industries in Which SmallEstablishments Employed Less Than 25 Percent ofthe Workers in the Particular Industry in 1968,Korea, by Size of Establishments .140

D12 Relative Efficiency of Large and Small Enterprises inIndustries in Which Small Enterprises Predominate,by Types of Industry, Taiwan, 1971 .141

D13 Relative Efficiency of Establishments for Industriesin Which Small Establishments Predominate, by Type ofIndustry and by Size of Establishment, Korea, 1968 .... 142

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D14 Relative Efficiency of Establishments in Industriesin Which Small Establishments Employed 25 to49 Percent of the Workers in the ParticularIndustry in 1968, Korea, by Size of Establishments .... 148

D15 Relative Efficiency of Establishments in Industriesin Which Small Establishments Employed Less Than25 Percent of the Workers in the Particular Industryin 1968, Korea, by Size of Establishments . ............ 150

I. INTRODUCTION

In recent years development economists and policy makers havebecome increasingly troubled by two problems found commonly in less developedcountries: the slow growth in industrial employment and the lag in ruraldevelopment. It is often suggested that small scale enterprises (SSEs)are efficient, have potential for further development, and that their growthwould help promote rural development as well as generate urban employment.It is, however, significant that remarkably little is known about SSEs, theircomposition, characteristics, and functions in less developed economies, andhow they respond to changes in development policies.

This study aims to provide some clarifications on these questionsby examining the small-enterprise sectors in two rapidly growing less devel-oped countries, South Korea and Taiwan. It is one of a series of reviews andcase studies being undertaken by the Bank (RPO 671-59). Both countries aredensely populated, and since the 1960s both have also adopted outward-lookingdevelopment policies that have encouraged their economies to follow their truecomparative advantage and pursue a labor intensive pattern of development. Astudy of small-scale industry in Korea and Taiwan should therefore provideinsight into the role and competitive position of SSEs in a labor-abundanteconomy following a labor-intensive growth path.

The term "small-scale enterprise" is an ambiguous one. 1/ Thereare numerous ways of measuring firm size -- by the number of persons employed,the volume of output or sales, or the value of assets employed, for example.According to one of these size criteria, a firm may be classified as small,while by another it might fall into the "large" category. Presumably thejustification for grouping and studying enterprises by size lies in the beliefthat there are significant differences -- in terms of market orientation, prod-uct quality, efficiency, the type of work organization in use, and the typeof energy input employed -- between small and large enterprises. However,the characteristics of enterprises do not change abruptly and discretelybut, rather, gradually and continuously with firm size (however measured).Accordingly any definition of SSE is to some extent arbitrary.

This study uses the number of persons employed as a measure of thesize of enterprise or establishment. Although some data on industrial sizeclass by total assets employed and by revenue earned is available for Taiwan,most of the industrial data by size class collected in Korea and in Taiwanare in terms of the number of persons employed. And, for international com-parisons particularly, the number of persons employed is probably the most

1/ For a useful discussion of the many aspects of small industry and thedifficulty of defining small industry, see Eugene Staley and RichardMorse, Modern Small Industry for Developing Countries (New York: McGraw-Hill, 1965), Chapter 1.

practical measure of size. As far as possible, this study will treat sizeas a variable, in the sense that the entire spectrum of firm sizes will beexamined. In other words, this paper studies "small enterprises" not inisolation but in conjunction with enterprises of all sizes. This approach istaken because SSEs form but one part of the economy so that their presence canbe understood only in relationship to larger enterprises. Furthermore, therelationships between SSEs and large scale enterprises (LSEs) are likely tochange in the process of economic development, and as they change, so will theposition of SSEs in the economy. Consequently, by examining both SSEs andLSEs, the position and function of SSEs in the economy are better understood.In parts of this study it will be convenient to classify establishments (orenterprises) into two broad size categories; in particular I shall at timesdenote enterprises (establishments) with fewer than 100 workers as SSEs andthose with 100+ workers as LSEs. While this division is in part made neces-sary by the statistical classifications employed in Taiwan, it does classifyenterprises into groups (particularly for the period since 1960) with signifi-cant different characteristics.

Many questions about the small-enterprise sector in Korea and Taiwaninterest us. Do SSEs provide an important demand for labor? In which indus-tries do SSEs predominate? How does the existence of a vigorous small-enter-prise sector affect income distribution? Are SSEs more labor intensive thanlarger firms, and are they efficient users of resources? How does the rela-tive position of SSEs change in the process of development? What is thespatial distribution of SSEs? How does the size distribution of enterprisechange as the economy develops, and what forces determine these changes? DoSSEs face different economic conditions than larger enterprises? Do many SSEssurvive and become medium or large firms? What has been the impact of govern-ment policies on the development of the small-enterprise sector? What are theappropriate policies for SSEs? This study does not examine all these issuesbut focuses on a few. While the issues selected for analysis are, to someextent, determined by data availability, they also include some of the moreimportant questions enumerated above.

The study is organized as follows: Chapter 2 presents measures ofthe current size and composition of the small-enterprise sectors in Korea andTaiwan and analyzes a number of their structural characteristics: industrydistribution, demand structure, and spatial distribution. Chapter 3 discussesthe changing relative position of small-factory manufacturing in Korea andTaiwan in the post-WWII period and identifies some of the forces that helpdetermine the competitive bases of SSEs. Chapter 4 examines the factor in-tensities of SSEs, identifies the types of industries,where SSEs are mostlabor intensive and attempts to compare the productivity of manufacturingestablishments by size. The main topic discussed in Chapter 5 is the factormarkets faced by SSEs. Finally, Chapter 6 assesses the impact of economicpolicies on the small-enterprise sector in Korea and Taiwan. Chapter 7 con-cludes the study with a brief summary of the more important findings.

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II. THE SMALL-ENTERPRISE SECTOR: SIZE AND STRUCTURE

There are many different types of small enterprises. Some SSEsare modern, others traditional; some are handicraft shops, others are smallfactories; some are located in rural areas, others in cities; some are oper-ated informally with production intermingling with household activities,others are organized formally as business enterprises, and some have a per-manent location while others do not. It is clearly useful to identify thedifferent types of SSEs that make up the small-enterprise sector in a country.This chapter attempts to estimate the current size and composition of thesmall-enterprise sectors in Korea and Taiwan and to identify some of theirmain structural characteristics. Although the focus is on small-scale manu-facturing there is also a brief discussion of SSEs in the non-manufacturingsectors.

The Small-Enterprise Sector in Manufacturing

Within manufacturing, the small-enterprise sector is composed ofhousehold production, the very small establishments (craft production), andthe small factories. 1/ Because these three components differ significantlyin economic characteristics, location, and economic functions, it is importantthat their size and relative positions in Korea and Taiwan be established.Unfortunately, this task is made difficult by the fact that manufacturingcensuses and surveys generally do not include the very small establishments(those with fewer than 4 or 5 workers) and that information pertaining tohousehold production is seldom, if ever, collected.

The only way to estimate the size of the non-factory sector (house-hold production and the very small establishments) in Korea and Taiwan isindirectly, by comparing the manufacturing employment figure as reported inthe population census and that reported in the manufacturing census or survey.

1/ Household production takes place in the home of the craftsman. Fre-quently, particularly in rural areas, it is a part-time operation. Theobjective of household production is to provide the owner and his familywith a livelihood or to supplement their income. By craft production,we have in mind the very small establishments (those with fewer than5 workers), usually located adjacent to the home of the owner. Itdiffers from household production in that in its operation one can moreeasily detect a distinction between entrepreneurial and managerial activ-ities on the one hand and production on the other. It is also commonin craft production to use non-family members either as apprentices oras temporary or long-term workers. In this study, we have accepted thefrequently used definition of factory as establishment with 5 or moreworkers. It would be useful if traditional and modern small factoriescould be separately studied, but unfortunately our data does not permitthis division.

The presumption is that the difference betw--en i:e two figures is a measureof those employed in the non-factory sector. However, this procedure is notwithout its ambiguities and problems. Because many who are engaged in house-hold production do so only on a part-time basis, the size of household manu-facturing will vary depending on how employment is defined in the populationand the manufacturing censuses. Furthermore, since manufacturing in thehousehold sector is usually intermingled with services (e.g., repairs) andtrade, there is also a classification ambiguity. For these reasons, the esti-mates presented below must be viewed with some caution.

Table 2.1 classifies manufacturing workers in Korea and Taiwan bythe type of establishment that employed them. A basic distinction is thatbetween factory and non-factory employment. In Korea, a factory is a manu-facturing establishment with 5 or more workers; in Taiwan it is any manufac-turing enterprise with 4 or more workers. In both countries, figures forfactory employment are those reported in the manufacturing censuses or sur-veys. Total non-factory employment in Korea is estimated by subtractingfactory employment from the total manufacturing employment figure reportedin the population census. Two estimates are provided in Table 2.1: in one(1975A), total manufacturing employment includes all workers aged 14 andabove who worked more than 1 hour during the survey period, and, in the other(1975B), total manufacturing employment excludes all temporary and dailyworkers. Non-factory employment in Korea is further divided between thoseemployed by the very small establishments (those with 1-4 workers) and thoseengaged in household production. The employment figure for the very smallestablishments is that reported in the 1973 survey of minor establishments,and that for household production is the difference between non-factoryemployment and those employed in the very small establishments in 1973.

Unlike the manufacturing surveys in Korea, the industrial and com-mercial censuses in Taiwan survey all registered manufacturing enterprisesregardless of size. 1/ A comparison of the employment figure in the indus-trial census and that in the population census show the former to be slightlylarger. 2/ Apparently, because the population census figure includes onlythose 12 and over who worked during the survey period for more than 3 hoursper day or two days per week, it excludes from manufacturing many of the part-time workers who normally make up the bulk of the informal household sector.Thus, it is not even possible to estimate the size of Taiwan's householdproduction by comparing employment figures from the population and the indus-trial censuses. Accordingly, all the figures for Taiwan in Table 2.1 arefrom the industrial censuses.

1/ Excluded from the censuses are enterprises belonging to the Ministryof Defence, workshops and training factories of schools and charityinstitutions, and establishments without a permanent location.

2/ in 1966, manufacturing employment was reported to be 589,660 in theindustrial census and 527,450 in the population census.

Table 2.1- THE RELATIVE POSITION OF SSEs IN MANUFACTURING

Korea and Taiwan

Korea Taiwan2l

1975A 1975B 1966 1971

Thousand Percent Thousand Percent Thousand Percent Thousand PercentWorkers of total Workers of total Workers of total Workers of total

1. Total employment 2,211,181-/ 100% 1,699,9221/ 11007 589,660 100% 1,201,539 100lO

2. Factory employment 1,420,144-/ 64 1,420,144-' 84 566,213 96 1,170,179 97

(size of establishment)3. 5 - 49 247,133 11 247,133 15 177,2564. 50 - 99 124,126 6 124,126 7 51,176 9 110,785 95. 100+ 1,048,885 47 1,048,885 62 337,781 57 773,551 64

6. Non-factory employment 791,03d/ 36 279,848-/ 16 - - -

7. Very small establishment 156,783-/ 7 156,783-/ 9 23,447-' A I 1,360-/ 3

8. Household production 634,254-' 29 123,065-/ 7 - -- -

a/ Include all workers age 14 and above who worked more than one hour during the survey period. The figure is from the 1975 Population and Hlousing Census Report Vol. 2 FivePercent Sample Survey 3-1 Economic Activity (Seoul: Economic Planning Board, 1978), table 7.

b/ Include all workers (employers, unpaid family workers, self employed, and regular eimployees) age 14 and above. Excluded are temporary and daily employees. The figure isis from the 1975 Population and Housing Census Report Vol. 2 Five Percent Sample Survey 3-1 Economic Activity (Seoul: Economic Planning Board, 1978), table 7.

c/ 1975 Report on Mining and Manufacturing Survey (Seoul, Economic Planning Board, 1976), table T-4.d/ Row 1 minus row 2.e/ Report on Minning and Manufacturing Census 1973, IV Minor Establishment (Seoul: Economic Planning Board, 1974), IV-1. This is the average number of workers employed by

manufacturing establishments with 1-4 woriers in 1973.f/ Row 6 minus row 7..&/ The 1966 data are from General Report on The Third Industrial and Commercial Census of Taiwan The Republic of China (Taipei: Commission on Industrial and Commercial Censuses

of Taiwan, 1968), Vol, TIT, table 37. The 1971 data are from The 1971 Industrial and Commercial Census of Taiwan and Fukien Area Republic of Chins (Taipei: The Committee on

Induistrial and Commercial Censuses of Taiwan and Fukien Area, 19737, Vol. III, table 38,

h/ Enterprises with 4-49 workers.i/ Enterprises with 1-3 workers.

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Because of the many definitional differences, a direct comparison ofthe Korean and the Taiwan data in Table 2.1 is not meaningful. Nevertheless,the data are still useful for what they reveal about the small-enterprisesector in each country. In both Korea and Taiwan, the available evidencesuggests that the small-enterprise sector is still a relatively importantfactor in manufacturing, particularly in terms of employment.

In Korea, the size of non-factory manufacturing, in terms of employ-ment, depends crucially on which figure from the population census is used torepresent total manufacturing employment. If we use the figure that includesin employment all those aged 14 and over who worked more than 1 hour duringthe survey period, then in 1975 the non-factory sector accounted for overone-third of Korea's manufacturing employment with the bulk engaged in house-hold production. However, because temporary workers are included in the popu-lation census but not fully accounted for in the manufacturing survey, thismeasure overstates the size of the non-factory sector (particularly house-hold production) by an unknown but probably considerable margin. Becausewe do not know how temporary workers are distributed between the factory andthe non-factory sectors, it is believed that the relative position of thenon-factory sector would be less distorted if temporary workers are excludedfrom total manufacturing employment. 1/ When this is done, the non-factorysector is found to account for 16 percent of Korea's manufacturing employ-ment: 9 percent in the very small establishments and 7 percent in house-hold production.

Because all the Taiwan data in Table 2.1 are from the industrialcensuses, the size of its non-factory sector is understated by a substan-tial margin. Earlier, it was noted that household production is not sur-veyed by the industrial censuses. In addition, the Taiwan data in Table 2.1exclude certain types of establishments that are considered manufacturingin other countries (including Korea). Two of the larger excluded groups--tailor shops and repair establishments--can be identified, and establish-ments with 1-3 workers belonging to these two groups employed 26,000 in 1966and 31,000 in 1971. When these are included in manufacturing, the size ofthe very small establishments nearly doubles. My guess is that in 1971 therelative size of Taiwan's non-factory sector was probably not very differentfrom that in Korea in 1975, perhaps in the range of 10 percent of manufac-turing employment.

If small factories are defined as manufacturing establishments with5-49 (or 4-49) workers, then Korea's small-enterprise sector (factory andnon-factory) absorbed about 31 percent of the employment in manufacturing,half of it in small factories and half in the non-factory sector. Assuming

1/ However, since the manufacturing survey may not exclude all temporaryworkers, this procedure tends to underestimate the size of the house-hold sector.

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that, in 1971, the non-factory sector absorbed 10 percent of Taiwan's manu-facturing employment, then its small-enterprise sector also accounted forabout one-third of the total employment in manufacturing. However, becauseKorea and Taiwan are among the most advanced less developed countries, itmay be appropriate to consider all establishments with 5-99 workers as smallfactories. In which case, the small-enterprise sector accounted for about38 percent of the manufacturing employment in Korea in 1975, and probablya similarly large share in Taiwan in 1971. One difference that stands outclearly in Table 2.1 is that factories with fewer than 50 workers are signif-icantly more important, in terms of employment, in Taiwan than in Korea. Weshall return to discuss this difference in Chapter 3.

If the non-factory sector accounts for a relatively small share ofmanufacturing employment, its impact on value-added is even less significant.Although we do not have a measure of value-added from household manufacturing,we do know that the value-added produced by the very small manufacturing estab-lishments, reflecting their substantially lower labor productivity, is only atiny fraction of the value-added produced by the factory sector. In Korea,the value-added produced by manufacturing establishments with 1-4 workers wasW 45,539 million in 1973, approximately 3 percent of the value-added producedby factories. 1/ In Taiwan, the value-added produced by manufacturing enter-prises with 1-3 workers was NT$725 million in 1971, or less than 2 percentof the factory value-added. 2/ Household production was probably even lessimportant. However, it should be remembered that the output of the non-factorysector has not always been insignificant. At one time, when the economies ofKorea and Taiwan were less developed, it must have produced a major share ofthe manufacturing output.

Because of data limitations, the relative size of the non-factorysector at various stages of economic development is estimated only for Taiwan.Defining factory manufacturing as establishments with 5 or more workers orwhich used power, and all other manufacturing as the non-factory sector, therelative position of factory and non-factory manufacturing can be roughly esti-mated. 3/ The total number of persons engaged in manufacturing is reported in5 of the 7 population censuses conducted by the Japanese colonial governmentin Taiwan. These included both factory workers and non-factory workers whoconsidered their crafts to be their principal occupation. Because, after

1/ Report on Mining and Manufacturing Census (Series II), 1973 (Seoul:Economic Planning Board, 1974), Tables I-5 and IV-1.

2/ The 1971 Industrial and Commercial Census of Taiwan and Fukien AreaRepublic of China (Taipei: The Committee of Industrial and CommercialCensuses of Taiwan and Fukien Area, 1973), Vol. III, Table 38.

3/ The discussion in the following three paragraphs draws heavily on myEconomic Development of Taiwan, 1860-1970, pp. 78-80.

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1914, factory employment statistics were also collected, non-factory employ-ment for the census years can be derived by subtracting factory employmentfrom the total employment in manufacturing. The results of this calculationare shown in Table 2.2. Before discussing these figures, it should be notedagain that, since handicraft techniques are very labor intensive, a comparisonof non-factory employment and factory employment tends to exaggerate the rela-tive importance of non-factory production in manufacturing. 1/

The estimates in Table 2.2 indicate that in 1915 more workers wereengaged in non-factory than in factory production. In fact, non-factoryemployment was more than three times that of factory employment. Althoughthe size of the difference may be somewhat exaggerated (because the 1915factory employment was collected only a few years after the establishmentof the factory reporting system and is likely to be understated), the promi-nence of the non-factory sector cannot be disputed. 2/ Apparently non-factorymanufacturing was most prevalent in the apparel, textile, and wood-and-bambooproducts industries. At least 50 percent of the discrepancy between the censusfigures and the factory employment statistics in 1920, 1930, and 1940 can betraced to discrepancies in these three industries. This is not surprising,in view of the fact that these industries are well suited for small-scalenon-factory production: they can operate with little capital, consume littleor no non-human power, utilize very simple technology, produce products withlocal markets and often high transfer costs, and they can easily be organizedas part of a putting-out system.

As expected, the size of the non-factory sector declined as Taiwanindustrialized: new energy inputs and other modern means of production wereintroduced that required larger shops and a more concentrated labor force.Our estimates show that the share of non-factory workers in the total numberof persons engaged in manufacturing declined from 75 percent in 1915 to 60

1/ One estimate put the gross value of non-factory manufacturing in 1937at 21.5 million yen, or about 5.5 percent of factory manufacturing. Theshare of non-factory production in total manufacturing was undoubtedlyhigher in earlier years. See DGBAS, Taiwan's National Income and Product,1955, p. 142.

2/ The importance of the non-factory sector would be even greater if side-line activities were also considered. It is well known that there isless specialization in countries at an early stage of development, sothat in less developed economies households often produce as a sidelinea wide variety of goods for consumption as well as for sale. In the 1930population census, besides the 124,712 persons who declared manufacturingas their principal occupation, another 53,000 reported manufacturing asa sideline, and 94 percent of them were located in the rural areas. Onesuspects that those who reported manufacturing as a sideline were engagedin non-factory manufacturing.

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Table 2.2 Estimated Non-factory Manufacturing Employment

Taiwan, 1915, 1920, 1930, 1940

A B C

Total personsengaged in

manufacturing Factory Estimated non-factoryaccording to employment manufacturing employmentcensus in manufacturing (A - B) C/A

1915 119,142 29,298 89,844 75.4%

1920 130,825 51,521 79,304 60.6%

1930 A 124,712 60,979 63,733 51.1%

1930 B 121,627 60,979 60,648 49.9%

1940 172,121 128,505 43,616 25.3%

Notes and Sources: Reproduced from Samuel P. S. Ho, Economic Development ofTaiwan 1860-1970 (New Haven : Yale University Press, 1978), Table 5.3.Factory employment is the sum of workers engaged by private manufacturingestablishments that employed at least 5 workers or used power and workersemployed by factories operated by the Monopoly Bureau. The 1915, 1920, andthe 1930A census figures and the 1930B and the 1940 census figures do notrepresent precisely the same thing. The former group represents the distribu-tion of occupied persons by their occupations and the latter group by theindustries by which they worked. The category "manufacturing", however,remains approximately the same for all five observations, as the 1930figures show.

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percent in 1920, 50 percent in 1930, and 25 percent in 1940. It is inter-esting that the period 1930-40, during which the relative size of the non-factory sector in terms of employment declined most dramatically, is preciselythe period in which the Japanese were most actively engaged in broadeningTaiwan's industrial base. 1/

The relative position of non-factory manufacturing deterioratedrapidly in the 1930s, not because of an accelerated decline in householdemployment, but because of a rapid increase in factory employment. Between1930 and 1940 non-factory employment decreased by about 20,000, approximatelythe same number by which it fell in the previous decade, but factory employ-ment increased by more than 60,000, thus doubling its size in a decade. Thispattern of growth--rapid increase in factory employment but not primarilyat the expense of non-factory employment--is supported by the known patternof industrialization in the 1930s. Factories established or expanded in the1930s produced goods that did not compete directly with non-factory shops.Rather they supplied Japan with industrial raw materials or replaced Japaneseimports.

The data from Taiwan suggests that, in the process of development,the position of the non-factory sector has undergone significant changes.When Taiwan began its transition from a traditional to a modern economy atthe turn of the century, the small-enterprise sector monopolized manufactur-ing, and within small industry, non-factory manufacturing predominated overfactory manufacturing. As the economy developed, non-factory manufacturingdeclined, but the small-enterprise sector continued to be dominant duringthe early phases of transition, and in 1930 nearly three-quarters of theworkers in manufacturing were still employed by establishments with fewerthan 10 workers. In the post-WWII period, as Taiwan approaches the end ofits transition to a modern economy, the position of the very small establish-ments has become insignificant. Increasingly, establishments with 1-3 work-ers are involved exclusively in services. In the 1960s and the 1970s, halfof the workers in establishments with 1-3 workers were engaged in tailoringand various types of repair. Although we have no direct evidence of thecurrent position of household production, it is safe to assume that it hasalso ceased to be an important factor in Taiwan's manufacturing. The mostimportant component of the small-enterprise sector in Taiwan's manufacturing(and also in Korea's) is now clearly the small factories (defined either asestablishments with 5-49 workers or establishments with 5-99 workers).

Small-Scale Enterprises in Non-Manufacturing Industries

Small enterprises are important in a wide variety of activitiesoutside of manufacturing. They are particularly important in such areasas construction, trade, transportation, and services. In Taiwan in 1971,

1/ See Economic Development of Taiwan, 1860-1970, Chapter 5.

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SSEs (enterprises with fewer than 100 workers) in non-manufacturing indus-tries employed approximately 784,000 workers, 1/ far greater than the 475,000employed by the SSEs in manufacturing. This section examines the positionof SSEs in Taiwan's non-manufacturing industries. The relevant data, derivedfrom the 1961 and the 1971 industrial and commercial censuses, are presentedin Table 2.3. 2/

In mining and in the supply of electricity, gas and water, SSEsoccupied a very minor position. In both of these industries about 90 percentof employment was in enterprises with 100 or more workers. However, in othernon-manufacturing industries, SSEs played a significantly more prominent role.In 1971, 40 percent of employment in construction was in enterprises with 20to 99 workers and another 13 percent in enterprises with fewer than 20 work-ers. Eighty percent of employment in trade in 1971 was in enterprises withfewer than 10 workers, and 60 percent of employment in other industries in1971 was in enterprises with fewer than 100 workers. But for the presenceof large financial institutions (banks and insurance companies) and a fewlarge transport enterprises (the railroads and the airlines), small enter-prises would have accounted for an even higher share of employment in otherindustries. Of the 136,000 workers employed by enterprises with 500 or moreworkers in other industries, over 100,000 were engaged by transport companiesand financial institutions. The other enterprises included in the category of"other industries"--mostly restaurants, hotels, recreation services, and per-sonal services--were mainly small, employing fewer than 100 workers. Indeed,57 percent of the 56,985 workers employed by hotels and restaurants and 88percent of the 103,321 workers in personal services were employed in enter-prises with fewer than 10 workers.

In addition to the small non-manufacturing establishments coveredby the industrial and commercial censuses, there exists in Taiwan a sizeableinformal sector composed of stalls and stands. 3/ In 1971, 43,456 stalls,employing over 77,000 people, were registered with district police depart-ments in Taiwan. Most of these stalls operated at one location, but aboutone-quarter of them moved from place to place. Fewer than 4 percent of the

1/ 6,714 in mining, 2,597 in electricity, gas and water supply, 100,520 inconstruction, 398,471 in trade, and 276,078 in other industries.

2/ Data by size of units exist for construction and trade in Korea. Unfor-tunately, these data were not available to me for this study. However,I suspect that the position of SSEs in construction and trade in Koreais very similar to that in Taiwan.

3/ The statistics in this paragraph are from The Report on the EconomicSurvey of Stalls and Stands in Taiwan (The Department of Budget, Account-ing and Statistics of the Taiwan Provincial Government, June 1972). Sum-mary statistics from this survey are reproduced in Statistical Yearbookof the Republic of China, 1978 (Taipei: DGBAS), pp. 136-42.

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Table 2.3 Yearend Employment in Selected Non-manufacturing Industriesby Size of Enterprise, Taiwan, Selected Years

Total Distributed by size (workers) of enterprise, percent

Industry Year (000) Total 1-3 4-9 10-19 20-49 50-99 100-499 500+

Electricity, gas 1961 14 100 .8 2.4 2.8 4.0 1.5 9.6 78.8and water 1971 19 100 .2 1.0 1.8 4.5 5.8 12.1 74.5

Mining 1961 75 100 .3 2.1 2.4 5.3 5.2 48.4 36.31971 56 100 .1 1.0 1.7 4.4 4.7 38.2 49.8

Construction 1961 140 100 1.9 4.4 7.4 15.0 11.8 33.1 26.41971 189 100 1.3 4.4 7.8 19.6 20.1 28.5 18.2

Trade 1961 195 100 73.1 17.7 3.6 2.7 1.1 1.9 01971 414 100 55.8 25.4 8.2 4.5 2.4 2.8 .9

Other Industriesa 1961 209 100 21.9 14.2 7.9 12.8 6.8 8.3 28.11971 471 100 11.6 12.4 9.1 15.1 10.4 12.6 28.8

aIncludes hotels, restaurants, transport and storage, banks and other financialinstitutions, commercial services, recreation services, personal services,and other unclassifiable industries. However, to make the 1961 and 1971 figuresconsistent, repair shops and tailorswere removed from personal services andplaced in manufacturing.

Sources: General Report, 1961 Industry and Commerce Census of Taiwan andThe Report of the 1971 Industrial and Commercial Censuses of Taiwan andFukien Area, Republic of China.

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people who worked in stalls were paid employees, so the stalls were mainlyfamily operations. Profits from operating stalls accounted for nearly 80percent of the total annual income of the families involved so that thesestalls should not be thought of as sideline activities. As might be expected,most of the stalls were eating stands or sold food products. Of the 77,210people engaged in operating stalls in 1971, 31 percent worked in eatingstands, 54 percent sold food products, 12 percent sold clothing and dailynecessities, and the remaining 3 percent were in other activities. In recentyears, compared to other forms of economic activities in Taiwan, the absolutesize of this sector has not increased by very much. From 1961 to 1971, thenumber of stalls increased by less than 14 percent. 1/

In non-manufacturing industries, the distribution of employment bysize of enterprise changed only slightly between 1961 and 1971. This stabilitycontrasts sharply with manufacturing, where significant changes occurred. 2/Employment in construction, trade, and other industries increased fastest insmall and medium scale enterprises--those with 20 to 200 workers. In construc-tion, employment in enterprises with 500 or more workers actually declined.Employment in enterprises with 3 or fewer workers declined relatively in allnon-manufacturing industries, and in mining, construction, and electricity,gas and water supply, it declined absolutely. Many small establishmentsobviously perished but in the boom environment of the 1960s some small non-manufacturing enterprises were also successful and grew into medium-scaleenterprises. However, relatively few large enterprises emerged during thisperiod, confirming the hypothesis that the advantages of large-scale opera-tion are much less important in non-manufacturing industries than in manu-facturing.

Structural Characteristics of Small-Scale Manufacturing

This section examines the industry distribution and the demandstructure for products of small-scale manufacturing in Korea and Taiwan.

We know little about the industry distribution of household produc-tion in manufacturing. Indirect evidence from population censuses suggeststhat, before WWII, the manufacturing of clothing and of wood and bamboo prod-ucts dominated household production in Taiwan. 3/ Information about the verysmall establishments and the small factories is more abundant and is summarizedin Table 2.4. Because of differences in coverage (Taiwan excludes establish-ments such as tailoring, repairs, and similar activities from manufacturing)comparison of the employment and value-added distributions in Korea with thosein Taiwan must be done with considerable caution.

1/ 38,227 stalls were registered in 1961 and 43,436 in 1971.

2/ See Chapter 3.

3/ Samuel P.S. Ho, Economic Development of Taiwan, 1860-1970, pp. 78-80.

Table 2.4 SMALL SCALE MANUFACTURING: EMPLOYMENT AND VALUE-ADDED DISTRIBUTED BY INDUSTRY

Establishments Establishments EstablishmentsIndustry a/ bf

With 1-4 Workers Witn 5-49 WorKers- With 50-99 WorkersEmployment Value added Employment Value added Employment Value added

(korea, 1973)

Manufacturing 156,783 45,539-/ 236,578 140,368-/ 97,442 93,233S/

Percentage distribution 100 100 100 100 100 100

Food, beverage, tobacco 41 36 19 23 11 16Textile, wearing apparel, and leatherproducts 32 39 26 21 32 17

Wood and wood products 8 8 7 8 2 2Paper, paper products, publishing andprinting 2 2 8 -8 7 6

Products of chemical, petroleum, coal,rubber, plastics 1 2 8 13 10 17

Non-metallic mineral products 5 5 7 5 6 21Basic Metals d/ d/ 2 3 4 3Metal products machinery, and equipments 4 5 19 18 21 15Other Manufacturing 7 3 3 2 6 3

(Taiwan, 1971)

Manufacturing 31,360 725-/ 285,843 e/ 285,843 5,840 110,785 2,359-~

Percentage distribution 100 100 100 100 100 100

Food, beverages, tobacco 56 58 11 10 7 2Textile, wearing apparel and leather products 3 3 12 11 20 18Wood and wood products 8 9 9 10 7 7Paper, paper products, publishing andprinting 3 3 8 8 4 5

Products of chemical, petroleum, coal,rubber, plastics 7 6 15 14 18 25

Non-metallic mineral products 3 3 10 9 10 8Basic metals d/ d/ 2 2 3 3Metal products machinery and equipment 17 15 29 32 27 29Other manufacturing 4 2 4 4 5 6

a/ For Taiwan, enterprises with 1-3 workers.b/ For Taiwan, enterprises with 4-49 workers.ct W million.d/ Less than .5%e/ NT$ million.

Sources: Report on Mining and Manufacturing Census 1973 (Seoul: Economic Planning Board, 1974), tables 1-5 and IV-1, and The 1971 Industrial andCommercial Census of Taiwan and Fukien Area Republic of China (Taipei: The Committee on Industrial and Commercial Censuses of Taiwanand Fukien Area, 1973), Vol III, table 38.

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In Korea and Taiwan, certain types of manufacturing industries areparticularly prominent in the small-enterprise sectors. Food and clothingare the primary activities of the very small establishments. In 1973, aboutthree-quarters of the employment and the value-added produced in establish-ments with 1-3 workers in Korea were produced by those engaged in the manu-facture of food and textile products. The Taiwan statistics confirm thepredominance of food among the very small manufacturing establishments butnot of textile products. The insignificant position of textile products inTaiwan reflects the difference in coverage more than any real structural dif-ferences. Once the excluded tailor shops, with 13,070 workers in 1971, aretaken into account, it is clear that food and textile products also dominatedthe very small establishments in Taiwan.

Among small factories in Korea, food and textile products continueto be important, accounting for about 40 percent of the employment and thevalue-added produced in such factories. In Taiwan, food plays a somewhatsmaller role, particularly among factories with 50-99 workers. Although therelative position of textile products in Taiwan is consistent with that inKorea for factories with 50-99 workers, it is considerably smaller in Taiwanfor factories with 5-49 workers, again reflecting the exclusion of tailorshops in the Taiwan statistics. Several industries other than food andtextile products are also important in the small-factory sector. In theearly 1970s, metal products accounted for a sizeable share of the employmentand value-added produced by small factories--about 20 percent in Korea andnearly 30 percent in Taiwan. Because of a sizeable plastic industry inTaiwan, many of its small factories also produced plastic products. Factorsfavoring the presence of small scale enterprise in manufacturing are examinedin Chapter 3.

Even in export-oriented economies such as those of Korea and Taiwan,the demand for products of small scale manufacturing comes primarily fromdomestic consumers. In a series of surveys, the Medium-Small Industry Bank(MSIB) in Korea surveyed the market relations of small-medium enterprises.The results from the 1975 survey are presented in Table 2.5, where the totalsales of small-medium manufacturing enterprises are divided between exportsand domestic sales. It should be noted that the MSIB surveys defined exportsto include both direct and indirect sales abroad, and indirect exports asgoods produced by small-medium enterprises but exported by other companies.Most probably "other companies" include only trading and export firms, buton this point the survey was not completely clear.

As Table 2.5 shows, one-fifth of the sales made by small-medium(5-199 workers) enterprises in 1975 was exported, a rise from 13 percent in1968. However, the data also shows that in 1975 exports as a share of totalsales increased with the size of the enterprise: 29 percent for firms with100-199 workers, 26 percent for those with 50-99 workers, 16 percent for thosewith 20-49 workers, 6 percent for those with 10-19 workers, and a negligible2 percent for those with 5-9 workers. A comparison of the 1975 export par-ticipation rates shows that 43 percent of the manufacturing enterprises with50-99 workers and 62 percent of those with 100-199 workers exported, but only

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Table 2.5 Total Sale of Small-Medium Manufacturing EnterprisesDistributed by Major Outlet and by Size ofEnterprise, Korea, 1975, Percent of Total Sales

Size of enterprise (workers)

All 5-9 10-19 20-49 50-99 100-199

Total Sales 100% 100% 100% 100% 100% 100%i

Sold abroad 20 2 6 17 26 29

Sold domestically 80 98 94 83 74 71

Through regularcommercial channels 59 89 75 62 50 47

Directly to othermfg. enterprises 21 9 19 21 24 24

contract sales 17 8 16 18 22 16

processing 6 2 7 10 5 5materials and parts 11 6 9 8 17 11

non-contract sales 4 1 3 3 2 8

Source: The Medium-Small Industry Bank, Report on the Status of Medium-SmallIndustries, 1975, table 2.21.

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7 percent of those with 5-19 workers sold their products abroad. The impor-tance of exports also varied considerably with industry. Industries wheresmall-medium enterprises exported a substantial share of their output in 1975included textiles (54 percent of sales exported), wearing apparel and leatherfootwear (24 percent), leather and leather products (63 percent), rubber prod-ucts (20 percent), and other manufacturing industries (63 percent). Industrieswhere small-medium enterprises exported little of their output included bever-ages (3 percent), wood and its products (5 percent), paper and its products(5 percent), petroleum and coal products (.2 percent), machinery (3 percent),and transport equipment (2 percent). In all two-digit manufacturing indus-tries, except non-metallic mineral products, export shares increased withfirm sizes. Nevertheless the data are still too aggregated for us to saywhether small firms exported less because they produced goods for which,because of their characteristics or quality, there was little or no demandon the world market or because their size made it more difficult for themto take advantage of the export incentives and to penetrate the world mar-ket. I suspect both factors were responsible.

The bulk of the goods produced by small-scale enterprises are solddirectly to the domestic consumers and retail shops. Nearly 90 percent ofthe output produced by enterprises with 5-9 workers are marketed in thismanner. The share declines somewhat for larger enterprises but remains atabout 50 percent even for enterprises with 50-199 workers.

The relationship between small and large factories is not alwayscompetitive. In some industries the relationship is complementary and, indeed,even cooperative. A successful modern small industry sector depends, to alarge extent, on the ability of small and large enterprises to pursue activ-ities that are complementary rather than competitive and to identify areaswhere greater cooperation would bring mutual benefits. One important formof complementarity--what Staley and Morse call direct complementarity--isthe "relation between manufacturing firms in which one systematically usesthe product of another as input into its own manufacturing operation." 1/The MSIB surveys shed some light on this type of complementarity in Korea.

The MSIB surveys identify the share of goods sold by small-mediumenterprises directly to other manufacturing enterprises, This sale is furtherdivided into contract and non-contract sales. Since contract sales involvegoods produced specifically on order from other manufacturing enterprises,their size and relative importance should provide a good measure of directcomplementarity. Table 2.5 presents contract sales as percentages of totalsales by size of enterprises, and the figures suggest that direct comple-mentarity hardly exists for the smallest manufacturing enterprises, thosewith 5-9 workers, and is fairly limited even for the larger enterprises,although the importance of contract sales increases with firm size, risingfrom 8 percent of total sales in enterprises with 5-9 workers to 22 percent

1/ Modern Small Industry for Developing Countries, p. 251.

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in enterprises with 50-99 workers. Interestingly, for enterprises with 100-199 workers, contract sales comprised only 16 percent of the total. Indus-tries where contract sales were particularly important include textiles,paper and paper products, rubber products, chemicals and chemical products,basic metals, metal products, machinery, electrical machinery and apparatus,

and transport equipment. 1/ Finally, for small-medium manufacturing enter-prises that received contract orders, such orders represented a substantialshare of their total sales. 2/ In 1975, 69 percent of the small-medium manu-

facturing enterprises that received orders from other manufacturing enter-prises reported that such orders accounted for 60 percent or more of their

total sales. Not surprisingly, these orders were somewhat more important

for the smaller than for the larger firms that received them.

The above figures, of course, measure not simply the direct comple-mentarity between small and large factories but also that among manufacturingenterprises of all sizes. However, there is evidence that in Korea directcomplementarity between small and large enterprises exists in a limited

fashion. In its 1975 survey, MSIB asked small-medium enterprises with con-tract sales to indicate whether they received orders from large enterprises(200+ workers). The responses were that 45 percent received orders only fromother small-medium enterprises (5-199 workers), 16 percent only from largeenterprises, and 40 percent from both small-medium and large enterprises.Apparently direct complementarity between small and large factories is moreimportant in the service industries and industries where separable manufac-turing operations are possible. In 1975, industries in which a high per-centage of the small-medium enterprises with contract sales had orders from

large companies included printing (70 percent), rubber products (80 percent),petroleum and coal products (100 percent), machinery (64 percent), and elec-

trical machinery and apparatus (61 percent).

Of the 3,978 small-medium manufacturing enterprises that receiveddirect orders from other manufacturing firms, 41 percent provided processingservices and 59 percent supplied parts and specific inputs. It is importantto note that it is common in Korea for the ordering firms to supply the bulkof the raw materials needed to manufacture the ordered component or input.Besides receiving raw materials, some small-medium enterprises have also re-ceived technical and credit assistance from the ordering firms. However, theMSIB surveys found that such technical and credit support has been extremely

1/ See Appendix Table Dl.

2/ Most firms with contract sales received orders from more than one firm.In 1975, of the 3,978 small-medium manufacturing enterprises that hadcontract sales, 9 percent received orders from only 1 firm, 49 percentfrom 2-5 firms, 20 percent from 6-10 firms, and 22 percent from 10+

firms.

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rare. 1/ It seems that the kinds of technical and credit support that largecompanies often given to small enterprises in Japan has yet to develop inKorea.

With many small firms producing more or less similar products ofrelatively low quality, competition is often fierce in the small-industrysector. It is therefore not surprising to find that, in Korea, small-mediumenterprises, to obtain orders, must often agree to price discounts and pro-vide substantial trade credits. In 1975, two-thirds of those small-mediummanufacturing enterprises with contract sales gave credits to their orderingfirms that covered at least 30 percent of the value of the orders. In about60 percent of the cases, the credit was for 30 days or more. The 1975 surveyalso learned that 61 percent of the small-medium enterprises with contractsales gave discounts to firms that ordered from them. Not surprisingly, amongmajor complaints voiced by small-medium enterprises about contract sales werepressure to lower prices and difficulties in getting paid for their goods andservices. 2/

Finally, Table 2.6 presents the distribution of raw materials usedby small enterprises by source and by size of enterprise. The most strikingcharacteristics of these distributions is that enterprises in the size cate-gories between 20 and 199 workers imported a fairly large share of their rawmaterials--one-third in enterprises with 20-49 workers and over 40 percentin enterprises with 50-199 workers. The importance of imported raw materialsis explained by the fact that in Korea many small enterprises with 20 or moreworkers were also prominent exporters (Table 2.5), and the import content ofKorea's exports has been typically high. That some small manufacturing enter-prises depended on imports for raw materials and that a substantial share oftheir output is also exported are of course both reflections of Korea's out-ward-looking pattern of development.

Spatial Distribution of Manufacturing

Because it affects regional employment and income distribution, thespatial distribution of manufacturing, particularly that of small-scale manu-facturing, is an important characteristic that requires our attention. Table2.7 distributes manufacturing employment in urban and rural areas in Koreaand Taiwan by factory and non-factory sectors. Detailed distributions ofestablishments and employment in the factory sector in Korea and Taiwan bylocation and by size of establishment are summarized in Appendix Tables D4and D5. Together, these tables give a rough indication of the spatial dis-tribution of manufacturing in the two countries.

1/ See, for example, Report on the Status of Medium-Small Industries, 1968,Table 1-17, and Report on the Status of Medium-Small Industries, 1975,Table 2.24.

2/ See, for example, Report on the Status of Medium-Small Industries, 1968,Table 1-17, and Report on the Status of Medium-Small Industries, 1975,Table 2.23.

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Table 2.6 Sources of Raw Materials and Parts Used by Small-Medium Manufacturing Enterprises by Size ofEnterprise, Korea, 1969, Percent of TotalRaw Material and Parts


All 5-9 10-19 20-49 50-99 100-199

Total raw materials 100% 100% 100% 100%,/^ 100% 100°,and parts

Acquired from abroad 23.5 8.2 15.1 33.6 41.0 43.1

Acquired domestically 76.4 91.7 84.8 66.5 59.0 56.9

Through regular commercialchannels 55.1 71.2 66.2 44.4 32.2 34.6

Directly from othermanufacturing enterprises 20.8 20.1 18.3 21.5 26.2 21.6

Self provided .5 .4 .3 .6 .6 .7

Sources: The Medium-Small Industry Bank, Report on the Status of Medium-SmallIndustries, 1968, Table 1-18.

Table 2.7 MANUFACTURING EMPLOYNENT DISTRIBUTED BY LOCATION AND TYPE OF ESTABLISHMENT(Thousand of Workers)

National Urban- a/T Rural ct

Total Urban Rural Total Factory- Total Factory -/ on-

Korea - 1975A 2,211- 1,541 670 1,541 1,057 484 670 363 307

% of total 100 70 30 100 69 31 100 54 46

Korea - 1975B 1,700-/ 1,204 496 1,204 1,057 147 496 363 132

% of total 100 71 29 100 88 12 100 73 27

Taiwan 1966 590 402 188 402 397 5S/ 188 170 18-'

% of total 100 68 32 100 99 1 100 90 10

Taiwan - 1971 1,202 613 589 613 606 7e/ 589 565 24-

% of total 100 51 49 100 99 1 100 96 4

a/ Urban: Korea: Seoul, Bijsan, Gyeonggi Do, and Gyeongsangnam Do.Taiwan: Taipei, Keelung, Taichung, Tainan, Kaohsiung, and Taipei Prefecture.

b/ Korea: Establishments with 5 or more workers. Taiwan: Enterprises with 4 or more workers.

c/ All manufacturing workers age 14 and above who worked more than one hour during the survey period.d/ All manufacturing workers age 14 and above who were employers, unpaid family workers, self employed,and;regular employees.

Excluded are temporary aad daily workers.e/ Excluded household prodiction.

Source: See table 2.1.

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The location breakdowns used in the two countries require briefexplanation. In both countries, factory data are available only for aggre-gated administrative divisions, so that refined geographical categories ormeaningful indexes of dispersion by size of establishment cannot be con-structed. To permit comparisons over time and between the two countries,I have arranged each country's data to isolate their most important urban-industrial centers. In Taiwan, the urban-industrial centers comprise itsfive major cities (Taipei, Keelung, Taichung, Tainan, and Kaohsiung) andTaipei Hsien, the prefecture that surrounds Taipei (the capital) and Keelung(the most important port-city). In Korea, the urban-industrialized centersare Seoul, Busan, and the provinces (Gyeonggi Do and Gyeongsangnam Do) adja-cent to these cities. Given this division, a high percentage of establish-ments or employment in the urban-industrial centers may be interpreted tomean a high degree of industrial spatial concentration.

Two measures of manufacturing employment in Korea are presented inTable 2.7: one includes all persons aged 14 and over who worked more than1 hour during the survey period (1975A), and the other excludes temporaryand daily workers (1975B). Regardless which employment figure is used, theurban-rural breakdown shows 70 percent of the employment in urban areas and30 percent in rural areas. However, as was noted earlier, the size of thenon-factory sector differs significantly depending on which manufacturingemployment figure is used. Consequently, the composition of urban and ofrural manufacturing employment also depends on which of the manufacturingemployment figures is used (compare 1975A and 1975B in Table 2.7). Usingthe 1975A figure, 31 percent of the manufacturing employment in urban areasand 46 percent of that in the rural areas are engaged in the non-factorysector (very small establishments and household production). However, oncetemporary workers are excluded, only 12 percent of the manufacturing employ-ment in urban areas and 27 percent of that in rural areas are in the non-factory sector. Because, for reasons mentioned earlier, the relative sizeof the non-factory sector may be less distorted when temporary workers areexcluded from the total employment figure, the 1975B distribution in Table2.7 is probably more reliable. If this is the case, then non-factory manu-facturing employment is divided about equally between urban and rural areas(53 percent in urban and 47 percent in rural).

Table 2.7 shows that in both 1966 and 1971 over three-quarters ofthe non-factory employment in Taiwan were located in rural areas. Further-more, between 1966 and 1971 the share of non-factory employment in ruralmanufacturing declined from 10 to 4 percent. However, it must be rememberedthat these percentages are based on data that exclude the household sector.

A comparison of factory employment in the two countries reveals ahigher degree of industrial spatial concentration in Korea than in Taiwan.It is significant that, over the years, the percentage of factory employmentlocated in urban areas has increased in Korea but has declined in Taiwan.The percentage of Korea's factory employment in Seoul and Busan and that inthe Seoul and Busan areas increased from 41 and 58 percent, respectively, in1958 to 48 and 74, respectively, in 1975. In contrast, it is estimated that

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the percentage of Taiwan's factory employment in its five major cities plusTaipei Hsien was 70 percent in 1966 and 52 percent in 1971. In other words,the percentage of factory employment located in "rural Taiwan" increased from30 percent in 1966 to 48 percent in 1971.

In both countries, large manufacturing establishments (those with100 or more workers) are more geographically concentrated than small estab-lishments, and large manufacturing establishments in Korea are geographicallymore concentrated than those in Taiwan (Appendix Tables D4 and D5). In theearly 1970s, for example, the share of establishments with 500 or more workerslocated outside the urban-industrial centers was 46 percent in Taiwan but only19 percent in Korea. Furthermore, in Korea, for all size categories exceptthe smallest (5 to 9 workers), the degree of spatial concentration increasedbetween 1958 and 1975, with the largest increases among the small size cate-gories of 10-19, 20-49, and 59-99 workers. On the other hand, in Taiwan, thedegree of spatial concentration in small size categories apparently declined-over time, although the comparison here is for a much shorter time period(1966-1971). It appears that, because of the linkages between large and smallmanufacturing establishments, the degree of spatial concentration among largeestablishments and that among small establishments (except for those withfewer than 10 workers) are positively correlated. For those small manufac-turing establishments with fewer than 10 workers, the Korean and the Taiwandata suggest that they are always more dispersed, with the majority locatedoutside the major urban-industrial centers. Elsewhere I have argued that thegreater dispersal of industry in Taiwan has had important beneficial effectson rural employment and equity. 1/

There are two major reasons why factory distribution is more dis-persed, with a larger share of manufacturing located outside the major urban-industrial centers, in Taiwan than in Korea. One is the early developmentof agro-industries, which are generally spatially dispersed, in Taiwan. Theother is that at the time when rapid industrialization began in the two coun-tries, rural infrastructure was more developed and more evenly distributedin Taiwan than in Korea.

An island 380 km by 140 km at its extreme points, Taiwan was servedduring the postwar period by about 3,000 km of railroads, 2,600 km of high-ways, and over 13,000 km of feeder roads. The density of paved highway andfeeder roads was 76.4 km per thousand sq km in 1962 and 214.5 in 1972. Ruralelectrification also began early in Taiwan, and, by 1960, 70 percent of itsfarm households had electric light. Because rural infrastructure was welldeveloped in Taiwan, its rural area was better able to respond to the changein economic climate that resulted when the government switched from an inward-looking to an outward-looking development strategy in the late 1950s. The

1/ Samuel P.S. Ho, "Decentralized Industrialization and Rural Development:Evidence from Taiwan," Economic Development and Cultural Change, Oct.1979.

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new emphasis on exports and on labor-intensive industries worked to theadvantage of the rural area, the primary source of labor in Taiwan. As itbecame easier and more profitable to export, the labor-intensive industriesin Taiwan expanded, and much of the expansion took place in the rural area.From 1956 to 1966, two-thirds of the employment increases in the textile,apparel, and wood products industries were in rural areas. 1/ Thus, inTaiwan rural infrastructure that was built to develop and to commercializeagriculture also helped to transmit industrial growth to the countryside.

The sequence of development was different in Korea. Unlike Taiwan,where agriculture and rural infrastructure were first developed and then usedto support industrialization, Korea is an example of how industrializationpreceded and helped bring about rural development. In 1964, only 13 percentof Korea's farm households had electricity and the province with the highestshare of electricity was Gyeonggi, which borders the city of Seoul. By thelate 1960s, rural electrification was still limited, reaching less than 20percent of Korea's farm households. Only in the 1970s, after a decade ofrapid industrialization, was electric power extended to the rural areas ona large scale. Road development followed a similar pattern. In 1960, atthe start of Korea's industrialization drive, the density of paved road wasbelow 10 km per thousand sq km and only 6.4 if city roads were excluded. 2/The road system was most developed in the Seoul area where the density ofpaved road (31.80 km per thousand sq km, and 17.95 excluding city roads) wasabout three times that of the national average and about five times the densityoutside the Seoul and Busan areas. Only after Korea became more industrializedwas the road system upgraded. In 1975, the density of paved road in Korea(excluding city roads) was still below 50 km per thousand sq km, a levelreached in Taiwan in the late 1950s. Given Korea's emphasis on export andits distribution of infrastructure in the 1960s, a concentrated pattern ofindustrialization was inevitable. Thus, in Korea, the expansion of labor-intensive industries, promoted by the government's outward-looking develop-ment policies, took place in a few large cities with workers migrating infrom the countryside. 3/ In the early 1970s, even though infrastructure inrural areas had become fairly well developed, the advantages of Korea's pri-mary cities, with their larger pools of labor, more developed technical andbanking facilities, and larger markets, had become so entrenched that indus-tries of all sizes continued to prefer locating in these cities.

1/ Based on the 1956 and the 1966 population censuses.

2/ These and the following statistics are derived from Ministry of Trans-portation, Statistical Yearbook of Transportation, various years.

3/ Seoul and Busan had 14 percent of Korea's population in 1960 and 27 per-cent in 1975.

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III. DYNAMIC CHANGES IN SMALL-FACTORY MANUFACTURING

The purpose of this chapter is to examine the relative position ofand changes in small-factory manufacturing in Korea and Taiwan during the1960s and the early 1970s, a period of rapid economic growth in both coun-tries. Section 1 examines the relative position of small-factory manufac-turing. Section 2 studies the mobility, death, and birth rates of factoriesby size. Section 3 applies the survivor technique to investigate minimumefficient plant size in 63 Korean manufacturing industries. The fourth andfinal section examines some of the factors that help determine the size andcomposition of small-factory manufacturing and how their importance changesin the process of rapid development.

Relative Position of Small Factories in Manufacturing

In both Korea and Taiwan the pace of economic growth increased sig-nificantly after the early 1960s. 1/ Real GDP in Taiwan increased at an aver-age annual rate of 7.4 percent during the 1950s and over 10 percent from 1960to the early 1970s. In Korea, the growth of real GNP rose from less than4 percent per year between 1953-55 and 1960-62 to nearly 9 percent between1960-62 and 1970-72. The rise in the rate of economic growth in both coun-tries can be attributed largely to the more rapid pace of industrialization,particularly the growth of manufacturing production. The average annual growthrate of manufacturing production in Korea was 12.7 percent from 1954 to 1960-62and 17.5 percent from 1960-62 to 1970-72. In Taiwan, manufacturing productionincreased at an average annual rate of 20.1 percent from 1963 to 1973 as com-pared to 10.8 percent from 1955 to 1962. As a result of rapid industrialgrowth in the 1960s and the early 1970s, the share of manufacturing in thereal GNP (GDP, in the case of Taiwan) had increased by the mid-1970s to over35 percent in Korea and over 40 percent in Taiwan.

1/ Many studies of postwar development in Korea and in Taiwan are now avail-able. For example, see David C. Cole and Princeton N. Lyman, KoreanDevelopment: The Interplay of Politics and Economics (Cambridge: HarvardUniversity Press, 1971), Larry E. Westphal and Kwang Suk Kim, IndustrialPolicy and Development in Korea, The World Bank, February 1974, Charles R.Frank, Kwang Suk Kim, and Larry E. Westphal, Foreign Trade Regimes andEconomic Development: South Korea (New York: Columbia University Press,1975), Paul W. Kuznets, Economic Growth and Structure in the Republic ofKorea (New Haven: Yale University Press, 1977), Mo-huan Hsing, John H.Power, and Gerardo P. Sicat, Taiwan and the Philippines Industrializationand Trade Policies (London: Oxford University Press, 1970), Ching-yuanLin, Industrialization in Taiwan, 1946-72 (New York: Praeger, 1973),and Samuel P.S. Ho, Economic Development of Taiwan 1860-1970 (New Haven:Yale University Press, 1978). The data used in this paragraph are thosecited in Kuznets' volume on Korea and Ho's volume on Taiwan.

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How did the relative position of small factory manufacturing changein this period of rapid industrialization? Table 3.1 presents the distribu-tion of factory employment in manufacturing by plant size in Korea and inTaiwan for several post-WWII years, 1/ and it shows that the emergence ofnew and large manufacturing plants and the growth of small manufacturingunits have combined to reduce the relative importance of small factories inboth Korea and Taiwan. Furthermore, while the decline of small factoriesrelative to large factories occurred throughout the entire postwar period,the pace of the decline increased sharply in the 1960s. In 1954, 45 percentof Taiwan's factory employment in manufacturing was in establishments with4-49 workers and 47 percent in establishments with 100 or more workers; thepercentages were 42 and 51, respectively, in 1961 and 26 and 66 in 1971. Thegrowth of the large-factory sector relative to the small-factory sector hasbeen even more dramatic in Korea. Employment in establishments with 100 ormore workers was 33 percent of total manufacturing employment in 1958, 43percent in 1963, and 74 percent in 1975. On the other hand, the share ofemployment in establishments with 5-49 workers declined from 54 percent in1958 to 45 percent in 1963 and 17 percent in 1975.

Part of the reasons for the declining position of small-scale manu-facturing can be traced to changes in the industrial composition of the manu-facturing sector. Because the importance of economies of scale differ acrossindustries, the position of small-scale manufacturing at the aggregate levelis in part determined by the type of industries developed in Korea and Taiwan.Table 3.2 distributes factory employment in manufacturing by two-digit indus-tries, and, although the data presented are too aggregated to show many ofthe important changes that have occurred, it is nevertheless clear that rapidindustrialization has been accompanied by changes in the composition of themanufacturing sector.

The relative position of the food industry, where scale economiesare relatively unimportant, declined in both countries, and, in the case ofTaiwan, the decline was quite significant. In both countries, three groupsof industries accounted for three-quarters of the net increase in factoryemployment in manufacturing: (1) textiles and apparels, (2) products ofchemicals, petroleum, coal, rubber, and plastic, and (3) metal products,machinery, and equipment. Within these three groups, strong growth was ex-perienced by such industries as man-made fibers, fabrics, petrochemicals,chemical fertilizers, and electrical machinery and apparatus, where theaverage size of establishment is quite large and where scale economies areknown to be important.

1/ For the distribution of all manufacturing (including the very smallestablishments but excluding household production) employment and value-added by size of unit and by two-digit manufacturing industries in Koreaand in Taiwan in the early 1970s, see Appendix Tables D2 and D3.

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Table 3.1 Distribution of Factory 1mployment inManufacturing Sy Size of Plant, Taiwanand Korea, Percentage

Size of planta (workers)

Total 4-9 10-19 20-49 50-99 100-499 500+

Taiwan:

1954c 100 18 13 14 9 16 31

1961 100 18 10 14 8 17 34

.1971 100 8 7 11 9 29 37

Korea:

1958 100 17 16 21 13 21 12

1963 100 15 14 16 12 21 22

)975 100 4 5 8 9 30 44

a For Taiwang enterprise; for Korea, establishment. However, there are veryfew multi-establishment manufacturing enterprises in Taiwan. In 1971, therewere 63,850 establishments and 62,328 enterprises in Taiwan's manufacturingsector.

bFor Korea,, 5-9 workers.

CThe 1954 Taiwan data-are estimated.as the product of the mid-point ofeach size class and ihe number of establishments in each class.

dData adjusted to include tailor and repair shops.

Sources: Korea: Final Report - Census of Mining and Manufacturing 1958;

Report on Mining and Manufacturing Census 1963, and Report on the NAiningand Manufacturing Survey, 1975. Taiwan: General Report on Industry andand Commerce Census of Taiwan, 1954; General Report, 1961 Industry andCommerce Census of Taiwan, and The Report of the 1971 Industrial andCommiercial Censuses of Taiwan and Fukien Area, Republic of China.

Table 3.2 FACTORY EMPLOYMENT IN MANUFACTURING BY INDUSTRY

Korea and Taiwan

Korea Taiwan

Industry Net Increase Net Increase

1968 1975 (1968-1975) 1966 1971 (1966-1971)

Total manufacturing 748,307 1,420,144 671,837 566,213 1,170.179 603,966

Percent of total manufacturing 100.0 100.0 100.0 100.0 100.0 100.0

Food beverages, tobacco 12.9 10.6 8.0 21.2 10.9 1.3Textile, apparel, leatherproducts 32.3 35.5 39.2 20.6 26.4 31.8

Wood, products of wood, bamboo,cane and cork 5.8 3.8 1.7 6.3 6.8 7.3

Paper, paper products, publishingand printing 6.0 4.9 3.7 5.3 4.3 3.4

Products of chemicals, petroleum,coal, rubber, and plastics 11.7 11.1 10.5 14.3 16.2 18.1

Nonmetallic mineral products 6.8 4.3 1.5 8.1 5.3 2.7Basic metals 3.8 3.3 2.8 3.1 2.6 2.1Metal products, machinery, and

equipment 15.7 19.4 23.6 19.0 22.9 26.7Miscellaneous manufacturing

industries 5.2 6.9 8.9 2.2 4.4 6.5

Sources: Korea: Report on the Mining and Manufacturing Census,1968 and Report on the Mining and ManufacturingSurvey, 1975. Taiwan: General Report on the Third Industrial and Commercial Census of Taiwan,The Republic of China and The 1971 Industrial and Commercial Census of Taiwan and Fukien AreaRepublic of China.

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Since the two countries were approximately at the same level ofdevelopment in the early 1970s, it is reassuring to find the distributionof their factory employment to be roughly similar. In both countries, plantswith 100 or more workers accounted for the bulk--about 70 percent--of factoryemployment. There are, of course, some differences between the distributionfigures for the two countries. One such difference, already noted in Chapter2, is that plants in the size categories employing 4-9, 10-19, and 20-49workers accounted for a larger share of the factory employment in manufac-turing in Taiwan (26 percent) than in Korea (17 percent). A second differ-ence is that plants with 500+ workers accounted for a larger share of thefactory employment in manufacturing in Korea (44 percent) than in Taiwan(37 percent).

Differences in the industrial composition of manufacturing in thetwo countries help to explain some of the differences in the size distribu-tion of employment. The development and the larger presence of industrieswhere scale economies are not so important such as plastic products, metalproducts, and machine tools, are some of the reasons for the stronger pres-ence of small-scale manufacturing in Taiwan. Another possible explanationfor the more prominent position of large firms in Korea is that the Koreangovernment, much more than the Taiwan government, has been directly andactively involved in that country's industrialization drive, and the govern-ment's attention and policy have generally focused on the larger companies.

The changing position of small enterprises is of course the resultof more than just changes in the industrial composition of the manufacturingsector. Within each manufacturing industry, new firms are born, some smallfirms grow larger, and many more perish. Accordingly, the size distributionof employment within a given industry also changes in the process of devel-opment. How this distribution changes is very much influenced by the absenceor presence of scale economies in the industry. However, in some industries,there are also forces that tend to offset the advantages of large size, andthus allow small enterprises to compete effectively and to exist in the com-pany of large firms. These factors are examined in the remaining sectionsof this chapter, but first the evidence pertaining to the birth, death, andmobility patterns in factory establishments in Korea and Taiwan is brieflydiscussed.

Birth, Death, and Mobility in Factory Establishments

An interesting and important question is whether the growth of anindustry comes primarily from existing or from new firms. To the extent thatthe growth comes from existing firms, it is interesting to know how much ofit is the result of small firms growing larger. A related question is whetherdeath and mobility rates among small factory establishments are higher thanaverage. To accurately answer these questions, it is necessary to have recordsof birth and death of enterprises. Unfortunately, neither Korea nor Taiwancollects birth or death statistics for manufacturing enterprises by size ofenterprise. There are some survey data that suggest very high death ratesamong small enterprises. For example, one survey in Taiwan reported that,

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of the 262 deaths it investigated in 1965, two-thirds were firms with initialcapital below US$1,250. 1/ Besides this evidence, there are two other sourcesthat shed some light on these issues: the MSIB surveys in Korea collectedthe age of small enterprises, and the 1961 and 1966 industrial censuses inTaiwan also reported the age of enterprises.

The age data of small manufacturing enterprises in Korea are pre-sented in Table 3.3, where they are tabulated by size of enterprise and yearsin operation (age). In 1973, 12 percent of the small enterprises (those with5-49 workers) were less than 3 years old, 39 percent between 4 to 8 yearsold, and nearly one-half had been in existence for 9 or more years. Theestimated average age of small enterprises in 1973 was 10 years. The dataalso show a slight tendency for the average age of small enterprises to declinewith size. This is somewhat surprising since it is believed that, becauseentry is easy for very small establishments and death rates among the verysmall firms are significantly higher than average, the average age of verysmall enterprise would be lower. In the case of Korea, because a greatershare of the very small enterprises are located away from urban-industrialcenters where competition is probably much keener, their more isolated loca-tion may be one reason why very small enterprises are slightly older. SinceKorea's manufacturing sector has grown extremely rapidly since the mid-1960s,it is also surprising to find that, in 1973, as many as one-quarter of theestablishments with 5-49 workers were born before 1960.

Using data from the 1961 and 1966 industrial censuses, very crudemeasures of birth and of mobility for enterprises of different sizes can beconstructed for Taiwan. The increase in the number of enterprises in anysize category (say 50-99 workers) between 1961 and 1966 (T1 - To) may beexpressed as:

T1 - T = B + (M - X),

where B is the number of "births" (surviving firms with 50-99 workers formedduring 1961-66), 2/ M is the number of "old" firms (those 5 years or olderin 1966) that moved from other categories to the 50-99 size category during1961-66 and X is the number of "old" firms (those that would be 5 years orolder in 1966) that left the 50-99 size category either by death or by move-ment to another size category during 1961-66. Similarly the increase in thenumber of workers in enterprises in any size category between 1961 and 1966(N1 - N0) may be written as:

1/ See M.M. Mleeng, "Some Aspects of Financing Small- and Medium-Size Indus-tries in Taiwan," Industry of China, May 1967, p. 7.

2/ Because the data are for a five-year period, some of the births may havebeen initially in another size category.

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Table 3.3 Age of Small-Scale Manufacturing Enterprisesby Size of Enterprise, Korea, 1973

By size of enterprise (workers)

All 5-9 10-19 20-49

Average agea (years) 10.1 10.3 9.8 9.4

Distribution of enterprisesby age (%) ; 100% 100% 100% 100%

0-3 years 12 11 14 13

4-8 years 39 39 38 43

9-13 years 24 23 25 25

14+ years 25 27 23 20

aEstimated by assuming the age of enterprises in each age category to be themid-point of that category.

Source: The Citizens National Bank, Report on the Survey of Small andPetty Businesses (Manufacturing), Table 1-6.

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NI - N =N b+ (N -N)1 0 Nb +(m 2 x'

where Nb is the number of workers in surviving enterprises born during 1961-66, N bS the number of workers in M, and N is the number of workers in X.Since the age of enterprises in 1966 and the size distribution of enterprisesin 1961 and 1966 are available for Taiwan, (TI - T0), B, (M-X), (N - N ), Nb,(N - N ) can be estimated, and these estimates are presented in Taile 3.4where they are arranged by size of enterprise. 1/

The data indicate that in 1966 new firms (B, surviving firms formedduring 1961-66) accounted for over one-half of both the number of enterprisesand number of workers in every size category except for the largest (500+workers). As expected, there were large negative net movements into thesmaller size categories and large positive net movements into the largestsize category. During 1961-66, 2,067 more enterprises left than entered thesize category with 10-19 workers, probably because of the very high deathrate among small firms. The net movement of enterprises during 1961-66 asa share of the number of enterprise in 1961 was -53 percent for enterpriseswith 10-19 workers, -40 percent for those with 20-49 workers, -21 percentfor those with 50-99 workers, -4 percent for those with 100-499 workers, and158 percent for those with 500 or more workers (Table 3.4). In other words,the evidence suggests that death and movement to a different size categoryoccurred frequently among small enterprises.

If it is assumed that during 1961-66 no firm with 500 or more workersdied or moved to a smaller size category--that is, X = 0 for enterprises with500 or more workers, then it can be deduced that, during 1961-66, 38 firmsmoved from a smaller size into the largest size category, and they contributedbetween 25 and 72 percent of the increase in employment in the 500+ size cate-gory. 2/ In other words, the growth of small and medium scale firms may havecontributed substantially to the increase of employment in enterprises in thelargest size category.

1/ I have omitted enterprises with 1-9 workers. The 1966 industrial censusincluded many small enterprises in trade and services that were classi-fied in manufacturing in the 1961 census. The size categories mostseriously affected were those with between 1 and 9 workers. Despiteadjustments (in particular the return to manufacturing of all repairestablishments and tailor shops in 1966), it is felt that the data for1961 and 1966 may still be incompatible in the size categories withbetween 1 and 9 workers.

2/ The lower percentage is derived by assuming all firms that moved fromsmaller size categories grew just enough to reach 500 workers in 1966.The higher percentage is derived by assuming that firms that alreadyemployed 500 workers in 1961 did not increase their employment between1961 and 1966.

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Table 3 . 4 Birth, Death and Growth of Manufacturing Enterprises, Taiwar,, 1961-66

Distributed by size (workers) of enterprise

10-19 20-49 50-99 100-499 500±

Number of enterprises in 1966, T1 3,912 2,510 758 643 131

Number of enterprises in 1966 lessthan 5 years old, B 2,107 1,408 420 339 24

Number of enterprises in 1961, T 3,872 1,851 426 318 69

T1 - T0 40 659 332 325 62

(M-X) 7(T1-7) - B -2,067 -749 -88 -14 38

'B/T1) 100 54% 56% 5S5% 53K 18'

[(M-X)/T0o 100 -53% -40% -21% -4% 158%

Workers in enterprises in 1966, N1 52,012 75,614 51,301 133,560 205,019

Workers in enterprises less than5 years old in 1966, Nb 27,656 42,527 28,356 69,548 21,605

Workers in enterprises in 1961, N0 63,985 53,781 29,052 63,723 128,961

N1 - N0 11,973 21,833 22,249 69,837 76,058

(N m-Nx = (Nl-NO) - Nb -15,683 -20,694 -6,107 289 54,453

(Nb/Nl) x 100 53% 56% 55% 52% 11%

[(Nm-N x)/NO] 100 -57% -49% -22% .4% 252%

Notes and Sources: M is the number of enterprises 5 years or older in 1966 that moved into a givensize category from other size categories during 1961-66. X is the number of enterprises that exited froma given size category either by death or by movement to another size category. Nm and N are the

number of workers in M and X respectively. For consistency, repair establishments and tailor shopsare included in 1966. The underlying data are from General Report, 1961 Industry and CommerceCensus of Taiwan and General Report on the Third Industrial and ComNercial Census of Taiwan, TheRepublic of China.

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In summary, the evidence from Taiwan lends some support to thebelief that (1) the death rate of small manufacturing establishments is high,(2) there is a great deal of mobility (upwards and downwards) among firmswith fewer than 100 workers, and (3) a considerable share of the growth inthe largest size category comes from movement of firms from smaller sizecategories.

Efficient Plant Size

Over time, the relative position of small enterprises in a givenindustry depends in part on whether or not scale economies are importantin that industry. In consequence, to understand the dynamic changes in thesmall enterprise sector we must consider the available evidence on scaleeconomies. In particular it is useful to have, for various industries,measures of minimum efficient plant size.

There are many ways of investigating scale economies and of estimat-ing the size range over which plants are efficient. To test for economiesof scale, production or cost functions may be statistically estimated.Alternatively, the most efficient plant size in an industry can be deducedfrom engineering data. Finally, the survivor technique has been used todetermine the minimum efficient plant size in a given industry. Given theavailable data in Korea and because we wish to investigate industries atthe four- or five-digit level, the only approach feasible is the survivortechnique.

The survivor technique differs from the other approaches notonly because it requires less data but, more important, in what it measures.Basically, the survivor technique calculates for two points in time the shareof an industry's output (or value of shipment) by size of establishment.Those size groups that experience increases in their shares are presumed tobe efficient sizes while the other size groups are considered inefficient.Obviously, efficient plant size, as determined by the survivor technique,is not the same as the plant size corresponding to the lowest point on thelong-run average cost curve. Rather, it is that size which copes mostsuccessfully with "all of the various market forces and constraints: labourrelations; technological change; government regulations; seasonality ofdemand; export opportunities; and shifts in the demand curve." 1/ It shouldalso be noted that, because it considers only private costs and benefits, thesurvivor technique does not measure social efficiency. But, when data arelimited, the survivor technique may be the only way of investigating scaleeconomies.

1/ Paul K. Gorecki, Economies of Scale and Efficient Plant Size in CanadianManufacturing Industries, Bureau of Competition Policy, Research MonographNumber 1, p. 197. For criticism of the survivor technique as a measureof scale economies, see W. Shepherd, "What Does the Survivor TechniqueShow About Economies of Scale?" Southern Economic Journal (July, 1967),pp. 113-122.

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Appendix A describes the procedure used to select industries forstudy and how the survivor criterion was applied to the selected industries.Of the 100 manufacturing industries selected for examination in Korea, thesurvivor technique determined the efficient size range for 63 (AppendixTable Al). These 63 industries represent a wide cross section of Korea'smanufacturing sector. Together they accounted for 46 percent of the factoryemployment in 1975, and, in 39 of the 63 industries, factories with fewerthan 100 workers employed a majority of the workers.

Table 3.5 lists the number of industries according to "efficient"plant size. The data is arranged by size category and by major industrygroup. For example, we see that, of the 63 industries, 9 are in the foodgroup, and the efficient plant sizes in 2 of the 9 food industries includethe size category 5-49 workers. For all 63 industries, the number of indus-tries with efficient plants in the size category 5-49 workers is 7; in thesize category 50-99 workers, 17; in the size category 100-199 workers, 34,in the size category 200-499 workers, 39, and in the size category 500+workers, 32. Thus, the survivor criterion suggests that only in a few indus-tries are establishments with fewer than 50 workers efficient. Apparently,in the Korean environment, the efficient plant size in most industries isabove 100 workers.

Efficient plant size, in the survivor sense, is determined by manyfactors other than scale economies. One of the more important of these factorsis monopolistic power. To eliminate the effect of monopolistic power, Table3.5 also presents the number of industries according to efficient plant sizefor those industries with 50 or more establishments (these are the numbersin parentheses). However, restricting the tabulation to only those indus-tries with many firms does not change the conclusion that in Korea the effi-cient plants in most manufacturing industries are those with 100+ workers.The removal of industries with fewer than 50 establishments eliminated notonly industries dominated by a few large enterprises but also industries thatfaced very small markets and could therefore only support a handful of smallenterprises.

Interestingly, of the 7 industries with efficient plants in the sizecategory 5-49 workers, apparently only one faced a relatively large market,and the employment in 3 of the 7 industries actually declined between 1968and 1975. 1/ Of the 17 industries with efficient plants in the size category50-99, 7 were also industries with declining employment, suggesting that theyfaced shrinking markets. On the other hand, industries with efficient plant

1/ The one large tndustry is electrical machinery and industrial equipmentwhich employed 10,967 people in 1975. But this is also one of the leastwell defined industries selected for examination, and it is large mainlybecause it is so broadly defined. It is most likely that in this industrysmall and large enterprises in 1975 were producing for totally differentmarkets.

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Table 3.5 EFFICIENT PLANT SIZE ACCORDING TO

SURVIVOR CRITERION

Number of industry with "-fficient" plantsIndustry Number of in size categoryGroup industry

in group 5-49 50-99 100-199 200-499 500+

Food 9 (7)a/ 2 (1) 3 (1) 5 (3) 5 (4) 2 (2)Beverage 2 (2) 0 (0) 1 (1) 1 (1) 1 (1) 1 (1)Textiles 10 (7) 2 (0) 3 (1) 3 (2) 6 (5) 7 (6)Wearing apparel,footwear made-uptextile goods 5 (4) 0 (0) 0 (0) 5 (4) 5 (4) 4 (3)Furniture & fixtures 2 (2) 0 (0) 1 (1) 2 (2) 2 (2) 0 (0)Paper & paper products 2 (1) 1 (0) 1 (0) 1 (0) 2 (1) 0 (0)Printing & publishing 2 (2) 0 (0) 0 (0) 0 (0) 0 (0) 2 (2)Leather products 1 (0) 0 (0) 0 (0) 1 (0) 1 (0) 1 (0)Rubber products 1 (0) 0 (0) 0 (0) 0 (0) 1 (0) 1 (0)Chemicals & chemical prods. 4 (0) 1 (0) 1 (0) 2 (0) 2 (0) 1 (0)Petroleum and coalproducts 1 (1) 0 (0) O (0) 1 (1) 1 (1) 1 (1)

Non-metallic mineralproducts 7 (4) 0 (0) 3 (3) 4 (3) 3 (2) 3 (0)

Basic metals 1 (0) 0 (0) 0 (0) 0 (0) 0 (0) 1 (0)Metal products 4 (2) 0 (0) 0 (0) 2 (1) 2 (1) 2 (2)Machinery,exclude

electric 2 (2) 0 (0) 1 (1) 2 (2) 2 (2) 1 (1)Electric machinery

and equipment 3 (3) 1 (1) 1 (1) 1 (1) 3 (3) 1 (1)Transport equipment 3 (2) 0 (0) 1 (1) 2 (2) 1 (1) 1 (0)Other manufacuring 4 (2) 0 (0) 1 (1) 2 (2) 2 (2) 3 (1)

Total 63 (41) 7 (2) 17 (11) 34 (24) 39 (28) 32 (20)

Percent of Total 100 (100) 11 (5) 27 (27) 54 (58) 62 (68) 51 (49)

a/ Number in parentheses excludes industries that have fewer than 50 establishments.

Source: Appendix table Al.

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size in the larger size categories were mostly those in large or growing mar-kets (as measured by the number of people employed and by employment growth,see Appendix Table Al). Apparently, market size and market growth, probablybecause they enable firms to take advantage of potential economies of scale,are important determinants of efficient plant size (in the survivor sense).Indeed, as we shall see in the next section, one of the factors favoringsmall enterprises is a small total market.

Changes in the Competitive Bases of Small ManufacturTing Enterprises

Because of economies of scale in production and marketing and betteraccess to credits, large manufacturing enterprises enjoy important advantages.Yet, in developing countries as well as in the most industrialized countries,large numbers of SSEs continue to exist in many industries. Apparently thereare also forces that favor small and medium sized production units, and theseforces are sufficiently strong in some industries to offset the advantagesof large size. The purpose of this section is to consider the competitivebases of SSEs in Korea and Taiwan during a period when both countries wereindustrializing rapidly and to see how the competitive bases changed in theprocess of development.

Small firms (those with fewer than 100' workers) may be said to pre-dominate in an industry if they account for halU or more of the industry'semployment. 1/ We shall call industries where SSEs predominate small-scaleindustries. Since industries that are dominated by SSEs may be presumed tohave characteristics that are favorable to small establishments, or at leastpermit them to compete on even terms, it is thEose small-scale industries whosecompetitive bases we need to analyze. To idenfrify the small-scale industriesand for the analysis to be meaningful, it is essential that industries aredefined as narrowly as possible. Fortunately, in Korea and Taiwan, databy size of plants are available for industries at the four- or five-digitlevel. 2/

1/ Instead of employment as the criterion, value added could have beenused. We use employment here partLy becaus;e we are interested in theemployment effects of SSEs and partly because more manufacturing indus-tries are dominated by SSEs in terms of employment than in terms ofvalue added (since labor productivity is genierally much lower amongSSEs). I also selected industrif!s on the basis of the value addedcriterion, and found that nearly' all the industries that would havebeen selected under the value added criterion are in fact selectedunder the employment criterion,

2/ However, it is important to note that even industries at the five-digitlevel frequently include activities that produce commodities with signif-icant design and quality differences and utilize very dissimilar produc-tion methods. It should alsc, be noted that the standard industrialclassification used in Taiwaa and that in Korea are quite different,with the one in Korea generally more detailed at every level.

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Table 3.6 shows that, in Taiwan in 1971, enterprises with fewerthan 100 workers accoujated for half or more of the industry's employment in55 of its 107 manufacturing industries at the four-digit level. Small enter-prises in these industries employed about 21 percent of all manufacturingworkers, and produced over 13 percent of all manufacturing value added. InKorea in 197j, as shown in Table 3.7, small factory establishments (thosewith 5-99 workers) accounted for half or more of the industry's employmentin 175 of its 373 five-digit manufacturing industries, and they employed 70percent of the workers and produced 56 percent of the value added in these175 small-scale industries. When the small establishments are disaggregatedinto their component size groups, the data in Table 3.7 reveal that estab-lishments with 5-49 workers employed 52 percent of the workers and produced37 percent of the value added in these same 175 industries. As for theirrelative importance in all manufacturing (defined here to exclude manufac-turing establishments with fewer than 5 workers), small establishments insmall-scale industries employed 10.2 percent of all manufactutring workersand produced 5.8 percent of the total manufacturing value added. Thesesmall-scale industries will reveal most clearly the conditions that favorsmall-scale manufacturing.

Staley and Morse, in their classical study on small scale indus-tries, grouped into eight categories those factors that help determine smallplant predominance in manufacturing industries. 1/ These are listed belowunder three major headings:

I. Locational influences

IA. Factories which process a dispersed raw materialIB. Products with local markets and relatively higher

transfer costsIC. Service industries

TI. Process influences

IIA. Separable manufacturing operationsIIB. Craft handworkIIC. Simple assembly, mixing, or finishi.ng operations

III. Market influences

IIIA. Differentiated products having low scale economiesIIIB. Industries serv:ing small tot'al markets

Following the methodology employed by Stale) and Morse, each small-scaletindustry in Korea and Taiwan was classified under that category which seemedto be the major reason for small-firm pradom:Inance. In many instances, it

1/ Modern Small Industry for Developing _ountries, Chapters 5 and 6.

Table 3.6 Share of Small Enterprisesa in Employment and Value Added, by Four-digit

Industries, Taiwan, 1971

Share of manufacturing Share of manufacturing value

% of industry Number of workers (000) _ mployment _(%) Value added (NT $ million) added (%)workers in Number of Small Other All Small Other All Small Other All Small Other All

small enterprises industries enterprises enterprises enterprises enterprises enterprises enterprises enterprises enterprises enterprises enterprises enterprises enterprises

75-100 26 111 16 127 9.2 1.4 10.6 2,134 487 2,621 5.1 1.2 6.3

50-74 29 143 82 225 11.9 6.8 18.7 3,433 2,386 5,819 8,3 5.8 14.0

25-49 24 110 189 299 9.2 15.7 24.9 2,116 7,990 10,106 5.1 19.3 24.4

0-24 28 65 486 551 5.4 40.4 45.8 1,250 21,624 22,874 3.0 52.2 55.2

Total 107 428 774 1,202 35.6 64.4 100.0 8,932 32,489 41,421 21.6 78.4 100.0

aEnterprises with fewer than 100 workers, except part-time home industry.

Source: The Report of the 1971 Industrial and Commercial Censuses of Taiwan and Fukien Area, Republic of China.

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Table 3. 7 Share of Small Establishmentsa in Employment and Value Added,by Five-digit Industries, Korea, 1975

Number of workers (000)Other

, of industry workers in Number of Small establishments establishments Allsmall establishments industries Total 5-9 10-49 50-99 100-499 500+ establishments

75-100 114 60 13 32 14 5 0 6550-74 61 85 19 44 22 42 14 14125-49 86 145 23 71 51 145 93 3830-24 112 80 6 37 36 235 511 826

Total 373 370 62 184 124 427 619 1,416

Share of total manufacturing employment(Z)Other

4 of industry workers in Number of Small establishmnts establishments Allsmall establishments industries Total 5-9 10-49 50-99 100-499 500+ establishments

75-100 114 4.2 1.0 2.2 1.0 .4 0 4.65G-74 61 6.0 1.3 3.1 1.6 3.0 1.0 10.025-49 86 10.2 1.6 5.0 3.6 10.2 6.6 27.00-24 112 5.7 .5 2.6 2.6 16.6 36.1 58.4

Total 373 26.1 4.4 13.0 8.7 30.2 43.7 100.0

Value added (Billion Won)Other

4c of industry workers in Number of Small establishments establishments Allsmall establishments industries Total 5-9 10-49 50-99 100-499 500+ establishments

75-100 114 77 13 39 22 8 0 855D-74 61 89 14 44 30 76 45 21025-49 86 136 17 67 52 208 127 4710-24 112 127 5 38 83 520 1,415 2,062

Total 373 429 49 189 191 812 1,586 2,828

Share of total manufacturing value added (%)Uther

, of industry workers in Number of Small establishments establishments Allsmall establishments industries Total 5-9 10-49 50-99 100-499 500+ establishments

75-100 114 2.7 .5 1.4 .9 .3 0 3.020-74 61 3.1 .5 1.6 1.1 2.7 1.6 7.425-49 86 4.8 .6 2.4 1.8 7.4 4.5 16.60-24 112 4.5 .2 1.4 2.9 18.4 50.0 72.9

Total 373 15.2 1.7 6.7 6.8 28.7 56.1 100.0

aEstablishments with 5 to 99 workers

Source: Report on the Mining and Manufacturing Survey 1975.

- 41

is a combination of several of these techno-economic factors that make a givenindustry suitable for small-scale establishments. Needless to say, becauseadequate descriptive and technical data are not available for all the indus-tries, a considerable element of judgment is involved in selecting the majorreason and in grouping the industries.

The main characteristics of each of the influences that Favor small-plant predominance in manufacturing industries and the industries includedunder each category in Korean and Taiwan are discussed in detail in AppendixB. Here, it is sufficient to take note of the following: The main factorsfavoring SSEs grouped under locational influences are ligh transport costsand the need for frequent face-to-face contact between producers and theircustomers. SSEs are also favored in industries where the production pro-cesses do not have important scale economies. More specifically, SSEs canbe competitive when technology is relatively simple, production runs short,production versatility important, or specialization in operation or partspossible. A third group of factors favoring SSEs is market influences, themost important being small total market. In addition to the industries inwhich small plants predominate, SSEs are also numerous in industries wherethey have only a minority position. For example, in Korea in 1975, smallestablishments in the 198 industries in which small plants do not predomi-nate employed 15.9 percent of all manufacturing factory workers and produced9.3 percent of the factory value-added in manufacturing, significantly greaterthan the total volume of small firm activity in the 175 industries in whichthey were predominant (Table 3.7). Apparently, in these industries, smallestablishments exist by "filling the cracks" not occupied by the large fac-tories. Not surprisingly, they include many industries involved in simpleassembly, mixing, or finishing.

The relative importance in Korea and Taiwan of the various typesof industry in which small firms were predomiaitoit is shown in Tables 3.8 and3.9 respectively. Although the data are only available in Taiwan for oneyear (1971), it is available in Korea for two years (1968 and 1975), andby comparing the data from the two years for Korea it is possible to seehow the competitive bases of small industry changed during a period of rapiddevelopment. 1/ When examining the data, it is useful to remember that in1968 Korea was in the early stage of its export-led industrial growth. How-ever, by 1975, Korea had developed a sizeable manufacturing sector and wasturning increasingly to the more capital- and skill-intensive industries.We should also note that in 1971 Taiwan had also had nearly a decade ofrapid industrial growth based on labor-intensive exports and its manufac-turing structure and its level of industrialization closely resembled whatexisted in Korea in 1975.

1/ The standard industry classification used in Korea change-1 bei:otuJen 1968and 1975. Unlike that for 1975, the most detailed data for 1968 was forindustries at the four-digit level. Thus, in 1968, the grouping of in-dustries was done at the four-digit level. However, many of the four-digit industries in 1968 had identical coverage as the five-digit indus-tries in 1975.

- 42 -

Table 3 . 8 Relative Importance of Types of Industry in which SmallEstablishments Predominatea, Korea, 1968 and 1975

Employment in small establishments

1968 1975Industry Type persons percent persons percent

IA. Dispersed resource processors 59,504 22.4 38,845 23.4IB. Market oriented industries 50,717 19.1 38,020 26.3IC. Service industries 15,404 5.8 14,202 9.8IA. Separable manufacturing operations 26,274 9.9 25,022 17.3IIB. Craft handwork 3,113 1.2 1,666 1.2IIC. Simple assembly, mixing, or finishing 94,590 35.6 25,462 17.6IIIB. Small total market 15,898 6.0 6,474 4.5

Total 265,500 100.0 144,691 100.0

Value added in small establishments

1968 1975Million won Million won

in current prices percent in current prices percent

IA. Dispersed resource processors 16,811 26.8 44,095 26.4IB. Market oriented industries 11,133 17.8 41,790 25.1IC. Service industries 3,529 5.6 12,370 7.4IIA. Separable manufacturing operations 6,532 10.4 26,577 15.9IIB. Craft handwork 379 .6 800 .5IIC. Simple assembly, mixing, or finishing 21,389 34.2 35,997 21.6IIIB. Small total market 2,875 4.6 5,037 3.0

Total 62,648 100.0 166,667 100.0

aIndustries in which small (5-99 workers) establishments accounted for half or more of industry employment.

Sources: Underlying data from Report on the Mining and Manufacturing Census, 1968 and Report on the Mining andManufacturing Survey, 1975.

- 43 -

Table 3.9 Relative Importance of Types of Industry inWhich Small Enterprises Predominatea,Taiwan, 1971

Employment in Value added insmall enterprises small enterprises

persons percent Million NT$ percent

IA. Dispersed resource processors 41,509 16.3 903 16.2

IB. Market oriented industries 72,813 28.7 1,408 25.3

IC. Service industriesC 29,875 11.8 758 13.6

IIA. Separable manufacturingoperations 52,697 20.8 1,290 23.2

IIB. Craft handwork b b b b

IIC. Simple assembly, mixing, orfinishing 48,046 18.9 1,055 18.9

IIIB. Small total market 8,793 3.5 152 2.7

Total 253,733 100.0 5,566 100.0

aIndustries in which small (1-99) establishments accounted for half or moreof industry employment.

bUnable to separate from other categories.

cRepair of machinery and automobiles are not separated from the manufacturingof machinery. For allocation purposes, one-third of the employment andvalue added in the manufacturing and repair of machinery is assigned toIC and two-thirds to IIA. This division probably overestimates theimportance of repair.

Source: Underlying data from The Report of the 1971 Industrial and CommercialCensuses of Taiwan and Fukien Area, Republic of China.

- 44 -

In terms of the three major influences--location, process, and mar-ket--it appears that locational factors and processes were the two most impor-tant causes of small firm predominance in manufacturing industry in Korea.In 1968, about 47 percent of the workers employed and 50 percent of the value-added produced by small establishments in industries shown in Table 3.8 werein small plants that processed dispersed resources, served local and regionalmarkets, or serviced local and regional industries. Taken together, dispersedresource processors and market oriented industries accounted for about 40-45percent of the employment and of the value-added in small-scale industries.Service industries, which accounted for about 6 percent of the employmentand value-added, were distinctly less important. Industries strongly influ-enced by production processes employed 47 percent of the workers and produced45 percent of the value-added in the small-scale industries in Table 3.8.Here, simple assembly, mixing, or finishing industries were dominant, employ-ing nearly 36 percent of the workers and producing 34 percent of the value-added in the industries in Table 3.8, far greater than the next largest typeof small-scale industry. SSEs were beginning to be important in industriesin which separable manufacturing operations are possible, accounting forabout 10 percent of the employment and of the value added. Finally, smallestablishments in industries with small total markets employed only 6 percentof the workers in small-scale industries and produced less than 5 percent ofthe small plant value-added.

Given the inadequate road and other transport facilities in Koreain the 1960s, the importance of locational factors in determining predomi-nance of small firms in an industry is understandable. That simple assembly,mixing, or finishing industries accounted for more than one-third of small-plant employment and of small-plant value-added is also consistent with ourexpectation, considering Korea's factor endowment and its industrializationpolicies. First of all, simple assembly, mixing, or finishing industriesgenerally require neither large fixed investments nor sophisticated tech-nology. Because entry to these industries is relatively easy, they are thetype of industry a less developed country in its early stage of industrial-ization would be most likely to develop first. Secondly, these are labor-intensive industries. Thus, with its low wages and its disciplined and fairlyproductive labor force, Korea had a significant comparative advantage in theseindustries. Finally, since product transport costs are usually moderate inthese industries, they have good export potentials. With these characteris-tics and given government policies that encourage' Tadustrial exports, it ishardly surprising that small establishments were so active in the simpleassembly, mixing, or finlshing industries.

A comparison of the Korean data for 1968 and those for 1975 revealssome interesting changes in the competitive bases of SSEs. However, beforediscussing them, let us first take note of the fact that small establish-ments in industries in which they were predominain enployed significantlyfewer workers iTn 1975 than in 1968 and produced about the same value-added

- 45 -

in 1975 (W 85,470 million in 1970 prices) as they did in 1968 (W 74,581 mil-lion in 1970 prices). 1/ Clearly the small industry sector had declined inimportance. The declining importance of all SSEs and of the small industrysector are brought out even more clearly in Table 3.10, where their positionsrelative to the factory sector as a whole are presented. Between 1968 and1975, the employment in industries where SSEs predominate (i.e., employ halfor more of the industry employment) declined by 153,000. In addition, theemployment in all factory establishments with 5-9 workers declined by 24,000and those in establishments with 10-49 workers increased only marginally,by 9,000 workers. In other words, there was a shift of employment and ofindustries from the small-industry sector to the large-industry sector, and,within industries, a shift from small to large enterprises.

As in 1968, locational and process influences were most importantin determining small firms' predominance in manufacturing industry in Korea in1975. In fact, industries in which locational factors are important accountedfor nearly 60 percent of the workers and of the value-added in small scaleindustries in 1975. It appears transfer costs for raw materials and productscontinue to be prominent reasons for small-plant operation, even in Korea in1975--a relatively small country with fairly good transport facilities. How-ever, a comparison of industries in categories IA and IB in 1968 and 1975shows that a number of important industries in these categories in 1968 wereno longer dominated by small plants in 1975. For example, small plants' shareof employment in coal briquettes was 80 percent in 1968 and 49 percent in 1975;in vegetable oils and fats, it was 86 percent in 1968 and 25 percent in 1975;in bakery goods, it was 56 percent in 1968 and 25 percent in 1975. Apparently,improved transport facilities and greater concentration of population in largecities such as Seoul, Busan, and Daegu permitted large enterprises to emergeand reduced small establishments to a subordinate position.

The most striking difference between the relative significance ofthe main types of small industry in 1968 and that in 1975 is the decline inthe importance of simple assembly, mixing, or finishing industries and thegrowth in the importance of industries in which separable manufacturing opera-tions are possible. Many simple assembly, mixing, or finishing industriesonce dominated by small plants no longer had this characteristic in 1975.For example, small plants' share of employment in cotton fabrics was 63 per-cent in 1968 and 45 percent in 1975; in synthetic fabrics it was 61 percentin 1968 and 38 in 1975; in bleaching, dyeing, and finishing of textiles itwas 54 percent in 1968 and 22 percent in 1975; in knitted underwear it was76 percent in 1968 and 24 percent in 1975; in hosiery it was 64 percent in1968 and 30 percent in 1975; in leather footwear it was 63 percent in 1968and 25 percent in 1975, and in men's outerwear it was 56 percent in 1968 and

1/ The figures in 1970 prices were obtained by deflating the figures inTable 3.8 by the implicit deflator for manufacturing value added reportedin the national accounts. The deflators are from Bank of Korea, EconomicStatistics Yearbook, 1977.

Table 3.10: SHIFT IN EMPLOYMENT BY SIZE OF ESTABLISHMENT AND BY SMALL-AND LARGE-SCALE INDUSTRIESKorea, 1968-1975 (thousands)

% of industry employment Total By Size of Establishmentin small establishment factory

employment C'mallTotal 5 - 9 10 - 49 - 99 100-499 500+

75-100 -109 -93 -42 -50 -2 -11 -5

50-74 -44 -28 -4 -17 -6 -11 -5

25-49 285 107 18 51 39 108 69

0-24 544 52 5 26 22 157 335

-4--Total 677 39 -24 9 53 244 394 O

Sources: Underlying data from Report on the Mining and Manufacturino Census, 1968 and Renort on the Miningand Manufacturing Survey, 1975.

- 47 -

31 percent in 1975. These were also some of Korea's leading export industriesin the late 1960s and early 1970s. Apparently, the widening of marketsthrough international trade permitted large enterprises to enter these indus-tries and also enabled small enterprises in these industries to become largeones. Thus, market expansion and the successful growth of small enterprisescombined to reduce the importance of small plants in many of the simpleassembly, mixing, or finishing industries. The emergence of a large numberof small metalworking establishments, many of which undoubtedly began assmall repair shops, responding in part to the backward linkages of industriesdeveloped earlier, accounted for the rise in the importance of categoryIIA, separable manufacturing operations. The growth of metalworking indus-tries is, of course, another signal that Korea had developed new skills andentrepreneurs and had entered a more advanced stage of its industrial trans-formation.

Because the Taiwan data are much less detailed, the grouping ofsmall-scale industries into major types was made less precisely than forKorea. A comparison of the 1971 Taiwan data (Table 3.9) with the 1975 Koreandata (Table 3.8) shows that the distribution of small-scale industries bymajor types of industry in Taiwan in 1971 was very similar to that in Koreain 1975. This similarity is reassuring since both countries followed nearlyan identical pattern of industrial growth, and Korea in 1975 was at a com-parable stage of development to Taiwan in 1971. As in Korea in 1975, loca-tional factors were very important in determining small-plant predominancein Taiwan's manufacturing industry in 1971. Of the minor differences betweenTaiwan in 1971 and Korea in 1975, two require explanations. First, despitea more diversified agriculture and a more developed agricultural processingindustry, the processing of dispersed resources was less important as a factorin determining small-firm predominance in Taiwan than it was in Korea. Thisdiscrepancy probably occurred because better rural transport facilities inTaiwan and the presence of important scale economies tipped the scale infavor of large enterprises in some of Taiwan's most important agro-industriessuch as sugar and vegetable and fruit canning. The second difference betweenthe two countries is that small industries in which separable manufacturingoperations are possible occupied a more prominent position in Taiwan in 1971than in Korea in 1975. One suspects that this prominence arose because, in1971, the metalworking industry in Taiwan was already exporting large quanti-ties of metal products, hand tools, and simple machinery. The wider marketundoubtedly created a more favorable environment for small establishments.

The evidence from Korea and Taiwan suggests that in the early stagesof industrialization, the competitive bases of SSEs are primarily those relatedto locational factors, particularly high transport costs. As transport costsdecline in the process of development, this source of competitiveness weakens.With industrialization, process influences also become important in deter-mining the competitive bases of SSEs. Initially, SSEs dominate those indus-tries in simple assembly, mixing or finishing that are usually the first toemerge in labor abundant countries. However, their relative importance inthese industries are likely to be temporary. As the markets of these indus-tries expand, firms will expand to take advantage of whatever scale economies

- 48 -

that may exist. With larger markets, the potentials of scale economies, evenrelatively minor ones, will also make it worthwhile for large firms to enterthese industries. In addition, with development, capital also becomes moreplentiful, making it relatively easier for entrepreneurs to mobilize the largerinitial capital required to establish a large enterprise.

As labor cost rises, comparative advantage shifts, and the economybecomes more complexed and developed in Korea and Taiwan, metalworking andmachinery industries, in which separable manufacturing operations are possible,have become increasingly more important both within the manufacturing and thesmall industry sectors. However, it is as yet unclear whether separable manu-facturing operations will form a strong competitive base for small establish-ments in the two countries. Industries in which production can be dividedinto separate operations permit a high degree of specialization and divisionof labor. In such industries production can be organized either by the inte-gration of the different tasks in large plants or by the separate performanceof the various tasks by smaller plants each specializing in one or two opera-tions (or parts). These industries, particularly at the early stage of devel-opment, are also noted for small lots and made-to-order purchases. Thisimplies that small firms can also be competitive if they are versatile andresponsive to the needs of customers. Thus, the opportunity for small firmsto prosper in these industries is good. The evidence suggests that smallmetalworking and machinery establishments in Korea and Taiwan have prosperedso far not through specialization but through versatility and low labor costs.There is little evidence of subcontracting or division of labor between smalland large enterprises in these industries. 1/ Indeed, the degree of verticalintegration is high, and large companies in Korea and Taiwan perform manyoperations and manufacture parts that would typically be subcontracted inthe industrialized countries. In consequence, large enterprises in Taiwanand Korea often own specialized equipment that is used only periodically. 2/This, in turn, increases the cost of production and tends to inhibit thegrowth of these industries.

The reasons why subcontracting and the division of labor betweensmall and large enterprises occur so rarely in Korea and Taiwan are alsofairly clear. The quality (in terms of interchangeability of parts and uni-formity of tolerances) of products produced by the metalworking and machinetool industries is low, particularly among the smaller establishments, inboth Korea and Taiwan. 3/ In other words, the lack of standardization and

1/ For example, see Alice H. Amsden, "The Division of Labour is Limited bythe Type of Market: The Case of the Taiwanese Machine Tool Industry,"World Development, 1977, Vol. 5, No. 3, pp. 217-233.

2/ Ibid.

3/ For comments on product quality in Taiwan, see ibid. Also see, "A Reporton Small Hardware Industries in Taiwan," Industry of Free China, February1967, pp. 27-42. For a review of conditions in Korea's metalworkingindustry see IBRD, "Korea: Development of the Machinery Industries," areport prepared by the Industrial Mission to Korea, March 17, 1978.

- 49 -

low quality products have kept the division of labor between small and largeenterprises to a minimum. Amsden also argues that, in these industries, thedivision of labor is also restricted by the type of market they face. 1/ Themetalworking and machine tool industries in Korea and Taiwan face marketsthat are composed of large number of small customers with limited resources(local manufacturing firms and Southeast Asian manufacturers), who are veryprice conscious. Because the quality of the product (be it a tool, machine,or simple metal product) often does not significantly affect its effective-ness, the customers are quite willing to trade off quality for a lower price.Given this type of market, the larger producing firm will want to be as fullyintegrated and self-sufficient as possible so that it can determine inde-pendently the quality of the parts used in its product and thus gain greaterflexibility to trade off quality for lower production cost and thus a lowerprice.

Demand as well as supply conditions in the metalworking and machineryindustries in Korea and Taiwan are changing. With a domestic economy that isnow more developed and sophisticated, the need for better quality metal prod-ucts and machine tools is rapidly increasing. The export market for highquality metal products and tools is also large and growing. With the expe-riences gained in the past decade, the Korean and Taiwanese producers arenow also more capable to produce better quality and more standardized goods.With the market changing and with product quality improving, the opportuni-ties for division of labor between small and large enterprises are bound toincrease. To take advantage of these opportunities, small metalworking andmachine tools establishments in both countries will need to upgrade theirequipment and acquire new skills and technology so that they can producehigher quality products and thus be able to become more involved in inter-firm transactions through specialization. Whether SSEs will be able to altertheir competitive base from product versatility and producing inexpensivelow-quality goods to product standardization and specialization is likelyto determine their future position and strength in these industries.

1/ Alice H. Amsden, "The Division of Labour is Limited by the Type of Market:The Case of the Taiwanese Machine Tool Industry," World Development, 1977,Vol. 5, No. 3, pp. 217-233.

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IV. RELATIVE EFFICIENCY AND CAPITAL INTENSITY IN SSEs

Whether or not SSEs should be promoted depends, at least in part,on how efficiently they utilize resources. If SSEs are more labor-intensivethan, and use less capital to produce the same goods as, large enterprises,then, in those less developed countries where labor is abundant and capitalscarce, strong economic justification would exist for promoting small-scaleindustries. The purpose of this chapter is to present the evidence on resourceuse by different sizes of firm in Korea and Taiwan. The main sources of theevidence are the industrial censuses, and the major issues to be examinedare: (1) Are SSEs more labor intensive than large enterprises? (2) In whatkind of industries are SSEs likely to be most labor intensive? (3) Do factorproductivities differ significantly by size of firm? (4) How well does thetotal factor productivity of SSEs compare to that of large enterprises?

Resource Use in Small Scale Manufacturing Industries: An Overview

Many studies have reported that small-scale industries are not onlylabor intensive but also fairly efficient in their use of capital. The evi-dence from Korea and from Taiwan reveals both supporting examples of and manyexceptions to these generalizations. This is hardly surprising since an in-dustry's labor intensity is often an attribute of the product in questionrather than a function of plant size. Table 4.1 presents the output/capitalratios, the capital/labor ratios, and measures of small-plant predominancein major manufacturing industry groups in the two countries. The industriesare ranked in the table by the percentage contribution of small (fewer than100 workers) plants to industry value-added in Taiwan.

Before turning to the results, a few words must be said aboutthe data. Appendix C discusses how capital, labor, and value-added aremeasured in the industrial censuses and surveys in Korea and Taiwan. Here,it is sufficient to say that, of the three measures, capital is the weakest.In both countries, the capital measure used is the book value of fixedassets. It is generally believed that in most countries book values under-state, probably by a considerable margin, the current real value of capital.However, in the case of Korea and Taiwan the problem may be somewhat lessserious because at the time the data was collected (1968 in Korea and 1971in Taiwan) much of the industrial capital in the two countries was of fairlyrecent vintage and the 1960s was a period when the prices of capital goodswere still relatively stable. The reported capital/output ratio for themanufacturing sector in Taiwan in 1971 was 2.78, which seems reasonable.However, because in the 1960s inflation was more serious in Korea than inTaiwan, the problem of using book values to measure capital may be greaterin Korea. The reported capital/output ratio for manufacturing in Korea in1968 was a low 1.37, suggesting that the book value of fixed assets may havebeen significantly below the current real value of capital. An unreliablecapital measure of course undermines our confidence in the capital intensityand capital productivity estimates.

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Table 4.1 Output-Capital and Capital-labor Ratios of Major Industry GroupsTaiwan (1971) and Korea (1968).

Taiwan, 1971 Korea, 1968VA per VA per Fixed

% VA % emp. unit unit Total Fixed Value added assetsin small in small of of assets per assets per % VA % emp. per unit perenter- enter- total fixes employee employee in small in small of fixed workerprises prises assets assets (OOONT$) (OOONTS) est. est. assets (000 Won)

Manufacturing 22 36 .17 .36 198 96 28 44 .73 554

Printing and publishing 67 86 .30 .58 112 58 44 51 .89 404

Fabricated metal prods. 65 72 .25 .43 103 59 60 64 .76 334

Furniture and fixtures 63 67 .29 .41 88 62 88 91 .93 228

Leather & its prods.(exc. footwear & apparel) 63 53 .23 .47 97 48 52 52 .50 701

Machinery, exc.electrical 58 67 .26 .57 111 51 63 68 .71 391

Precision equip. & inst. 51 50 .19 .32 114 68 38 45 1.12 337

Nonmetallic minearalproducts 35 64 .17 .25 190 131 28 57 .27 1,329

Misc. manufactures 29 36 .30 .59 83 43 37 29 1.00 155

Food and beverages 27 43 .15 .30 200 97 34 65 1.32 431

Wood & its prods. 26 40 .24 .49 147 73 34 39 .75 513

Transport equipment 26 45 .13 .37 302 110 29 44 .72 551

Basic metals 26 29 .05 .11 360 153 16 21 .79 510

Rubber & its products 25 32 .25 .49 110 55 7 8 1.06 239

Apparels (incleatherfootwear) 21 24 .26 .53 74 37 65 65 1.25 198

Paper and its products 18 35 .19 .35 198 109 22 50 .64 730

Chemicals and theirproducts 18 37 .16 .31 280 144 13 28 .56 1,385

Textiles 14 16 .12 .23 198 98 25 33 .55 450

Electrical machineryand apparatus 8 20 .27 .75 168 59 24 30 .92 409

Petroleum & coal prods. 1 7 .23 .49 1,028 480 20 69 1.14 1,015

Tobacco 0 0 .09 .21 764 318 0 0 3.16 790

Notes and Sources: Small enterprises (establishments) are those with fewer than 100 workers in Taiwan and those with5-99 workers in Korea. The Report of the 1971 Industrial and Commercial Censuses of Taiwan and Fukien Area,Republic of China. Report on Mining and Manufacturing Census, 1968.

- 52 -

Among the more significant relationships revealed in Table 4.1 arethe following: (1) in both countries the same industry groups have high sharesof small plant value-added. Of the first 11 industry groups in Taiwan, 10 areranked among the first 11 in Korea. The one exception is apparel (includingleather footwear), which ranks fourteenth in Taiwan but second in Korea.Small plants produced 21 percent of the apparel industry's value-added inTaiwan but 65 percent in Korea. (2) In both countries industry groups withhigh share of small-plant value-added also tend to have relatively high output(value-added)/capital ratios and relatively low capital/labor ratios. 1/ Ofthose industry groups in which small plants contributed 30 or more percentof the industry value-added, printing, metal products, and furniture andfixtures in both Korea and Taiwan have higher output/capital ratios and lowercapital/labor ratios than the respective national averages for manufacturing.There are, however, important exceptions. For example, in Korea, leather andleather products and machinery (excluding electrical machinery), two majorindustry groups dominated by small establishments, have either an output/capital ratio that is lower or a capital/labor ratio that is higher thanthe average for manufacturing. Non-metallic mineral manufacturing is anotherindustry group with both substantial small firm participation in the two coun-tries and a lower output/capital ratio and higher capital/labor ratio than theaverage for manufacturing. (3) Not all industry groups dominated by largeplants have high capital/labor ratios and low output/capital ratios. Rubberand rubber products and electrical machinery and apparatus manufacturing aretwo industry groups that have relatively little small-firm participation inKorea and in Taiwan but which have output/capital ratios that are higher andcapital/labor ratios that are lower than the respective national average formanufacturing. The apparel industry in Taiwan is another example. It hasa significantly higher output/capital ratio and a significantly lower capital/labor ratio than the average for manufacturing, yet only 21 percent of itsvalue-added and 24 percent of its employment are accounted for by small enter-prises.

That the characteristics of the major industry groups are so diversesuggests that simple generalization about resource use in small-scale indus-tries can be misleading. It is therefore important to disaggregate the majorindustry groups as much as possible. While it would be ideal to define in-dustry at the product level, the most detailed data for Korea and for Taiwanare for industries at the four-digit level. Nevertheless, this amount ofdetail represents a substantial improvement over the data for major industrygroups used in Table 4.1. Relevant ratios for Taiwan's industries in whichsmall plants were predominant appear in Table 4.2, arranged according to themajor types discussed in Chapter 3. Similar data for Korea by major typesof small-scale industries are presented in Table 4.3 (the capital/labor andoutput/capital ratios for individual industries are in Appendix Tables D6 andD9).

1/ The capital/labor ratios, of course, only approximate the direct effecton the demand for labor per unit of capital invested. In this study noattempt is made to ascertain the total (direct and indirect) effects onthe demand for labor per unit of capital invested either by industry orby the size of establishment.

- 53 -

Table 4.2 Output-Capital and Capital-Labor Ratios for Industries in whichSmall Enterprises Predominate, by Types of Industry, Taiwan, 1971

Value-added per Value-added per Total assets Fixed assetsunit of total unit of fixed per person per person

assets assets engaged (OOONT$) engaged (OOONTS)

Total manufacturing .17 .36 198 96

Sna1' industrya .22 .40 126 69

,A. Resource processors .18 .35 182 93Meat processing .31 .40 61 7z8Dairy products .24 .36 135 90Vegetable oil .04 .15 367 101Rice milling .19 .25 116 86Tea processing .10 .15 144 103Tanning and leather finishing .23 .46 97 48Sawmills and planing mills .22 .48 222 101

I1. Market oriented industries .19 .29 113 73Food, n.e.c. .20 2 7Furniture and fixtures .29 .41 88 62Agricultural insecticides .12 .40 325 95Glass and its products .18 .29 212 132Structural clay products .29 .38 50 38Cement products .25 .40 92 57Non-metallic minearal

products, n.e.c. .12 .18 153 102Metal furniture .33 .46 69 48Tin cans and boxes .31 .51 82 50Aluminum products

(e.g. door & window frames) .26 .42 99 61Manufactured ice .15 .19 165 128

IC. Service industries .30 .59 109 56Printing .30 .61 TT5Metal processing (spraying,

electro-plating, etc.) .34 .47 67 48

IjA. Separable mfg. operations .25 .51 711 55Iron and steep products for

industrial use .22 .41 126 68Mfg. and repair of machinery

and equipment, exc. elec. .26 .57 111 51Transport equipment, n.e.c. .29 .54 94 50Metal products, n.e.c. .31 .57 75 41Special electrical apparatus .25 .42 91 53Professional, scientific

equipment .19 .32 114 68

lIC. Simple assembly, mixing,or finishing .23 .45 130 70

Flavoring exc. monosod. glutamate T2 .15 S 16Products of wood, bamboo,

cane, n.e.c. .42 .62 46 31Processed paper and its prods. .18 .32 32 46Bookbinding .30 .40 76 56Acids and alkalis .10 .15 337 217Paint, color, ink .16 .38 117 75Medical & pharmaceutical

preparations .21 .49 192 80Soap, detergent, cosmetics .13 .31 177 71Chemical products, n.e.c. .16 .37 161 69Textile products, n.e.c. .19 .32 82 50

IIIB. Small total market .20 .31 83 54Canning, preserving of meat .31 .40 W 7i8Animal fats .26 .30 81 70Mills, n.e.c. .16 .19 69 55Silk textiles .20 .30 75 49Leather apparel .51 1.31 98 38Wood preservation .29 1.01 265 76Paper bags .26 .53 114 56Publishing .06 .06 319 295Engraving and etching .30 .33 78 69Inedible oils and fats .03 .06 144 67Coal products .18 .23 155 123Asphalt materials .26 .34 113 86Rubber and synthetic rubber .21 .28 89 67Rubber sole .16 .25 59 37Basic metal, n.e.c. .49 .61 42 34Electric insulators

and insulation .03 .12 420 104Motorized tricycles .33 .43 49 38

aAll industries where small enterprises predominate, i.e., account for half or more of the industry's employment,except for animal feeds and copper, two industries with negative value added in 1971. Small enterprises are thosewith fewer than 100 workers.

Source: Based on data in The Report of the 1971 Industrial and Commercial Censuses of Taiwan and Fukien Area,Republic of China.

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Table 4.3 Output-Capital and Capital-Labor Ratios For Industriesin Which Small Establishments Predominate, By Typeof Industry, Korea, 1968

Value added Fixed assetsper unit of per workerfixed assets (000 won/person)

Total manufacturing .92 476

Small Industrya .72 360

IA. Resource processors .77 425

IB. Market oriented industries .71 350

IC. Service industries .66 403

IIA. Separable mfg. operations .68 379

IIB. Craft handwork 1.81 67

IIC. Simple assembly, mixingor finishing .72 332

IIIB. Small total market .51 407

aAll industries in which small establishments predominate, i.e., account forhalf or more of the industry's employment. Small establishments are thosewith 5-99 workers.

Note and Source: For the output-capital and the capital-labor ratios of theindividual small industries in each of the categories, see tables 4.5 and 4.6.Based on data in Report on Mining and Manufacturing Census, 1968.

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At the aggregated level, it is worth noting that in Taiwan all typesof small industries have higher average output/total assets ratio than totalmanufacturing. However, when fixed assets are used in the calculation, only3 small industry groups (IC, IIA and IIC) have higher output/fixed assetsratios than total manufacturing. In Korea, all types of small industry exceptcrafts (IIB) have lower average output/fixed-assets ratios than total manufac-turing. Because these ratios are averages, we cannot deduce from them aloneany meaningful conclusion or hypothesis about the small industries in the twocountries.

Even though the relative importance of the different small industrieswas quite different in the two countries, the output/capital and the capital/labor ratios by types of small industry in Korea and Taiwan reveal some commonfeatures. Both countries' processors of dispersed resources (type IA) showedhigher capital/labor ratios than the average for all small industries. How-ever, in comparison to the national average for all small industries, theKorean processors had a slightly higher output/capital ratio while the Taiwanprocessors had a lower output/capital ratio. In both countries the variationamong industries is considerable in this category. For example, in Korea, itranged from a low capital per worker of W 117,000 in cut stone and its prod-ucts to W 736,000 in sawmills. In Taiwan, it ranged from a low total assetsper worker of NT$61,000 in meat processing to NT$367,000 in vegetable oil.In both countries, the capital/labor ratios is sawmills and vegetable oilwere among the highest, while the output/capital ratios in these two indus-tries were among the lowest.

The capital/labor ratio in small market-oriented industries approxi-mated the national average for all small industries in both countries. How-ever, while the output/capital ratio in small market oriented industries wasnear the national average for all small industries in Korea, it was substan-tially lower in Taiwan. In both countries, low output/capital ratio was afeature of three types of industry: miscellaneous food, ice, and nonmetallicmineral products. Apparently the relatively greater importance of these indus-tries in Taiwan is the main reason why the output/capital ratio in its marketoriented industries was lower.

Separable manufacturing operations showed a lower capital/laborratio and a higher output/capital ratio than the national average for allsmall industries in Taiwan but was near the national average in Korea. Italso appears that there is less variation among industries in this category.Simple assembly, mixing, or finishing industries approximated thenational average for all small industries in both output/capital and capital/labor ratios. However, variation among the industries in this category isconsiderable. In general, the small chemical and chemical products indus-tries have relatively high capital/labor ratios and relatively low output/capital ratios, while the apparel, wood product and paper product industrieshave relatively low capital/labor ratios and relatively high output/capitalratios.

Because so few industries are included in the service category (IC),it is difficult to make any generalization. One of the more important serviceindustries is the metal processing industry (plating and galvanizing), and inboth Korea and Taiwan it showed significantly lower caital/labor and higheroutput/capital ratios than the national average for all small industries.

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Handicraft industries, a category (IIB) available only for Korea, showed thehighest output/capital and the lowest capital/labor ratios. Finally, thecomposition of industries with small total markets in both countries is verydiverse. It should be noted that many of them showed relatively high capital/labor ratios, and that their average output/capital ratio was l½wer than thenational average for all small industries.

The data presented so far are the averages for individual industriesor industry groups. We turn now to discuss the more interesting and importantquestion: within industries, are there significant differences between smalland large plants in their capital intensity and efficiency?

Capital Intensity by Size of Establishment in Manufacturing

This section compares the capital/labor ratios, constructed fromcensus and survey data, for industries at the four-digit level by size ofestablishment. Because this type of comparison is fraught with pitfalls, webegin by summarizing some of the more important difficulties. There are, ofcourse, the usual measurement problems. We have already mentioned that bookvalues may seriously understate the true value of capital. If the extent ofunderstatement is the same across firm size, then comparisons of capitalintensity by size of firm may still be reasonably meaningful. But, if theextent of understatement differs systematically by firm size, then it becomesmuch more difficult to interpretate the observed differences in capital in-tensity unless there is also information about the extent of understatementby size of firm. Firms may also have different capacity-utilization rates.In which case, the capital/labor ratio (unless properly adjusted for thedifference in utilization rates) will give an incorrect measure of capitalintensity. Though usually less troublesome than capital, labor measurementsare, however, not free of problems. For example, to the extent that laborquality varies systematically by size of firm, differences in capital/laborratios may reflect this difference rather than any difference in capitalintensity.

Comparison of capital intensity by firm size is meaningful onlyif all firms belong to the same industry and if the industry is preciselyand carefully defined. Ideally, all firms should produce the same productof similar quality. If not, differences in capital intensity may be causedby product or quality differences rather than differences attributable tofirm size. We attempt to minimize this problem by using the most disaggre-gated data available in Korea and Taiwan. However, even industries at thefour digit level are seldom defined for a single product of a given quality.In other words, disaggregation can reduce but not eliminate the problem.Finally, if firms within a given industry are not vertically and horizon-tally integrated to the same extent, then differences in capital/ laborratios may be the result of differences in the degree of integrationand in the types of ancilliary goods and services provided. Again, this isa problem that cannot be eliminated when we are restricted to census data.Despite these considerable shortcomings, comparing the capital labor ratiosat the four-digit industry level by size of establishment is still a usefulpart of any investigation into capital intensity by size of establishment.

57 -

Because the four-digit industries used in the 1968 Korean manufacturing census are defined more narrowly (indeed, many are at the productlevel and correspond to the five-digit classification used in Korea since1975) than those in the 1971 Taiwan industrial census, and because theKorean data can be disaggregated into finer size categories (the Taiwandata can be classified into two size categories only -- 0-99 and 100+),factor proportions derived from the Korean data are more revealing anduseful than the ones calculated for Taiwan. Accordingly, our discussionshall focus primarily on the Korean data and examine the Taiwan resultsonly very briefly.

Appendix table D12 presents the capital/labor ratios of large (100+workers) and small plants in each of the industries in which small plantswere predominant in Taiwan in 1971. An inspection of the data reveals thatsmall plants had lower capital/labor ratios than large plants in the vastm.ajority of the small scale industries. However, because many of the four-digit manufacturing industries in Taiwan are defined quite broadly, we mustnot accept these results at face value, particularly since the more detailedKorean data reveal somewhat different results.

The capital/labor ratios for industries in which small establish-

ments (5-99 workers) were predominant in Korea in 1968, for industries inwhich small establishments accouated for 25-49 percent of the industry employ-ment in 1968, and for industries in which small establishments accounted for0-24 percent of the industry employment in 1968 are presented in appendixtables D6, D7, and D8 respectively. Thne more significant relationshipsbetween capital/labor ratio and firm size found in these tables are discussedbelow.

The capital/labor ratio for all manufacturing industries increaseswith the size of establishments, although it remains nearly constant throughthe range of 10 to 199 workers. The capital/labor ratio for all small in-dustries (those in which small plants were predominant in 1968) also shows atendency to rise with size of establishment, except for the fact that thereis a sharp drop once the size category of 500+ workers is reached. However,one should not attribute too much significance to this decline, since thecapital/labor ratio for establishnients with 500+ workers reflects only theconditions in the very few small industries that had such large establish-ments.

Treating the manufacturing sector and the small-industry sectoras agggregates mixes the influences of products and of size. To separateas much as possible the product from the size effects, the capital/laborratio of each individual industry in appendix tables D6, D7, and D8 must beexamined. The size category with the highest capital/labor ratio is identi-fied for each industry and the results are summarized in table 4.4. The "notclassified" category includes the less homogeneous industries and industrieswhere establishments are concentrated in a few size categories. Perhapsthe most salient feature of table 4.4 is that the capital/labor ratios foor

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the individual industries do not vary in a consistent manner with the sizeof establishment. For example, of the 10 type IA small-scale industriesclassified in table 4.4, the highest capital/labor ratio is found in everysize category except the category 500+.

It has often been noted that low volume technique is usually thelabor-intensive technique. But, judging by the Korean data, low volumetechniques do not always have capital saving attributes. While there aremany small-scale industries in Korea in which the capital/labor ratio islowest in establishments with 5-9 workers and rises with the size ofestablishment, there are just as many in which the capital/labor ratio ishighest in establishments with 5-9 workers and declines substantially as thesize of establishment increases. Of the 71 small-scale industries classifiedin Table 4.4, only in 22 was the highest capital/labor ratio in a sizecategory above 100 workers. Indeed, the distribution for small-scale in-dustries shows a sharp drop in the number of industries with highest capital/labor ratio when establishment size increases from below to above 200 workers.For those industries not dominated by small enterprises, the distribution ofhighest capital/labor ratio by size category also does not show any consis-tent pattern. Table 4.4 shows that among these industries, the highestcapital/labor ratio was found about as often in size categories below asabove 100 workers. For all manufacturing industries classified in table 4.4,the size categories with the most cases of highest capital/labor ratio are"10-19 workers" and "20-49 workers," each with 26 industries. Apparently thecapital saving aspect of low volume techniques are present only for someproducts and some processes.

Even though the capital/labor ratios for many industries in Koreado not increase with establishment size, a sufficient number of industries dohave this characteristic to warrant some speculation about why capital inten-sity increases with firm size. The observed rise in capital intensity, ofcourse, may be simply a reflection of the statistical and coverage problemscited earlier. In other words, the difference between the capital/labor ratioof SSEs and that of LSEs may be due to differences in the product produced,differences in the rate of capacity utilization, 1/ and other measurementproblems. Besides these statistical explanations, two additional reasonshave frequently been offered to explain the rise in capital intensity withfirm size.

The one most often mentioned in that SSEs and LSEs face very dif-ferent factor prices. Because, in comparison with LSEs, SSEs pay a higherprice for capital and a lower price for labor, they tend to select the morelabor-intensive technique. However, one suspects that a part of the observeddifferences in factor prices may just be reflecting the fact that SSEs andLSEs use factors of differing quality. For instance, SSEs generally employ

1/ There is some evidence that large firms in Korea have higher rates ofcapacity utilization. Consequently, while their higher capital/laborratios may reflect a higher degree of mechanization, they do notnecessarily imply a higher capital intensity once differences inutilization rates are accounted for.

Table 4.4 NUMBER OF CASES (INDUSTRIES) WHERE CAPITAL/LABOR

RATIO IS HIGHEST IN THE SIZE CATEGORY INDICATED

Korea 1968

Not

5-9 10-19 20-49 50-99 100-199 200-499 500+ fieda/ Total

IA 1 2 1 2 2 2 0 3 13Industries where IB 4 6 3 2 2 0 0 5 22SSEs have IC 0 0 0 0 1 1 1 0 350+% of IIA 1 4 3 2 1 0 0 6 17employment IIB 0 0 0 0 0 0 0 2 2(Small-Scale IIC 4 2 3 3 5 3 0 7 27Industries) Subtotal 10 14 10 9 11 6 1 23 84

IIIA 1 1 3 1 4 0 0 38 48

Total 11 15 13 10 15 6 1 61 132

Industrieswhere SSEs @

have 25-49% 4 5 7 6 1 5 4 5 37 0

of employment

Industrieswhere SSEshave 0-24% 4 6 6 2 3 5 9 9 44of employment

Grand total 19 26 26 18 19 16 14 75 213

a/ All industries which contain the word "Miscellaneous", "other", or "not elsewhere classified" in theirtitles plus all industries which did not have establishments in at least 4 size categories, at leastone of which is below and one above 100 workers.

Source: Appendix tables D6, D7, and D8. See chapter 3 for the description of the various categoriesof small-scale industries.

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a significantly larger share of unskilled workers and workers with limited orno education. Data from Korea and Taiwan suggests that, once these qualitydifferences are accounted for, the wage difference between SSEs and LSEsnarrows but does not disappear. 1/ To the extent that the differences infactor prices are caused by market distortions and that the p_ices paid bySSEs reflect more accurately the factors' social opportunity costs, thenLSEs are economically inefficient. In which case, attempts should be madeto reduce or eliminate the market distortions.

There is evidence that, in some industries, the rise in capitalintensity with firm size is a characteristic of the production function.That is to say, the production function is not homothetic, but rather one inwhich the capital intensity of the technique selected, at given factor prices,increases with scale. In this case, it is economically efficient for thesmall plants to select a labor intensive technique and the large plants tochoose a capital intensive technique.

Another important finding of appendix tables D7 and D8 is that thecapital/labor ratios of many of the industries in Korea not dominated bysmall establishments are quite low, often considerably lower than theaverage for the manufacturing sector as a whole or the average for the small-industry sector. Indeed, in 35 of the 81 industries in Korea not dominatedby small establishments (i.e., where small establishments accounted for fewerthan 50 percent of the industry employment) in 1968, the capital/labor ratiowas lower than the average for the small-scale industry. In total, these35 industries employed nearly 190,000 workers, or approximately one-quarterof Korea's total factory employment in manufacturing. Included among these35 industries are also some of the fastest growing industries in Korea (e.g.,electrical machinery, rubber footwear and various textile products).Apparently, the success of Korea's and Taiwan's manufacturing sectors inabsorbing labor is due, to a large part, to the development in the twocountries of industries that produce labor-intensive products rather thanto any special attention to the small-industry sector.

Efficiency by Size of Establishment in Manufacturing

Meaningful measures of efficiency or productivity by size ofestablishment are also difficult to construct. Besides the difficultiesof measuring capital and labor already discussed, there are some additionalproblems that need to be noted. Ideally, efficiency comparisons by size ofestablishment should be restricted to firms that produce the same product,face the same market (so that they receive the same price for their output),and are vertically and horizontally integrated to the same degree. Clearlycensus and survey data do not meet these conditions a'nd disaggregation tothe four-digit industry level reduces but does not eliminate these problems.Consequently, there are likely to be distortions in our efficiency measuresso that comparison across firm size must be made with some caution.

1/ See chapter 5.

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Although they are approximations, the comparison of productivity by estab-lishment size to be presented in this section is nevertheless a usefulfirst step in analyzing relative efficiency across firm size.

Because its data are less detailed, the efficiency measures forTaiwan are less meaningful. Accordingly we shall limit our discussion ofrelative efficiency in Taiwan's small scale industries to a brief summary.In assessing the evidence, it is important to keep in mind that in Taiwansmall-scale industries, even when disaggregated to the four-digit level,are not very homogeneous. Consequently, our findings must be viewed withconsiderable caution.

Appendix table D12 presents the output/capital and the output/laborratios of large and small plants in each of the industries in which smallplants were predominant in Taiwan in 1971. An inspection of the data revealsthat small plants had equal or higher labor productivity than large plants ina sizeable number of small scale industries. However, small-scale industriesin which the output/capital ratio was higher in small than in large plantswere much fewer in number. But, interestingly, in nearly every market-oriented small-scale industry (category IB), small plants had higher output/capital ratios than large plants. Altogether, in 14 small-scale industries(out of the 42 in appendix table D12 in which large enterprises co-existedwith small enterprises), small plants had both higher output/capital andhigher output/labor ratios, 1/ suggesting that in these industries smallplants used resources more efficiently than did large plants. But there werealso 11 small-scale industries in which small plants had both lower output/capital and lower output/labor ratios.

Since input-output coefficients are available for small and forlarge plants, measures of relative total factor productivity (relativeefficiency), A(s)/A(1), can be constructed for each industry using theequation:

A(s() m l rO(s)/Ii(s) ai

A (1) i O)/ IIi()1 a. = 1

where A(s) is the total factor productivity of small plants, A(1) the totalfactor productivity of large plants, O(s) the value added produced by smallplants, O(l) the value added produced by large plants, Ii(s) the ith factorof production used by small plants, I.(1) the ith factor of production usedby large plants, and a 's are the factor shares. Only two factors of pro-duction are explicitly identified, capital (total assets in operation) andlabor.

1/ They were tea processing, structural clay products, manufactured ice,products of wood, bamboo, cane, n.e.c., soap, detergent, and cosmetics,motorized tricycles, copper, food, n.e.c., non-metallic mineral products,n.e.c., professional and scientific equipment, process paper and its products,mills, n.e.c., silk textiles, and animal feeds.

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For each industry in appendix table D12, two 9-Eculations ofrelative efficiency are presented. In calculation A the a s are the in-dustry's actual factor shares recorded in the 1971 industrial census, andin calculation B the capital share is assumed to be .2K/(2K + W), where Kis the indust-y's total assets in operation and W is the industry actual wagebill. Calculation B is presented in recognition of the fact that factorprices in less developed countries do not generally reflect their opportunitycosts. Specifically, in Taiwan, with ceilings on interest rates and creditrationing, the accounting costs of capital understate the opportunity costsof capital. The assumption in calculation B is that the shadow interest rateis about 20 percent. Since by 1971 much of Taiwan's surplus labor had alreadydisappeared as the result of rapid industrial growth in the 1960's Taiwan'swage rates are unadjusted on the assumption that they reflect reasonably wellthe opportunity costs of labor. Relative efficiency measures were alsocalculated using shadow interest rates of 25 percent and 30 percent, but theygave fairly similar results and are not presented here.

Using actual factor shares as weights, the relative efficiencymeasures show small plants to be equally or more efficient (ratios equal orgreater than 1) in 20 (including the two in which large enterprises producednegative value added) of the 42 industries in appendix table D 12 where com-parisons were possible. When factor shares that reflect an interest rate of20 percent are used as weights, the relative efficiency ratio equaled orexceeded I in 23 industries, and in 6 other it was greater than .80. Pro-ductiv:ity in small plants became competitive with that in large plants in agreater number of industries when weights reflecting an interest rate of 20percent were used because in most small-scale industries in Taiwan, thecapital/labor ratio was generally higher in large than in small enterprises,while labor productivity was not comparably higher.

The total factor productivity of both small and large enterprisesdo not differ systematically by type of small-scale industries. Smallplants were found to be more productive than large ones in all types ofindustries. However, in many small-scale industries, SSEs were also foundto be distincti-vely less productive than large enterprises. This raisesthe question of how to explain small plant predominance in these industries.Since some of these industries are not very homogeneous, one obvious explana-tion is that SSEs produce different products than do LSEs, and the productsthey produce are not in competition with one another. Another likely reasonis that SSEs prevail by paying lower wages than LSEs. SSEs are able to dothis in part because they use lower quality labor. In other words, ourproductivity measures are distorted, and in reality SSEs are not less effi-cient than large enterprises. Finally, our relative efficiency measures maybe accurate, so that in time the predominance of SSEs in these industrieswill decline.

Because industries are defined more precisely and narrowly inthe 1968 Korean manufacturing census than in the 1971 Taiwan industrialcensus, and because the Korean data can be disaggregated into more andfiner size categories, the productivity estimates by firm size derivedfrom the Korean data are more revealing and useful than the ones in Taiwanjust discussed. We turn now to examine these estimates.

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Many studies have observed an apparent inverted "U" relationshipbetween the output/capital ratios of manufacturing industries and firm size,i.e., the output/capital ratio rises as firm size increases, usually reach-ing a peak somewhere in the size range of 50-200 workers and then declines.Because of this relationship, SSEs are believed to use capital more produc-tively than LSEs. However, the more detailed Korean data suggest that theinverted "U" relationship exists only at the aggregated level and reflectsproduct differences more than size differences.

Appendix table D9 presents the output/capital ratios by firm sizefor the manufacturing sector as a whole and for those industries with smallfirm predominance (the small-industry sector) in Korea. Output/capitalratios by firm size for industries in Korea not dominated by SSEs are pre-sented in appendix tables D1O and Dli. The inverted "U" relationship isobserved for the manufacturing sector as a whole, with the output/capitalratio rising to a peak at the size category 100-199 workers and then declin-ing. Reflecting this inverted "U" relationship, the output/capital ratiosfor establishments in the size categories below 100 workers are significantlylower than the average for the manufacturing sector, while those for estab-lishments in the size categories above 100 workers are higher than average.

Interestingly, when the output/capital ratios for small industryas a whole are calculated by size, the inverted "U" relationship becomesvery much less noticeable. Furthermore, the output/capital ratios for thesmall industry sector do not differ as significantly by size of establishmentas they do in the manufacturing sector as a whole. For example, in the smallindustry sector, the output/capital ratio is .67 for establishments with 5-9workers and .65 for establishments with 200-499 workers. The exceptions arethe size categories 50-99 and 100-199 workers where the output/capital ratios,at about .81, are somewhat higher than those in the other size categories.When the small-industry sector is disaggregated to individual small indus-tries, appendix table D9 shows that the output/capital ratios do not vary ina systematic manner with the size of establishment. One interesting finding,however, is that, among all size categories, establishments with 50-99workers had the highest output/capital ratios in a surprisingly large numberof small industries, particularly among those in categories other than IIIB(small total markets). Finally, the evidence also does not suggest any con-sistent relationship between the output/capital ratio and firm size for thoseindustries in Korea not dominated by SSEs (see appendix tables D1O and D1I).

A firms's efficiency depends, of course, not only on its capitalproductivity but also on the productivity of its other factors. Appendixtables D13, D14, and D15 present efficiency measures by establishment sizefor individual four-digit manufacturing industries in Korea on theassumption that only two factors, capital and labor are used. The relativeefficiency measure is similar to the one used earlier, except the comparisonis now between the total factor productivity of establishments of a givensize and that of the industry as a whole. In other words, the equation usedto compute the relative efficiency of establishments in the jth size categoryof a given industry is:

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A (i) = -L(j)/Ii(j) a i i a

A i=1 L 0 ai

where A(j), 0(j), and Ii(j) are respectively the total factor productivity,value added, and ith factor of production in the jth size category of theindustry. A, 0, and I. are respectively the total factor productivity, valueadded, and ith factor of production in the industry. a I's are factor shares.As there are only two factors -- capital (fixed assets in operation) andlabor -- m = 2. When the relative efficiency measure, A(j)/A, equals one, itmeans that the total factor productivity of establishments in the jth sizecategory equals the average total factor productivity for all establishmentsin the industry. Relative efficiency measures are calculated using actualfactor shares for the ai's as well as using shadow interest rates of 20, 25,and 30 percent. Shadow interest rates are used in the belief that in Korea,as in Taiwan, interest paid on capital is below the social opportunity costof capital. Because efficiency measures calculated with capital shadowpriced at 20, 25, and 30 percent yield similar results, appendix tables D13,D14, and D15 present only the relative efficiency measures based on the actualfactor shares and on capital shadow prices at 20 percent.

For each four-digit manufacturing industry in Korea, the size cate-gory with the highest total productivity (capital shadow-priced at 20%) isidentified and the results, distributed by firm size, are summarized in table4.5. To make the analysis more meaningful, the less homogeneous industriesand industries where establishments are concentrated in only a few sizecategories are not considered. Accordingly, all four-digit industries whichcontain the words "miscellaneous," "other," or "not elsewhere classified" intheir titles and industries which do not have establishments in at least foursize categories (at least one of which is below and one above 100 workers)are grouped together in table 4.5 under the heading "excluded." Of the 213four-digit industries in 1968, 75 are in the "excluded" category (half of themfrom category IIIA of the small industry sector), and together they accountedfor 14.5 percent of the factory employment.

Table 4.5 shows that in only a limited number of industries istotal productivity highest in small establishments, particularly if small isdefined to exclude the size category 50-99 workers. In only 16 of the 71small industries condidered is total productivity highest in a size categorybelow 50 workers. Interestingly, 8 of the 16 are simple assembly, mixing, orfinishing industries (IIC). Together these 16 industries accounted for only7.3 percent of the total factory employment in 1968. In other words, they arerelatively minor industries. Total productivity is highest in the sizecategory 50-99 workers in 22 of the small industries considered, and in 1968

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Table 4.5 Number of Cases (Industries) Where Total Productivity(Capital Shadow Priced at 20%) is Greatest in The Size Category Indicated

- Korea, 1968

5-9 10-19 20-49 50-99 100-199 200-499 500+ Excluded-/ Total

IA 0 0 1 3 2 4 0 3 13Small scale industries IB 0 1 1 5 4 3 3 5 22(Industries where IC 0 1 0 0 0 1 1 0 3SSEs have 50%+ IIA 0 0 1 3 3 4 0 6 17of employment) IIB 0 0 0 0 0 0 0 2 2

IIC 2 1 5 7 1 2 2 7 27Subtotal 2 3 8 18 10 14 6 23 84

IIIA 1 0 2 4 2 1 0 38 48

Total 3 3 10 22 12 15 6 61 132

Industries whereSSEs have 25-49% 3 3 2 6 5 10 3 5 37of employment

Industries whereSSEs have 0-24% 1 2 5 5 3 10 9 9 44of employment

Grand Total 7 8 17 33 20 35 18 75 213

Employment in correspondingindustries as % of total factoryemployment

Industries Where SSEshave:50% of employment .5 .5 6.3 10.6 2.7 8.5 11.2 8.4 48.5

24-49% of employment 1.3 .3 .4 2.3 2.5 4.0 1.7 .9 13.3

0-24% of employment .2 1.0 6.6 4.1 .6 12.8 7.6 5.2 38.2

All industries 2.0 1.9 13.2 17.0 5.7 25.3 20.4 14.5 100%

a/ All industries which contain the words "miscellaneous", "other", or "not elsewhere classified"in their titles plus all industries which did not have establishments in at least 4 size categories,at least one of which is below and one above 100 workers.

Sources: Appendix tables D13, D14, and D15. See chapter 3 for the description of the variouscategories of small scale industries.

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they accounted for 10.6 percent of the total factory employment. Clearly,in the Korean context, 50-99 workers is the most important of the smallsize categories. In total, some 18 percent of all factory employment inmanufacturing or about 36 percent of the factory employment in the small-industry sector are accounted for by small industries where total pro-ductivity is highest in establishments with fewer than 100 workers.Table 4.5 also shows that 33 of the 71 small industries are most efficientin a size category above 100 workers. Many of the small industries in typeIA and IB seem to fall into this category. In 6 small industries thehighest total productivity is found in the 500+ size category, and these6 industries accounted for 11.2 percent of all factory employment in manu-facturing or nearly one-quarter of the factory workers in the small-industry sector.

In some of the industries where SSEs do not predominate, thehighest total productivity is found in size categories below 100 workers,particularly in the size category 50-99. However, these appear to berelatively minor industries as their total employment is but a small per-centage of all factory employment in manufacturing. In most industries notdominated by SSEs, the most productive establishments were those with 100+workers. Indeed, in many of these industries, both the output/capital ratioand relative efficiency increase significantly with the size of establish-ment. Because these are also some of the most labor-intensive industriesin Korea, they are important providers of employment in the manufacturingsector. This evidence lends support to the observation that in many indus-tries large establishments are not only more productive but also more laborintensive than small establishments.

In assessing the above findings, it should be noted that thereexist several reasons for believing the efficiency measures to be biasedagainst SSEs. In contrast to LSEs, SSEs in Korea are more likely to under-report their value-added, use lower quality labor, have a lower rate ofcapacity utilization, and operate in more competitive conditions. All ofthese would show up in the productivity measures as lower efficiency.However, there also may be some factors that bias the productivity measuresin favor of SSEs. In particular, capital may be understated to a greaterextent for small than large establishments. If so, this difference mayoffset some of the biases against the small establishments.

With these qualifications in mind, what conclusions can we drawfrom the Korean data? The evidence strongly suggests that establishmentsin size categories below 100 workers are most productive in only alimited number of industries, and in half of these cases the most productivesize is the "small-medium" size category of 50-99 workers. Furthermore, theemployment impact of these industries, particularly those that are efficientfor establishments with fewer than 50 workers, are limited. Employment inall industries where establishments in size category 5-9 workers are mostproductive accounted for only 2 percent of the factory employment in manu-facturing; in size category 10-19 workers, 1.9 percent; in size category20-49 workers, 13.2 percent, and in size category 50-99 workers, 17 percent.If only industries where small establishments predominate are considered,

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the impact declines significantly. Employment in small industries whereestablishments in size category 5-19 workers are most productive amountedto only 1 percent of all factory workers; in size category 20-49 workers,6.3 percent, and in size category 50-99 workers, 10.6 percent.

It would appear from the Korean data that establishments withfewer than 50 workers cannot be relied upon to generate a large amountof employment efficiently. In part this is because small establishmentsare found to be efficient in only a few industries, and in part becausethe few industries where small establishments are efficient do not absorblarge number of workers. Thus, from the viewpoint of efficient employ-ment creation, small (particularly the very small) may not necessarily bebeautiful.

Resource Use in Small Scale Non-Manufacturing Industries

Up to this point I have said little about SSEs in non-manufacturingindustries. In part this is because there are less data on non-manufacturingactivities by size of establishment. Tables 4.6 and 4.7 present respectivelythe relevant ratios and relative efficiency measures in a number of importantnon-manufacturing industries in Taiwan in which SSEs play a prominent role.Needless to say, these ratios and efficiency measures suffer from many of thesame problems mentioned in the earlier discussion of manufacturing. Salientfeatures revealed in these tables are discussed below.

In all construction activities, there is a tendency for the capital/labor ratio to decline with the size of enterprise, but this tendency isparticularly strong in painting and well drilling, the two constructionactivities in table 4.6 most precisely defined. In some of the other con-struction activities, such as civil engineering, the capital/labor ratio,after falling with the size of enterprise, rises at the largest category,confirming the fact that large civil engineering firms often engage indifferent types of construction work than small establishments. Althoughvalue-added per unit of total assets rises with the size of enterprise inall construction industries except civil engineering, the relative efficiencymeasures (either those constructed with the actual factor shares as weights,or those constructed on the assumption that capital share is .2K/(.2K + W))show construction enterprises with fewer than 30 workers to be clearly themore efficient users of resources in all types of construction activitiesexcept electrical engineering, where they are about equally productive aslarger enterprises.

Restaurants and hotels and transportation and storage also displaycapital/labor ratios that appear to increase with the size of establishment,but the rise occurs primarily in the size range of 100+ workers. Onesuspects that the large enterprises are tourist hotels, airlines, and rail-roads that are not usually considered part of the small-industry sector.One may conclude that the more traditional transport facilities and restau-rants that are part of the small-industry sector have capital/labor ratiosthat do not vary significantly by size of enterprise. For restaurants

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sable 4.6 Total Assets in Operation per Person Employed and Value-added per Unit of Total Assets in Operation forConstruction, Trade, and Selected Service IndustriesBy Size of Enterprise, Taiwan, 1971

Total assets per Size of enterprise (workers)person employed, 000 NT$ 1-3 4-6 7-9 10-19 20-29 30-49 50-99 100-499 500+

Construction

Civil engineering 190 121 64 39 32 51 32 31 113Electrical engineering 170 87 70 66 34 47 53 87 -Pipe installation 127 88 104 86 116 52 43 32 -Painting 88 64 54 31 25 12 5 2 -Well drilling 118 63 34 40 42 23 14 2 -Others 315 659 95 97 44 24 45 4 -

Wholesale trade 233 201 214 237 237 258 207 319 2026Retail trade 93 108 117 115 112 131 111 140 -Restaurants and- hotels 96 141 133 150 122 155 193 246 662Transportation and storage 1r59 132 124 129 92 126 131 254 419Personal service 64 55 55 49 53 36 37 92 -

Value added per unit oftotal assets

ConstructiOn

Civil engineering .38 .41 .47 .55 .61 .33 .43 .69 .23Electrical engineering .19 .29 .32 .45 .54 .42 .52 .21 -Pipe installation .29 .36 .29 .42 .14 .23 .32 a -Painting .26 .37 .35 .68 .55 .80 2.19 1.20 -Well drilling .30 .30 .82 .56 1.04 .77 .66 3.57 -Others .21 .50 .15 .33 .53 .69 .26 3.17 -

Wholesale trade .14 .17 .19 .19 .17 .24 .25 .27 .02Retail trade .26 .24 .25 .24 .24 .20 .28 .11 -Restaurants and hotels .23 .16 .16 .14 .14 .14 .10 .06 .18Transportation and storage .26 .29 .24 .25 .26 .23 .22 .17 .15Personal services .33 .38 .40 .42 .37 .58 .32 .24 -

aNegative value-added.

Source: Based on data in The Report of the 1971 Industrial and Commercial Censusof Taiwan and Fukien kA-ea, Reou blic of China.

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Table 4.7 Relative Efficiency by Size of Enterprise, A(j)/A,for Construction, Trade, and Selected ServiceIndustries, Taiwan, 1971

Size of enterprise (workersl _

1-3 4-6 7-9 10-19 20-29 30-49 50-99 100-499 500+

I. Actual factor shares

ConstructionCivil engineering 2.71 2.02 1.40 1.08 1.02 .82 .73 1.13 1.07Electrical engineering 1.05 .99 .93 1.25 .93 .91 1.23 .70 -Pipe installation 1.71 1.61 1.48 1.80 .79 .65 .77 a -Painting, etc. 1.16 1.24 1.03 1.27 .84 .70 .93 .26 -Well drilling 1.44 .88 1.47 1.14 2.19 1.00 .57 .65 -Others 1.06 3.78 .42 .95 1.01 .95 .49 1.82 -

Wholesale trade .83 .92 1.05 1.14 1.02 1.46 1.33 1.86 .47Retail trade .99 1.02 1.11 1.05 1.05 .97 1.18 .53 -Restaurants and hotels 1.13 1.06 .99 .94 .85 1.03 .81 .64 3.89Transportation & storage 1.10 1.04 .84 .88 .71 .81 .80 .98 1.19Personal services .99 1.01 1.06 1.02 .97 1.12 .62 .95 -

II. Capital share = .2K(.2K+W)

ConstructiJonCivil angineering 2.10 1.71 1.35 1.16 1.13 .83 .81 1.27 .92Electrical engineering .91 .95 .93 1.25 1.03 .96 1.27 .67 -Pipe installation 1.43 1.50 1.31 1.68 .68 .71 .89 a -Painting, etc. 1.01 1.15 .99 1.36 .95 .90 1.42 .47 -Well drilling 1.27 .82 1.45 1.10 2.12 1.02 .61 .84 -Others 1.05 3.71 .42 .94 1.01 .96 .49 1.86 -

Wholesale trade .89 1.02 1.15 1.21 1.09 1.52 1.48 1.83 .27Retail trade 1.00 1.01 1.07 1.02 1.02 .91 1.15 .49 -Restaurants & hotels 1.35 1.08 1.03 .94 .92 1.02 .73 .52 2.14Transportation & storage 1.28 1.33 1.09 1.13 1.02 1.04 1.02 1.00 1.02Personal services .98 1.03 1.08 1.06 .99 1.23 .68 .88 -

aEnterprises in this category had negative value added.

Source: Based on data in The Report of the 1971 Industries and Commercial Census ofTaiwan and Fukien Area, Republic of China.

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and hotels, both output/capital ratio and relative efficiency are highestfor establishments with 1-3 workers and 500+ workers, that is, among thesmallest eating establishments and the most modern tourist hotels. Forrestaurants and hotels with 4-99 workers, the output/capital ratio andrelati-ve efficiency are somewhat lower and do not change significantlywith size. Enterprises with 1-99 workers in transportation and storagehave approximately the same output/capital ratio, about .25, but largerenterprises have significantly lower output/capital ratios. Except forthose with 500+ workers, enterprises with 1-6 workers in transportationand storage are the most efficient users of resources. And, when relativeefficiency is calculated on the assumption of a 20 percent rate of returnon capital, enterprises with 1-6 workers in transporation and storage areeven more productive than those with 500+ workers.

There is no discernible trend in the capital/labor ratios by sizeof enterprise in wholesale trade, retail trade, or personal services. Inwholesale trade, both the output/capital ratio and relative efficiency risewith the size of enterprise, but they drop sharply in enterprises with 500+workers. However, over a wide size range (30-499 workers) the variationoccurs within very narrow bands: between .24 and .27 for the output/capitalratio and between 1.5 and 1.8 for the relative efficiency measure. Asexpected, the output/capital ratio and the relative efficiency measure inretail trade establishments show little variation by size of enterprise,except that those with more than 100 workers have significantly smalleroutput/capital ratio and lower relative efficiency. Finally, both theoutput/capital ratio and the relative efficiency measure in enterprisesthat provide personal services fluctuated by size, but within relativelynarrow limits.

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V. CAPITAL, LABOR, AND ENTREPRENEURS IN THE SMALL ENTERPRISE SECTOR

This chapter presents evidence from Korea and Taiwan pertainingto the sources of capital for small enterprises, the prices small enterprisespay for factors, and the characteristics of entrepreneurs in the small enter-prise sector.

Capital

The initial capital requirement is one, and perhaps the most impor-tant, potential barrier to entry into the small enterprise sector. A 1973survey of small (5 to 49 workers) manufacturing enterprises, conducted bythe Citizens National Bank (CNB) in Korea, asked "new" firms (those estab-lished between January 1971 and June 1973) to indicate the approximate mag-nitude of their initial investment. 1/ From the responses received, the2,510 manufacturing enterprises with 5 to 49 workers established between1971 and June 1973 are distributed by industry, size, and size of initialinvestment in Table 5.1.

Unfortunately, it is not possible to deduce the average initialinvestment from the information in Table 5.1, but the data suggest that itincreased with size (number of workers) of enterprise. Of the 1,411 "new"enterprises with 5-9 workers, 44 percent began with initial capital below1 million won (about US$2,500 at the 1972-73 exchange rate), 49 percent withinitial capital between 1 and 10 million won (US$2,500-25,000), and 6 percentwith initial capital between 10 and 30 million won (US$25,000-75,000). Ofthe 724 "new" enterprises with 10-19 workers, the distribution by size ofinitial capital was as follows: below 1 million won, 20 percent; 1 to 10million won, 58 percent; 10 to 30 million won, 19 percent, and above 30 mil-lion won, 3 percent. Finally, of the 375 "new" enterprises with 20 to 49workers, distribution by initial capital was as follows: below 1 millionwon, 7 percent; 1 to 10 million won, 38 percent; 10 to 30 million won, 35percent; and above 30 million won, 21 percent. To put the distribution some-what differently, more than two-thirds of the "new" enterprises with 5 to 49workers began with initial capital greater than US$2,500. Of the 798 enter-prises that began with initial capital of less than US$2,500, 75 had lessthan US$250, 95 between US$250 and US$500, 112 between US$500 and US$750, 186between US$750 and US$1,200, and 329 between US$1,200 and US$2,500. Thesefigures suggest that, while the initial capital requirements were not pro-hibitively large, they were also far from modest. With a per capita GNP ofUS$375 in 1973, not many Koreans could easily have raised US$2,500. However,

1/ The Citizens National Bank, Report on the 1973 Survey of Small and PettyBusinesses (Manufacturing). The survey interviewed 1,684 small enter-prises, selected by stratified random sampling techniques from a popu-lation of 21,045 enterprises with 5 to 49 workers.

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Table 5.1 Number of Small Manufacturing Enterprises Established During 1971-1973Distributed by Size of Initial Investment, Size of Enterprise, andIndustry, Korea

By size of enterprise and size of initial investment

5-9 workers 10-19 workers 20-49 workers

Below 1 1-10 10-30 Below 1 1-10 10-30 30+ Below 1 1-10 10-30 30+Total mil won mil won mii won mil won mil won mil won mil won mil won mil won mil won mil won

Manufacturing 2510 628 696 87 145 419 136 24 25 141 130 79

Food 233 37 87 13 26 26 0 24 0 0 0 20

Beverage 175 51 50 37 0 24 13 0 0 <0 0 0

Textile 346 48 13 12 37 -100 0 0 25 38 37 36

Apparel 486 225 174 0 24 51 0 0 0 12 0 0

Wood & its prod. 106 25 26 0 0 37 18 0 0 0 0 0

Furniture & fix. 111 76 24 0 0 0 11 0 0 0 0 0

Paper & its prod. 65 0 26 0 0 14 12 0 0 0 13 0

Printing & pub. 84 0 25 0 0 37 0 0 0 22 0 0

Industrial chem. 57 0 12 0 0 13 11 0 0 15 6 0

Other chem. 50 12 0 0 10 13 0 0 0 0 0 15

Prods. of pet.and coal 100 13 61 0 0 15 11 0 0 0 0 0

Nonmetallicminearal prod. 212 102 48 13 11 13 0 0 0 17 0 8

Metal products 110 12 50 0 13 0 23 0 0 0 12 0

Machinery 101 13 24 12 0 25 14 0 0 0 13 0

Elec. mach.and apparatus 49 0 0 0 0 12 0 0 0 25 12 0

Transp. equip. 101 0 38 0 0 26 0 0 0 0 37 0

Other mfg. ind. 124 14 38 0 24 13 23 0 0 12 0 0

Source: The Citizens National Bank, Report of the 1973 Survey of Small and Petit Businesses (Manufacturing), Table 1-5.

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we need to remember that these figures are for establishments with 5 to 49workers. Establishments smaller than 5 workers would undoubtedly have muchmore modest initial capital requirements.

The initial capital requirements differ, of course, oy industry.In Korea, industries with relatively modest initial capital requirementsinclude wearing apparel, furniture and fixtures, and non-metallic mineralproducts. 1/ Fifty-one percent of the "new" small (5 to 49 workers) enter-prises in wearing apparel, 68 percent of those in furniture and fixtures,and 53 percent of those in non-metallic mineral products began with initialcapital of less than 1 million won, and the initial capital invested in 90or more percent of the "new" small enterprises in these three industries wasless than 10 million won. It is not surprising, therefore, to find one-thirdof the small enterprises established during 1971-73 in these 3 industries.

Industries where a substantial share of the small enterprises estab-lished during 1971-73 began with initial capital of 10 million won or moreincluded beverages (29 percent), paper and its products (38 percent), indus-trial chemicals (30 percent), metal products (32 percent), machinery (39 per-cent), and transport equipment (37 percent). Furthermore, during 1971-73,no small enterprises with less than 1 million won in initial capital wereestablished in the following 5 industries: printing and publishing, elec-trical machinery and apparatus, industrial chemicals, paper and its prod-ucts, and transport equipment. In three industries, printing, petroleumand coal products (mainly coal briquettes), and electrical machinery andapparatus, nearly all of the small enterprises established during 1971-73began with initial capital between 1 and 10 million won. Finally, it shouldbe noted that in many industries--most notably in food, beverages, and tex-tiles--the variance in the size of initial investments was quite large--evenwhen the size (number of workers) of the enterprises is taken into consider-ation. For example, of the 138 beverage enterprises with 5-9 workers estab-lished during 1971-73, 51 began with less than 1 million won, 50 with between1 and 10 million won, and 37 with 10 to 30 million won. The large varianceundoubtedly reflects, in part, the fact that small enterprises in these indus-tries produce a large variety of goods of varying qualities so that the typeand therefore the cost of capital equipment required would differ widely.

The working capital requirements of small-scale industries or, asdefined by the 1973 CNB survey, the amount of funds needed to operate a smallmanufacturing enterprise for one cycle (or circulation), are also available.These are tabulated and arranged by industry and by size of enterprise inTable 5.2. Not surprisingly, the amount of working capital required increaseswith the size of enterprise. Thus, the average requirement for enterpriseswith 20-49 workers was more than twice that for enterprises with 10-19 workersand more than 6 times that for enterprises with 5-9 workers. The average work-ing capital required by a manufacturing enterprise with 5-9 workers in 1973

1/ All figures in this and the following paragraph are calculated fromfigures in Table 5.1.

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Table 5.2 Average Working Capital Required bySize of Enterprise and Industry, 1973

(000 won/enterprise)


Total 5-9 10-19 20-49

Manufacturing 1,812 857 2,229 5,344

Food 1,071 579 1,695 2,903

Beverages 906 642 1,496 1,894

Textiles 3,212 980 3,037 5,393

Wearing apparel 768 466 1,003 5,028

Leather and its products 4,595 2,931 9,029 2,611

Leather footwear 590 482 1,204 2,043

Wood and its products 3,650 2,520 3,551 15,725

Furniture and fixtures 739 569 1,279 2,250

Paper and its products 2,737 801 3,333 6,526

Printing and publishing 2,274 493 3,198 12,105

Industrial chemicals 3,137 2,941 2,900 3,626

Other chemicals 4,554 806 3,000 13,941

Petroleum refining 1,541 1,541 - -

Petroleum and coal prod. 4,066 2,483 2,813 16,292Rubber products 1,444 1,424 1,737 1,184

Plastics products 2,720 986 86 7,552

Non-metallic minearalproducts 926 615 1,299 3,199

Basic metals 3,010 1,266 2,249 5,023

Metal products 2,104 1,162 2,385 4,696

Machinery 2,033 1,098 2,402 3,937

Electrical machineryand apparatus 1,832 775 1,141 3,430

Transport equipment 3,326 2,105 3,342 4,974

Photographic, scientific,measuring equipment 821 176 751 1,604

Other manufacturing 1,484 857 1,654 2,609industries

Sources: The Citizen National Bank, Report of the 1973 Survey of Small andpetit Businesses (manufacturing), Table 1-25.

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was W 857,000 (about US$2,100) but varied considerably by industry. In 3industries (wearing apparel, leather footwear, and furniture and fixtures),the average working capital required by an enterprise with 5-9 workers wasabout US$1,00u, but in five others (transport equipment, petroleum and coalproducts, industrial chemicals, wood and its products, and leather and itsproducts) it exceeded US$5,000. Consistent with our expectation, since asubstantial portion of the initial capital is used as working capital, indus-tries with relatively modest working capital requirements, such as apparel,furniture and fixtures, and non-metallic mineral products, were also thosewith relative low initial capital requirements.

The 1973 CNB survey also identified the main sources of initialcapital funds as well as the sources of working capital, and the surveyresults appear to confirm two important characteristics commonly attributedto the small-enterprise sector. The first is that the small-enterprise sectoroperates in a fragmented capital market and is isolated from the organizedor the institutional credit market. The second is that small enterprisesappear to play an important role in mobilizing savings that might otherwisebe used unproductively.

The survey findings show that, of those enterprises with 5-49 workersestablished from 1971 to June 1973, 25.5 percent identified their main sourceof initial capital as loans from friends and relatives; 8.8 percent, financialinstitutions; 6.4 percent, private lenders; 4.9 percent, severance pay, and54.4 percent, other sources (the main one, presumably, was personal savings).This clearly suggests that little of the initial capital invested in the small-enterprise sector in Korea came from either the organized credit market orfrom the informal curb market (private lenders). Rather, the bulk of theinitial capital was financed from the accumulated savings of the entrepre-neurs and their immediate circle of friends and relatives. Apparently, inless developed countries, where financial institutions often do not servethe small savers, small enterprises provide a channel through which savingscan be put to productive uses.

Financial institutions in Korea apparently play a somewhat larger,but still a minor, role in supplying funds to existing small enterprises foruse as working capital or to help finance additional fixed investments. AMedium-Small Industry Bank survey reported that, of the investments in fixedcapital made by manufacturing enterprises with 5-49 workers in 1975, 32 per-cent were financed by financial institutions, 3 percent by private lenders,and 65 percent self-financed (presumably from own savings and that of friendsand relatives). 1/ However, the very small enterprises still had to dependalmost exclusively on their own resources for expansion. Eighty-four percentof the fixed capital investments made by enterprises with 5 to 9 workers in

1/ The Medium-Small Industry Bank, Report on the Status of Medium-SmallIndustries, 1975, Table 2.9.

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1975 was self-financed. In Korea, small enterprises also depend primarilyon their own resources for working capital. According to the 1973 surveyof small and petty businesses, approximately three-quarters of the requiredworking capital of small manufacturing enterprises was self-provided. 1/Of the one-quarter that was borrowed, 61 percent was from financial insti-tutions, 8 percent from private lenders, 17 percent from other enterprises(presumably trade credits), and 14 percent from friends and relatives. Ingeneral, the larger the enterprise, the larger share of the borrowed portionof the working capital was financed by financial institutions. Of the workingcapital borrowed by enterprises with 20-49 workers, 70 percent came from finan-cial institutions, but for enterprises with 5-9 workers the share was only 44percent.

It is easy to understand why small enterprises have received solittle institutional credit. Loans are more costly to process and defaultrisks are perceived to be substantially higher for SSEs than LSEs. This meansthat, unless special institutions are created to serve SSEs, their needs willbe largely ignored. Until recently, such institutions did not exist in Koreaor in Taiwan. Furthermore, the financial institutions in Korea and Taiwanare largely government owned and controlled, and during much of the postwarperiod institutional credits, by and large, were allocated administratively.In consequence, credit flowed primarily to those enterprises (government orprivate) or projects the government favored, and neither the government inKorea nor the one in Taiwan considered the development of the small-enterprisesector important in itself. Under such conditions, it is not surprising tofind the small-enterprise sector isolated from the organized credit market.

Because of the fragmented capital market, it is widely believedthat small and large enterprises pay significantly different prices for theircapital. It is true that in Korea and Taiwan the interest on institutionalloans is low and usually subsidized and that enterprises that are able toget institutional credits are generally large. Enterprises that cannot getinstitutional loans, and most SSEs would fall into this category, must borrowfrom the informal credit market where the lending rates are much higher. 2/The little evidence we have suggests that in the mid-1970s private lendersin the unorganized credit market charged interests of 3-4% per month in Koreaand 2-3% per month in Taiwan. Thus, interest rates on the unorganized marketare several times higher than that charged by financial institutions. Itwould appear that, in Korea and Taiwan, interest costs are significantly

1/ This and the following statistics are from The Citizen National Bank,Report of the 1973 Survey of Small and Petty Businesses (Manufacturing),

Table 1.25.

2/ For one description of the informal credit market in Taiwan, see D.R.DeGlopper, "Doing Business in Lukang," in W.E. Willmott, ed., EconomicOrganization in Chinese Society (Stanford: Stanford University Press,11972), pp. 297-326.

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lower for LSEs than for SSEs, and that the higher interests paid by the SSEscannot be completely explained by the higher cost and greater risk of lendingto small enterprises. These differences may help explain why some SSEs inKorea and Taiwan are more labor intensive. Lack of access to institutionalcredit may also be why SSEs in Korea and Taiwan are under-cai :alized andoperate with insufficient working capital. Undercapitalization is, of course,one reason why the mortality rate is so high among SSEs. 1/

Labor

Because of imperfections in the labor market, it is widely believedthat wage costs are substantially higher in LSEs than in SSEs, and this dif-ferences is one important reason why SSEs are able to compete against the tech-nically more superior LSEs. Is this wage difference between small and largeenterprises observed in Korea and Taiwan, and to what extent is the differencedue to market imperfections?

At the aggregate level, the wage difference between small and largeenterprises is obvious and substantial. In Korea, the annual average wagein 1968 was W 63,000 in manufacturing establishments with 5-9 workers,W 83,000 in establishments with 10-19 workers, W 84,000 in establishmentswith 20-49 workers, W 92,000 in establishments with 50-99 workers, W 102,000in establishments with 100-199 workers, and W 125,000 in establishments with200+ workers. 2/ In other words, the annual average wage paid by establish-ments with 200+ workers was about twice that paid by establishments with 5-9workers. In Taiwan, the wage differential between large and small enterprisesis apparently somewhat smaller. In 1971, manufacturing establishments with500+ workers paid an annual average wage that was about 60 percent higherthan that paid by establishments with 1-9 workers. 3/

Aggregate data often hide as much as they reveal. In Korea, moredetailed data suggest that the relationship between wage and establishmentsize is much more varying at the disaggregated level, and that some of thewage differences are caused by differences in the quality of workers employedby small and large establishments. To see whether the positive relationshipbetween wage and firm size exists when industries are more precisely defined,I used the data from the 1968 manufacturing census in Korea and calculated

1/ Undercapitalization is one reason often cited by small entrepreneursfor going out of business. See Donald R. DeGlopper, "Artisan Work andLife in Taiwan," Modern China 5 (July 1979), pp. 290-95.

2/ Report on Mining and Manufacturing Census, 1968.

3/ The 1971 Industrial and Commercial Censuses of Taiwan and Fukien Area,Republic of China. The annual average wage per worker was NT$16,539for establishments with 1-9 workers and NT$26,172 for establishmentswith 500+ workers.

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the annual average wage by establishment size for all four-digit industries.The establishment size that reported the highest annual average wage perworker is identified for each industry, and the results are distributed byestablishment size and presented in Table 5.3. As before, the less homo-geneous industries and industries where establishments are concentrated ina few size categories are excluded.

Once the wage data is disaggregated to the four-digit industrylevel, average wage is no longer found to increase always with firm size.Indeed, Table 5.3 shows that in 26 industries the highest wage is paid byestablishments with fewer than 50 workers. However, in 88 of the 138 four-digit industries considered, the highest wage is paid by establishment with100+ workers, and in many cases the wage difference is considerable, withlarge establishments paying average wages as much as two or three times thatpaid by the smallest establishments. Apparently, even within individualindustries, there is still substantial wage difference by plant size, withlarge plants generally, but by no means always, paying higher wages. Becauselabor is not homogeneous and because different plants use workers of differingcharacteristics (quality, training, skills), whether or not the wage differ-ence between size categories is a real difference cannot be determined unlessthe wage statistics are standardized for quality and skill differences.

Available data do not permit us to take account of all the differ-ences in workers' characteristics. However, the 1967 wage survey in Koreadoes identify earnings by broad categories of workers according to two-digitindustries and size of establishment. Earnings data for two prominent typesof workers are tabulated in Table 5.4. The average hourly wages of permanentmale production workers with middle school education or less (grade 9 or less)are presented in panel A and that of temporary male production workers inpanel B. Both sets of data suggest that (1) the average wage of the largestenterprise is not always the highest and (2) the wage gap between large andsmall enterprises is considerably smaller when the type of worker is definedmore precisely. For example, temporary male production workers (most of whomare presumably unskilled), receive, as expected, a lower wage than permanentmale workers. However, in addition, the data also show that large enter-prises do not always pay the highest wage for this type of worker, and thatthe difference between the wage paid by small and large enterprises, in manyindustries, is quite limited (less than 40 percent).

One other difference between workers in LSEs and those in SSEs needto be noted. In Korea and Taiwan, the turnover rates of workers are substan-tially higher in SSEs than in LSEs. While precise statistics are not avail-able, it is indicative that in Taiwan workers in SSEs are sometimes referredto as "floating labor." 1/ This difference between the workers in SSEs and

1/ Donald R. DeGlopper, "Artisan Work and Life in Taiwan," Modern China,5 (July 1979), pp. 299-305.

Table 5.3 Number of Cases (Industries) Where Annual Average Wage Per Workeris Highest in The Size Category Indicated - Korea, 1968

Not5-19 20-49 50-99 100-199 200+ Classified- Total

IA 1 1 3 3 2 3 13IB 0 3 2 6 5 6b/ 22

Small scale industries IC 0 0 0 2 1 0 3(industries where IIA 0 1 2 2 6 6 17SSEs have 50+% IIB 0 0 0 0 0 2 2of employment) IIC 0 6 4 5 5 7 27

Subtotal 1 11 11 18 19 23

lIZA 1 1 4 3 1 38 48

Total 2 12 15 21 20 61 132

Industries whereSSEs have 25-49% 1 5 2 6 18 5 37of employment

Industries whereSSEs have 0-24% 4 2 6 4 19 9 44of employment

All industries 7 19 23 31 57 75 213

a/Include all industries which contain the words "miscellaneous", "other", or " not elsewhereclassified" in their title plus all industries which did not have establishments in at least4 size categories, at least one of which is below and one above 100 workers.

b/Include one industry where the annual average wage per work was the same for all establishmentsizes.

Sources: Based on data in Report on Mining and Manufacturing Census, 1968. See chapter 3 forthe description of the various categories of small industries.

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Table 5.4 AVERAGE WAGE-/ BY TWO-DIGIT MANUFACTURING INDUSTRY

AND ESTABLISHMENT SIZE - KOREA, 1967(Won/hour)

Industry Establishment Size Category (Workers) 200+All 5-29 30-199 200+ 5-29

A. Permanent male production workerwith middle school education or less

Food 37 29 42 46 1.59Beverage 28 22 38 25 1.14Textile 40 30 32 50 1.67Apparel and footwear 34 30 40 34 1.13Wood and cork products 38 34 47 37 1.09Furniture and fixtures 33 32 37 - -

Paper and paper products 32 24 34 53 2.21Printing and publishing 36 25 29 43 1.72Leather and its products 26 23 29 35b/ 1.52Rubber products 39 31b/ 38 43 1.39Chemicals 39 31 34 52 1.68Petroleum and coal products 34 33 37 33 1.00Nonmetallic mineral products 39 36 33 56 1.56Basic metals 43 35 34 54 1.54Metal products 29 26 31 35 1.35Machinery (excluding electric) 33 27 35 41 1.52Electric machinery & apparatus 30 25 31 37 1.48Transport equipment 35 29 34 48 1.66Miscellaneous 30 29 30 34 1.17

B. Temporary Male Production Worker

Food 26 23 28 31 1.35Beverage 17 15 24 - -Textile 31 26 31 36 1.38Apparel and footwear 33 36 25 32 .89Wood and cork products 27 30 36 23 .77Furniture and fixtures 18 18 18 - -Paper and paper products 18 21 16 24 1.14Printing and publishing 20 19 18 55 2.89Leather and its products 17 16 16 19 1.19Rubber products 18 - 20 17 -Chemicals 27 20 29 28 1.40Petroleum and coal products 32 31 36 55 1.77Nonmetallic mineral products 31 30 34 28 .93Basic metals 32 45 21 28 .62Metal products 21 21 21 22 1.05Machinery (excluding electric) 29 18 33 40 2.22Electric machinery & apparatus 22 17 22 25 1.47Transport equipment 36 41 26 35 .85Miscellaneous 20 26 13 - -

a/ Total earnings divided by total hours worked.b/ No educational breakdown available

Source: Calculated from data in Bank of Korea, Report on Wage Survey, 1967, pp. 93-246.

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those in LSEs undoubtedly also help to explain some of the observed differ-ences between the wages paid by small and large enterprises. It appearsthat, once these quality and other differences between workers are takeninto account, much of the observed wage differences between small and largeenterprises would be eliminated, though probably not completely.

The conclusion that the wage gap between small and large firmsin Korea and Taiwan, once the characteristics of workers are standardized,is small does not come as a surprise. Labor markets appear to be relativelyfree of distortions in both Korea and Taiwan, In both countries,.unions are weak and disorganized, and government interventions suchas minimum wage legislation are few and not vigorously enforced. If thereare imperfections in the labor maarket, they appear to be minor, certainlyless serious than the distortions in the capital market.

Entrepreneurs

Whether or not a small business is successful and whether or nota small enterprise is able to grow into a large firm depends, more than onany factor, on the ability of the entrepreneur to recognize and seize oppor-tunities and to manage the enterprise's operation. This section examinesthe socio-economic characteristics of proprietors of small manufacturingenterprises in the hope of gaining insight into the characteristics ofentrepreneurs. The primary source of information is again the 1973 CNBsurvey of small and petty businesses. From this survey, selected charac-teristics of small-scale industrial proprietors in Korea are obtained andpresented in table 5.5.

We are interested in the background of small-scale proprietors forwhat it may reveal about the characteristics of entrepreneurs. Seventy-threepercent of the small scale proprietors in Korea started their businesses fromscratch, 22 percent purchased their business, and only 4 percent acquiredtheir business through inheritance (item 1, Table 5.5). This distributionvaried little by size of enterprise. Although the surprisingly small percent-age of proprietors who obtained their business through inheritance may beexplained, at least in part, by the Korean War which destroyed much of thecountry's industrial capital, it is also evidence that most small scaleproprietors are self-made.

Because formal education may enhance a person's managerial andtechnical skills, an important characteristic of a small-scale proprietoris his educational attainment. Unfortunately, the 1973 CNB survey did notobtain this information. It did, however, obtain some information aboutthe experience of small-scale proprietors. Since experience is not onlya substitute for formal education but may, in many cases, provide bettertraining for the proprietor, this information is useful. Two indicators ofexperience are presented in Table 5.5 (items 2 and 3): the distribution ofproprietors by age and by occupation before becoming owners.

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Table 5.5 Characteristics of Small-Scale Industrial Proprietorsand Their Enterprises by Size of Enterprise, Korea, 1973


Total 5-9 10-19 20-49

(1) Percentage distributionof how proprietorsacquired business 100% 100% 100% 100%

Established business 73 71 .76 75Inherited business 4 4 3 4Purchased business 22 23 20 18Others 1 1 2 3

(2) Percentage distributionof proprietors by age 100% 100% 100% 100%

Below 19 .1 .1 0 .420-29 1.9 2.2 1.1 1.830-39 22.4 24.5 21.5 14.640-49 36.9 37.2 36.6 35.850-59 31.2 29.2 32.7 37.960+ 7.4 6.7 8.1 9.4

(3) Percentage distributionof proprietors' occupa-tion before becomingowner 100% 100% 100% 100%

Worked in an enterprisein same line of business 32 33 35 25

for 0-5 years (5) (5) (6) (5)for 5-10 years (13) (13) (13) (9)for 10+ years (14) (15) (16) (11)

Woriked in an enterprisein a different line ofbusiness 16 16 15 22

Worked in family business 20 18 13 11

Merchant 20 18 22 24

Civil service, police,and military service 12 12 11 10

Others 4 4 4 7

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Table 5.5 Characteristics of Small-Scale Industrial Proprietorsand Their Enterprises by Size of Enterprise, Korea, 1973


Total 5-9 10-19 20-49

(4) Percentage of enterprises 31% 21% 39% 65%with separate accountsfor enterprise and forhousehold

(5) Percentage distributionof enterprises bybook-keeping methods used 100% 100% 100% 100%

Double entry 10 4 12 32Single entry 27 20 36 43Others (inc. memo) 63 76 52 24

Source: The Citizens National Bank, Report on the Survey of Small and PettyBusinesses (Manufacturing), 1973, Tables 1-2, 1-3, and 1-15.

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If we assume that age and experience are positively related, thenthe age distribution of small-scale proprietors gives some indication oftheir experience. In Korea only 2 percent of small-scale proprietors wereyounger than 30 years and 68 percent were between the ages of 40 and 59.Furthermore, the proprietors of enterprises with 20-49 workers were slightlyolder than those of smaller enterprises. These figures suggest that mostsmall-scale proprietors have some experience, and that proprietors of enter-prises with 20-49 workers have somewhat more experience than those of thesmaller enterprises.

The data under item 3, Table 5.5, show that, before becoming ownersof small enterprises, 84 percent of the proprietors had experience in com-merce or industry. In fact, one-third of the proprietors, before becomingowners, worked in the same line of business, and most of them for at least5 years. This reflects the well-known fact that, in many industries, e.g.,furniture, the aim of most apprentices and journeymen is to go into business-for themselves. 1/ Usually, the main obstacle is capital. The desire tobe independent often leads to the establishment of businesses before suffi-cient capital has been accumulated. Because of undercapitalization, mostof these ventures end in failure. The data also show that 20 percent ofthe small-scale proprietors were previously merchants, and that more of theowners of enterprises with 20-49 workers had commercial experience than didowners of smaller enterprises. Apparently, commerce is a good trainingground for entrepreneurs. This is understandable considering that proprie-tors of small-scale industrial enterprises are as much involved in commerceas in manufacturing. That many proprietors were once merchants is alsoevidence that commercial profit is a major source of capital for small-scaleindustry.

Another possible indicator of the ability of the small-scale pro-prietor is whether or not the small enterprise separates its own account fromthe proprietor's household account. How the enterprise keeps its records mayalso indicate the proprietor's ability. The available evidence for Korea ispresented as items 4 and 5 in Table 5.5. As the data indicate in 1973, only31 percent of the small-scale proprietors kept separate accounts for theirenterprises. The percentage, however, increased with size of enterprises.Whereas 21 percent of the enterprises with 5-9 workers had separate accounts,65 percent of those with 20-49 workers had separate accounts. The largerenterprises also used more sophisticated book-keeping methods. More thanthree-quarters of the enterprises with 20-49 workers used either the doubleentry or the single entry book-keeping methods, but less than one-quarter ofthe enterprises with 5-9 workers used these methods. Most of the very smallenterprises, if they kept records at all, maintained only a very rudimentaryset of accounts. This lack of accounting and managerial know-how is onereason why small firms find it so difficult to expand beyond 30-50 workers.

1/ Ibid., p. 292.

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also not clear whether operating a small business will necessarily give anentrepreneur the needed managerial and financial skills for operating amedium-large enterprise.

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VI. ECONOMIC POLICIES AND THE SMALL-ENTERPRISE SECTOR

The small-enterprise sector has received relatively little atten-tion from policy makers in Korea and Taiwan. In the 1950s and the early1960s, government policy in both countries focused on promoting industrial-ization through import substitution. Enterprises that received specialgovernmient attention and assistance in this period were usually large and,at least in Taiwan, many were also enterprises the government inheritedfrom the Japanese. However, the development policy adopted in the earlypostwar period, as well as the changes in policy introduced in the early1960s, had important indirect impact on the small-enterprise sector. Thischapter begins by reviewing the policy environment in Korea and Taiwan andassessing its effects on the small-enterprise sector. It then briefly dis-cusses government policies in two areas that are thought to be particularlycritical to the development of small enterprises: credit and technicalassistance.

Development Strategy and The Small-Enterprise Sector

Because of the difference in the pace of industrialization beforeand after 1960 and because in both countries the underlying forces respon-sible for industrialization in the 1950s were different than those in the1960s and the early 1970s, it is useful to divide the postwar period intotwo subperiods. 1/ During the first subperiod (1949-1960 for Taiwan and1953-1962 for Korea), both Korea and Taiwan, partly in response to theireconomic environment (inflation, balance of payment difficulties, and un-promising markets for traditional exports), followed an import substitutionapproach to industrialization. This period was characterized by overvaluedexchange rates, complex exchange and import controls, continued tradedeficits, low bank interest rates with credit rationing, and large govern-ment budget deficits financed by borrowing from the central bank. At first,import substitution was successful in stimulating growth as domestic pro-duction of numerous consumer non-durables, such as flour, fabrics, and flatglass, and some intermediate goods, such as, cotton and synthetic yarns,newsprint, and selected industrial chemicals, expanded to replace imports.Indeed, during the early (and easy) phase of import substitution in Taiwan(1949-54), manufacturing production increased at an average rate of 22 per-cent per year, although rehabilitation of war-torn industries was partlyresponsible for the rapid rate of growth. Following this expansion, however,opportunities for easy substitution were soon exhausted in both countries,and continued rapid industrialization become problematic.

1/ The data used in this and the following three paragraphs, unless notedotherwise, are those cited in Paul Kuznets, Economic Growth and Structurein the Republic of Korea (New Haven: Yale University Press, 1977) andSamuel P. S. Ho, Economic Development of Taiwan 1860-1970 (New Haven:Yale University Press, 1978).

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The first subperiod came to an end in the early 1960s when bothcountries switched from an inward- to a more outward-looking strategy ofdevelopment. It is important to point out that in the second subperiod(roughly the 1960s and the early 1970s) neither country entirely abandonedimport substitution. Indeed, direct and indirect controls continued to pro-tect many industries and were partly responsible for the rapid growth sincethe early 1960s in the production of such import substitutes as chemical fer-tilizers, petrochemicals, basic metals, automobiles, and plastics. What setsthe two subperiods apart is that in the second subperiod industrial exportswere also intensively promoted by both countries. In the 1960s Korea andTaiwan adopted more realistic foreign exchange rates, liberalized importcontrols, and generally reduced the distortions caused by previous economicpolicies. At the same time, both countries introduced such export incentivesas tax reductions and exemptions, improved access to imported raw materialsand capital goods, and easy credit to finance working capital and fixed in-vestments for exporting firms. By turning to exports and allowing marketforces to play a greater role in the allocation of resources in the secondsubperiod, industries in Taiwan and Korea were induced to develop more inline with the countries' comparative advantage, that is along a labor-inten-sive growth path.

This heavy emphasis on export expansion, particularly of industrialgoods, produced spectacular results. The improved performance of manufac-turing since the early 1960s has already been noted. In Korea exports rosefrom US$43 million in 1960-62 to TJS$ -176 billion in 1970-72. In Taiwanexports soared from US$174 million in 1960 to US$3.114 billion in 1972. Asa share of GNP, exports increased from 5 percent in 1960-62 to 20 percent in1970-72 in Korea, and from 11 percent in 1960 to 45 percent in 1972 in Taiwan.In both countries, the share of manufactured goods in total export rose fromabout 20 percent at the end of the first subperiod (1959 for Taiwan and 1962for Korea) to over 80 percent by the end of the second. In the early 1970s,about one-quarter of Korea's manufacturing output was exported, and the prin-cipal exports during the second subperiod were plywood, finished textiles,and electronic equipment. In Taiwan, industries that exported 30 or morepercent of their output included textiles and clothing, wood products, leatherand leather products, rubber products, plastic products, and electrical machin-ery and apparatus.

Korea's and Taiwan's manufactured exports have been generally laborintensive (particularly in comparison to their imports and import substitutes)so that the export induced industrial growth in the 1960s has been extremelysuccessful in creating employment. In both countries, manufactured outputand export growth were led in the 1960s by such labor-intensive commoditiesas clothing, shoes, electronics and electrical apparatus, and simple metalproducts. The data suggest that manufactured exports and output became in-creasingly more labor intensive in the 1960s. In contrast, Wontack Hong'sstudy shows that the labor intensity of Korea's exports began to decline in

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the 1970s. 1/ And the evidence from Taiwan suggests a similar trend: indus-trial output and exports have gradually become more capital- and skill-inten-sive.

In the two subperiods just described neither the government in Koreanor the one in Taiwan actively promoted the development of the small enter-prise sector per se. Rather, SSEs were left largely to fend for themselves.However, because they helped determine the economic environment within whichSSEs operated, the general development policies of the two governments prob-ably had considerable indirect impact on the small enterprise sector in bothsubperiods. The first subperiod, when import substitution was emphasized,provided an opportunity for many SSEs to emerge in industries that relied onrelatively simple technology and where the required initial capital was notlarge. However, the first subperiod was also one during which the govern-ments in both countries relied heavily on administrative devices to imple-ment their policies. For example, credits and foreign exchange to buy rawmaterials and capital goods were rationed by government agencies. Becauselarge enterprises are better able to deal with bureaucratic procedures, itis believed that direct controls like those used in Korea and Taiwan in the1950s and early 1960s generally favored LSEs over SSEs. Accordingly, in thefirst subperiod, SSEs probably found it difficult to grow beyond the smallestsize. In the latter part of the first subperiod, when the easy import-sub-stitution phase was over, the economic environment became uncertain and lessfavorable to rapid growth. In these years, small as well as large enterprisesfound the going very difficult.

In the more outward oriented second subperiod, the governments inboth countries relied less on direct controls and more on prices to implementtheir policies. Thus, for example, interest rates and foreign exchange rateswere permitted to move to more realistic levels and to play a larger alloca-tive roles. Increasingly, tariffs rather than direct controls were used tolimit imports. It is difficult to measure the net effects of these changeson the small enterprise sector. Some export promotion schemes affected theSSEs directly. For example, the government sponsored Taiwan Handicraft Pro-ductivity and Trade Center provided product development and marketing ser-vices to firms producing handicrafts for exports, and most of these firms,but by no means all, were small. However, because most SSEs produced pri-marily for the domestic market, the export promotion policies did not ingeneral directly affect the small-enterprise sector. More important werethe indirect effects of the outward-looking policies.

While the liberalization of controls and the shift from quantityto price rationing introduced in the second subperiod reduced some of thediscriminatory effects of earlier policies towards SSEs, and may have made

1/ Wontack Hong, Factor Supply and Factor Intensity of Trade in Korea (Seoul,Korea: Korea Development Institute, 1976).

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it easier for some SSEs to expand, other aspects of the outward looking strat-egy made conditions more difficult for the small enterprise sector. The out-ward-oriented policies altered the incentive framework in favor of exports,and very quickly Korean and Taiwanese firms discovered that they faced a verymuch larger total market than in the first subperiod. With increased oppor-tunity to take advantage of scale economies, size became a much more impor-tant advantage. To export, firms also had to meet more stringent design andquality standards, and in achieving these standards size was again important.Because in the second subperiod both countries followed their comparativeadvantage more closely, it was also a time when labor intensive manufacturingindustries expanded rapidly. Consequently, SSEs in both Korea and Taiwanfound that they were in competition with many new and often very large enter-prises for the same unskilled and semi-skilled workers. On the whole, theseindirect effects probably made conditions less favorable for the SSEs, par-ticularly the very small.

The growth and changing relative position of the small enterprisesectors in Korea and Taiwan in the two subperiods lend considerable supportto the above analysis. Table 6.1 presents the annual growth rates of manu-facturing employment by the size of plants in Korea and in Taiwan. For thepostwar period as a whole (1958-75 for Korea and 1954-71 for Taiwan), therates of growth of manufacturing employment in both countries increased withplant size. For example, in Korea, the growth of employment in manufacturingestablishments with 500 or more workers betw7een 1958 and 1975 was more than9 times that in establishments with 5-9 workers. However, when the two sub-periods are examined separately, they show significantly different patternsof growth. In the first subperiod, when both countries attempted to indus-trialize through import substitution, the rates of growth of employment invery small establishments (those with fewer than 10 workers) were quite rapid,relative to those in establishments of larger sizes and also in comparison tothe rates of growth of employment in very small units in the second subperiod.The rapid growth in employment in the smallest size category (and also theemployment in establishments with 10-19 workers in Korea) in the first sub-period appears to be a consequence of a large number of births in the smallsize categories. Birth, death, and mobility statistics by size of establish-ment are not available, but the substantial increase in the number of smallestablishments during the first subperiod certainly suggests a very high birthrate, especially in the smallest category. In Korea, the number of establish-ment with 5-9 workers increased from 7,019 in 1958 to 10,132 in 1963. 1/ InTaiwan, the number of enterprises with 1-3 workers and those with 4-9 workersincreased from 30,643 and 7,724 in 1954 to 34,695 and 11,430 in 1961, respec-tively. 2/

1/ Final Report - Census of Mining and Manufacturing, 1958 and Report onMining and Manufacturing Census, 1963.

2/ General Report on Industry and Commerce Census of Taiwan, 1954 andGeneral Report, 1961 Industry and Commerce Census of Taiwan.

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Table 6.1 Annual Growth of Manufacturing Employment By

Size of Plant, a Korea and Taiwan

All Size of plant (no. of workers)plantsb 1-3 4 -9d 10-19 20-49 50-99 100-199 200-499 500+

Korea

1958-75 10.5 - 2.1 3.1 4.5 7.9 10.8 14.4 19.2

1 St subperiod(1958-63) 9.1 - 6.6 6.5 3.4 6.7 6.2 11.1 23.5

2nd subperiod(1963-75) 11.1 - .3 1.8 4.9 8.5 12.8 15.8 17.5

TaiwanC

1954-71 8.6 .1 4.6 5.5 7.9 10.3 13.5 10.81S subperiod(1954-61) 5.6 2.5 6.3 2.5 6.1 4.4 7.1 - 7.8

2 subperiod(1961-71) 10.7 -1.6 3.4 7.6 9.2 14.4 18.2 - 12.9

aIn the case of Korea, establishment, and in the case of Taiwan, establishmentin 1954 and enterprise in 1961 and 1971.

bIn the case of Korea, excludes establishments with fewer than 5 workers.

cTailor and repair establishments are included in manufacturing.

dFor Korea, 5-9 workers.

Sources: Korea: Final Report - Census of Mining and Manufacturing 1958; Reporton Mining and Manufacturing Census 1963, and Report on the Mining and Manu-facturing Survey, 1975. Taiwan: General Report on Industry and Commerce Censusof Taiwan, 1954; General Report, 1961 Industry and Commerce Census of Taiwan,and The Report of the 1971 Industrial and Commercial Censuses of Taiwan andFukien Area, Republic of China, The 1954 Taiwan data are estimated as theproduct of the mid-point of each size class and the number of establishmentsin each class.

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When export growth quickened the pace of industrialization in thesecond period, the rate of employment growth in the larger units, with theexception of establishments with 500+ workers in Korea, increased signifi-cantly. In Korea, the employment growth rates in units with fewer than 20workers decliaed while those in units with 20-499 workers increased. InTaiwan, the rates of employment growth in units with fewer than 10 workersdeclined while those in units with 10 or more workers increased. Indeed, inthe second subperiod, employment in establishments with fewer than 4 workersdeclined absolutely in Taiwan, from 72,984 to 61,957 (or to less than 5 per-cent of Taiwan's manufacturing employment). There is also evidence that theemployment in establishments with fewer than 5 workers in Korea also declinedin the second subperiod. 1/ It is interesting to note that in both countriesthe number of establishments in the smallest category declined in the secondsubperiod, suggesting that the birth rate in this category was relativelymodest and therefore unable to offset deaths and movement to other size cate-gories. 2/

The growth pattern just described was not confined to a few indus-tries but was a sector-wide phenomenon. Table 6.2 presents the percentagedistribution of the net increase in manufacturing employment between 1961and 1971 in Taiwan by two-digit industries and by size of enterprise. Inall manufacturing industries, at least 50 percent of the net increase inemployment was in establishments with 100 or more workers and, in the foodand beverage, textile and apparel, and wood-product industries, over 80 per-cent of the increase was in these size categories. Except for the basic metaland the metal product and machinery industries, all manufacturing industriesexperienced an absolute decline in the number of workers employed by estab-lishments in the smallest size category (1-3 workers). However, the declinewas relatively minor except in two industries: food and beverages and woodproducts. In the food and beverage and the nonmetallic mineral product indus-tries, the decline in employment also extended to the size categories of 4-6and 7-9 workers.

The growth pattern of manufacturing employment for two-digit indus-tries in Korea during the second subperiod (1963-75) was very similar tothat described for Taiwan. A preponderant share of the total increase inmanufacturing employment occurred in establishments with 100 or more workers(Table 6.3). Although there are no data on establishments with fewer than 5

1/ The 1966 population census reported manufacturing employment (excludingtemporary and daily workers) to be 763,920. The 1966 manufacturing cen-sus reported persons employed in manufacturing establishments with morethan 5 workers to be 566,665, suggesting that workers in establishmentswith fewer than 5 workers to be 197,255. In 1973, results from a sam-ple survey suggest that small establishments with fewer than 5 workersemployed 156,783 workers. For reasons why temporary workers are excludedfrom the 1966 population census figure, see chapter 2.

2/ In the second subperiod, the number of manufacturing establishments inthe smallest category (5-9 workers in Korea and 1-3 workers in Taiwan)declined from 10,132 to 9,641 in Korea and from 34,695 to 32,000 inTaiwan. The Taiwan figures include tailor shops and repair establish-ments.

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Table 6 .2 Net Increase in Manufacturing Employment, 1961-1971

By Size of Enterprise and By Industry, Taiwan

Total increase Distributed by size (workers) of enterprise, %

(000) Total 1-3 4-6 7-9 10-19 20-49 50-99 100-499 500+

Manufacturing 796 100 -1 2 2 5 9 10 35 38

Food, beverages, tobacco 37 100 -20 -5 -4 2 10 11 52 53

Textiles, wearing apprel,leather producta 223 100 -1 a 1 2 5 7 40 46

Lumber and products of wood,bamboo, cane, and cork 45 100 -16 -2 a 7 11 13 31 55

Paper, paper products, andprinting 26 100 -1 1 2 14 18 8 37 21

Chemicals, products of chemicals,petroleum, coal, rubber, plastics 145 100 -a 2 2 5 10 10 39 32

Nonmetallic mineral products 23 100 -1 -2 -2 7 18 29 30 20

Basic metals 18 100 1 2 1 5 18 13 34 26

Metal products, machinery, &equipment 237 100 4 5 4 7 10 10 23 36

Other manufacturing industries 41 100 -7 3 2 6 8 13 49 27

aLess than .5%

Sources: Underlying data from General Report, 1961 Industry and Commerce Census of Taiwan and The Report of theT17T1Tndustrial and Commercial Censuses of Taiwan and Fukien Area, Republic of China. The 1971 data has beenadjusted to include tailor and repair shops.

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workers, the growth pattern of employment in establishments with 5-9 workersin Korea is consistent with that in Taiwan; a decline in employment in severalindustries, most notably in food and beverages and in petroleum and coalproducts. The decline in the petroleum and coal product industry occurredprimarily among small establishments producing coal briquettes. an importantproduct in Korea but unimportant in Taiwan where the climate is subtropical.The growth pattern described above has had the effect of increasing theaverage size of manufacturing establishments. In both countries, the increasewas due in part to a significant rise in the average size of establishments innearly every two-digit manufacturing industry, but it was also due partly toa very rapid expansion of a number of industries where the average size ofestablishment was substantially larger than the average for manufacturing asa whole. In Taiwan, for example, 46 percent of the increase in manufacturingemployment between 1961 and 1971 occurred in the textile and clothing and thechemical industries (including petroleum, coal, rubber, and plastic products).In 1971, the average number of workers per establishment was 80 in the textileand clothing industry, 38 in the chemical industry, but only 28 for manufactur-ing as a whole. 1/

The Korean data in Table 6.3 also show that the difference in growthpatterns between the two subperiods observed at the aggregate level also existsfor most two-digit industries. In the first subperiod, the import substitu-tion phase, when industrial growth was relatively slow, employment growthwas spread over all the size categories from 5 to 500+ workers with no appar-ent relationship between employment growth and plant size. Interestingly,however, in many two-digit industries, establishments with 5-9 workers absorbeda large share of the net increase in employment, often larger than establish-ment in the 20 to 199 size categories. For establishments with 5-9 workers,such a substantial expansion of workers, despite loss of employment through apossibly large number of failures, and growth to larger size categories, isevidence that births (including growth from the 1-4 category) in this sizecategory were large. This is, of course, consistent with our earlier findingthat the total number of manufacturing establishments in the smallest sizecategory increased rapidly in the first subperiod.

In the second subperiod (1963-1975), when manufacturing absorbedover 1 million workers in contrast to 133,000 in the first subperiod, estab-lishments in the smaller size categories (5-9 and 10-19 workers) absorbedlittle of the net increase. Indeed, at the two-digit industry level, birthand movement into the 5-19 size categories only just exceeded deaths and move-ment to larger size categories. Above the 5-19 size range, the larger thesize class, the greater share of the net increase in employment it absorbed.This was true for manufacturing as a whole as well as for nearly all the two-digit industries.

1/ All the figures here exclude repair and tailor shops.

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Table 693 Net Increase in Manufacturing Employment, 1958-1963 and 1963-1975

By Size of Establishment and By Industry, Korea

Total Distributed by size (workers) of establishment, _increase Total 5-9 10-12 20-49 50-99 100-199 200-499 500+

1958-1963Manufacturing (excluding tobacco) 132,932 100 12 11 7 10 8 13 39

Food 10,127 100 42 13 4 14 -6 26 5

Beverages 1,457 100 85 1 -33 -3 4 46 -50

Textiles 22,841 100 -16 a 3 11 6 12 84

Apparel and footwear 5,875 100 31 7 11 7 13 31 a

Wood and its products 535 100 32 -185 -215 -3 16 -37 524

Furniture and fixtures 2,190 100 26 40 15 13 6 0 0

Paper and its products 5,924 100 5 11 11 17 21 35 0

Printing and publishing 3,050 100 44 19 -3 -10 -21 44 27

Leather and its products 955 100 2 11 21 13 12 41 0

Rubber and its products 8,185 100 -1 2 -1 4 -1 -4 109

Chemicals and their products 14,852 100 6 9 10 10 15 18 31

Petroleum and coal products 8,398 100 39 38 19 3 -2 2 0

Nonmetallic mineral products 4,571 100 35 2 -2 21 8 -12 48

Basic metals 5,406 100 -2 6 12 21 12 18 32

Metal Products 7,279 100 19 30 22 9 6 14 0

Machinery, excluding elec. 6,800 100 18 24 19 7 5 5 21

Electrical machinery and apparatus 8,054 100 6 10 11 9 23 14 27

Transport equipment 10,773 100 12 12 1 4 8 -1 64

Other manufacturing industries 5,660 100 7 16 23 29 9 15 0

1963-1975Manufacturing 1,018,163 100 a 1 5 8 12 22 52

Food 71,345 100 -1 4 8 8 15 18 47

Beverages 11,134 100 -18 -5 6 7 14 22 75

Tobacco 7,259 100 0 0 1 0 0 39 60

Textiles 212,448 100 -a 1 3 8 17 27 44

Apparel and footwear 146,070 100 4 2 1 3 8 29 53

Wood and its products 30,051 100 4 4 7 2 5 1 76

Furniture and fixtures 4,659 100 4 -1 3 8 28 35 24

Paper and its products 19,830 100 2 4 13 18 23 33 7

Printing and publishing 22,480 100 2 3 1S 10 11 13 45

Leather and its products 17,733 100 -1 1 2 11 15 30 40

Rubber and its products 45,770 100 a 1 2 3 -a 1 94

Chemicals and their products 74,824 100 1 2 5 8 1S 24 45

Petroleum and coal products 2,533 100 -169 -118 -15 58 54 58 232

Nonmetallic mineral products 36,802 100 4 2 7 7 14 26 41

Basic metals 34,388 100 a 3 5 5 11 13 63

Metal products 37,436 100 1 3 13 12 16 21 34

Machinery, excluding elec. 33,294 100 1 6 12 16 14 20 30

Electrical machinery and apparatus 116,332 100 -a 1 4 7 9 16 63

Transport equipment 31,611 100 -6 -4 3 7 8 8 83

Other manufacturing industries 62,164 100 a -a 5 11 14 25 45

aLess than .5

Sources: Underlying data from Final Report - Census of Mining and Manufacturing, 1958, Report on Mining and ManufacturingCensus, 1963, and Report on the Mininq and Manufacturiwn Survey,1975.

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In summary, the evidence suggests that the relative position ofthe small enterprise sector may have been indirectly but strongly influencedby the development strategy pursued in Korea and Taiwan. It seems that thefirst period of import-substitution was less damaging to the relative sizeof the smallenterprise sector than the second period of export promotion,even though the means by which the import-substitution policies were imple-mented in the two countries discriminated against the SSEs. Apparently, whenthe development strategy turned outward, the relative position of the small-enterprise sector was weakened partly because larger markets increased theimportance and advantage of large plant size and partly because in the freereconomic environment of the second subperiod SSEs may have found it easierto expand and move to a larger size category.

Credit and Technical Assistance to SSEs

Among the many problems faced by SSEs, capital scarcity and thelack of managerial and technical skills are mentioned most frequently andconsidered most critical by both government agencies responsible for smallindustry development and by small entrepreneurs themselves. It is thereforenot surprising that the literature on small industry usually considers creditavailability and technical and managerial assistance to be the key to successin the promotion of the small-enterprise sector. This section discussesthe credit and technical assistance programs available to SSEs in Korea andTaiwan in the postwar period.

The banking system is the only organized credit market in Korea andTaiwan. Because SSEs lack suitable collateral and keep inadequate recordsand because of the high cost of servicing SSEs, banks are extremely reluc-tant to provide credits to small enterprises unless given special incentivesto do so. In a free market, the incentive would be higher interest rates.But, in Korea and Taiwan, the problem is complicated by the fact that interestrates are regulated by the government, and credits are allocated according togovernment-determined priorities. Consequently the amount of bank creditsavailable to SSEs in Korea and Taiwan in the 1950s and the 1960s dependedon the priority the government-assigned to the small-enterprise sector.

In Taiwan, the government did little to make the organized creditmarket accessible to the small-enterprise sector. The few programs in ex-istence were and are still small and limited in scope. Since 1954, the gov-ernment, in cooperation with commercial banks, has operated a small industryloan program, but the amount of funds distributed through the program has beenlimited. In 1966, the government launched a pilot program to help develop theisland's small industries. A Small Business Committee was organized in theCouncil for International Economic Cooperation and Development (CIECD) toassist promising small manufacturing establishments (less than 100 workersor with total assets below NT$5 million [US$125,000]) with good export poten-tial. 1/ The committee adopted a "total approach," as it attempted not only

I/ C.C. Chao, "Scheme of Assistance to Small Industries," Industry of FreeChina, Oct. 1966, p. 23.

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to help the selected SSEs to obtain credits but also to provide them withtechnical, marketing, and managerial assistance. Because the program reachedonly a small number of SSEs, its impact on the small-enterprise sector waslimited. Only in 1976 did the government create a Small and Medium IndustriesBank.

In Korea, government assistance to the small-enterprise sectorappears, at least on paper, more organized and better financed. Before 1961,the government, in cooperation with commercial banks, provided credits to SSEsthrough several special funds, among which the most important were "ProductionLoans for Small Industries," "Loans from Vested Property Funds," and "Loansfrom Counterpart Fund." 1/ In 1960, loans to small industries in mining,manufacturing, transportation, and commerce from these funds and from otherbank sources amounted to 7 percent of total bank loans. 2/ In 1961, as partof its intensified effort to industrialize, the government created the MediumIndustry Bank (later renamed Medium-Small Industry Bank) to promote smallindustries. 3/ The government not only allocated, with the help of its newbanks, more of its own funds to small industries, but it also stipulated in1965 that at least 30 percent of the new loans extended by commercial banksmust be to small industries. As a result of these actions, loans to smallindustries as a share of total loans made by all (government and commercial)financial institutions increased from 7 percent in 1960 to 15 percent in1964 and over 24 percent in 1968. 4/ However, as an indication of the amountof credit actually made available to the small-enterprise sector as definedin this paper, these figures are very misleading. This is because the Koreangovernment defines small industries to include mining and transportation enter-prises with 5-300 workers and total assets below W 30 million and manufacturingenterprises with 5-200 workers and total assets below W 30 million. Thus whathappened in Korea in the 1960s probably was not so much an expansion of creditto small establishments as an expansion of credit to medium-sized enterprises.

That small manufacturing enterprises, particularly those with fewerthan 50 workers, were given little access to the organized credit market inKorea is suggested by the priorities set by the Korean government and usedby the banks to allocate industry loans. 5/ In the 1960s, high priority for

1/ The Medium Industry Bank, Financing Small Industry in Korea, 1968, pp.22-42.

2/ Ibid., p. 40.

3/ Besides the Medium Industry Bank, the government also created the CitizensNational Bank in 1963 to help finance small industries.

4/ The Medium Industry Bank, Financing Small Industry in Korea, pp. 40 and73.

5/ Ibid., pp. 52-65.

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loans was given to (1) those enterprises that were designated export-producingfirms, (2) help convert enterprises with good prospects for exports and highrates of net foreign exchange earnings to export industries, and (3) enter-prises in specialized export industries. 1/ Since establishments with fewerthan 50 workers are seldom important exporters or have good export prospects,the government priority scheme, by stressing export, effectively precludedmany SSEs from the organized credit market. It would appear that the bulk ofthe bank credits provided in the 1960s under the title of small industry loansin fact went to medium sized firms, particularly those with 100+ workers.That this was indeed the case is confirmed by various surveys of SSEs whichshow that credit received from financial institutions to be positively relatedto firm size and that firms with fewer than 50 workers received little creditfrom the organized market. 2/

The effect of restricting SSEs' access to the organized credit marketwas to force the small entrepreneurs to look for funds from non-institutional-ized credit sources, e.g. from family members, friends, relatives, and privatemoney lenders. Apparently, in Korea and Taiwan, considerable amounts of fundswere made available through these non-institutionalized sources. There was arapid increase in the number of SSEs in the 1950s and the early 1960s, andsurveys show that the bulk of the initial capital came from non-institutionalcredit sources. Furthermore, over the years, the gap between the curb interestrates and the lending rates of commercial banks has narrowed significantly inboth Korea and Taiwan, and this would not have occurred if credit was difficultto obtain on the informal market. All this is not to say that SSEs in Koreaand Taiwan are not short of capital or that SSEs do not have great difficultiesin raising funds. What is clear is that the small-enterprise sectors in Koreaand Taiwan have been able to mobilize considerable funds from sources otherthan the organized credit market.

The experience in Korea and Taiwan suggests that the lack of bankcredit may not be an insurmountable obstacle to the development of the small-enterprise sector as long as funds are available from non-institutionalizedsources. Indeed, a major contribution of SSEs is that they provide a channelthrough which savings not served by existing financial institutions can bemobilized for productive uses. Ideally, one would like to see the creditmarket less regulated and that SSEs be given a chance to compete on equalterms with LSEs for credit. But, when interest is regulated, providing sub-sidized credit to SSEs may lead to a serious waste of resources. SSEs are

1/ In 1965, 13 products were identified as specialized export goods andenterprises producing these goods were given preferential financingfor development. The 13 products were raw silk, silk fabrics, ceramicproducts, rubber products, radio and electrical appliances, cannedmarine products and mushrooms, woolen fabrics, plywood, cotton fabrics,clothing, leather products, industrial handicrafts, and miscellaneousarticles (e.g., metal tableware).

2/ See Chapter 5.

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extremely difficult to assess so that a general subsidized credit scheme aimed

at supporting the small enterprise sector may end up financing many establish-ments that are wasteful users of capital. Perhaps more useful are credit

schemes like those in Korea that are aimed at achieving well-defined govern-ment objectives (e.g., export promotion), rather than directed at the general

goal of small-enterprise promotion. However, in such cases, the criteria usedto distribute loans are likely to preclude many, if not most, small establish-ments.

Because the lack of managerial and technical skills is a major handi-cap for most SSEs, government intervention to upgrade the know-how and skillsof small entrepreneurs may pay off handsomely. In the past and at present inKorea and Taiwan, the government has been only marginally involved in pro-viding managerial and technical training and extension to SSEs. In Korea,the Medium Industry Bank has attempted to help some small industries to improvetheir management and technology but the bank does not consider this its main

function. The government also helps finance various small industry coopera-tives that provide their members with a variety of services such as managementand technical guidance. Finally, since 1967, the government has operated amodest program to encourage the household production of handicrafts, agricul-tural and fishery by-products and agricultural process goods. 1/

In Taiwan, numerous institutions have been created to facilitatethe dissemination of industrial technology and to improve managerial andtechnical skills, e.g., the China Productivity and Trade Center (CPTC), theMYetal Industries Development Center (MIDC), and the Taiwan Handicraft Promo-

tion Center (THPC). 2/ THPC was established specifically to provide overallsupport to Taiwan's handicraft industries, particularly those with good exportpotential. Its main customers have been small establishments, most with fewerthan 20 workers. Although CPTC and MIDC were designed to serve industrialenterprises irrespective of their size, they have in fact served primarilythe larger establishments, mostly those with 100+ workers. Thus, there doesnot exist in Taiwan an organization that specializes in providing managerialand technical training and assistance to SSEs in the size range 20 to 100workers.

1/ Three government agencies are involved in this program: the Ministryof Agriculture and Fisheries, which gives administrative support, Officeof Rural Development, which gives technical support, and National Agri-cultural Cooperative Federation, which gives marketing support. Because

so many agencies are involved, there are complaints that the program is

not well coordinated.

2/ W. van Warmelo, "The Development of Small Enterprises in Taiwan, Republicof China," Industry of Free China, November, 1967, pp. 8-11.

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Presumably small-industry development is the transformation ofsmall traditional enterprises to small modern enterprises. Whether or notthis can be successfully achieved depends ultimately on the quality of thesmall entrepreneurs and their ability to operate efficiently and productively.Even in Korea and Taiwan, where literacy is high and development has been inprogress for some time, a large number of small entrepreneurs lack the tech-nical, financial, and managerial know-how needed to operate a modern estab-lishment successfully. It would appear that the government has an importantrole to play in disseminating new technology to the small-enterprise sectorand in helping small entrepreneurs to acquire the skills needed to survive ina more complex economy. More specifically, what is needed is an organizationthat can provide managerial and technical training and extension to establish-ments in the size range of 10 to 100 workers. The level of training shouldnot be so sophisticated as to be impractical or beyond the grasp of smallentrepreneurs, many of whom have had only a grade-school education. In otherwords, something like the agricultural extension service should be made avail-able to the small-industry sector. One way of organizing such a service isto work through existing industry associations or cooperatives.

A related problem is the lack of interaction between small and largeenterprises. As discussed earlier in Chapter 3, most large firms in Korea andTaiwan are highly integrated, often performing tasks that would typically besubcontracted in industrialized countries. This, of course, is a source ofinefficiency in the economy. The lack of specialization and division of laborbetween small and large enterprises in Korea and Taiwan reflects partly thetype of market faced by Korean and Taiwanese producers, in which customersconsider low costs more important than high quality; and partly the low levelof technical skills among SSEs. With the economy developing rapidly, SSEs inKorea and Taiwan, in order to survive and prosper, will need to upgrade theirequipment and acquire new skills and technology so that they can producebetter quality products and become more involved in interfirm transactionsthrough specialization. Policy makers need to be aware that promoting thesmall-enterprise sector through managerial and technical training and exten-sion will in the long run facilitate over-all industrialization. It is moreefficient and more profitable for firms of all sizes if small and large enter-prises grow together in a mutually reinforcing and complementary manner, takingfull advantage of all the possibilities for specialization and division oflabor that exist in the industry. Because large enterprises are likely tobenefit from the modernization of the small enterprise sector, they may bewilling to participate in helping existing SSEs to acquire new skills andtechnology. In this regard, the government should consider introducing in-centives that will encourage large firms to subcontract work and to providetraining and other assistance to SSEs.

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VII. SUMMARY AND CONCLUSIONS

The purpose of this study is to better understand the development

potentials of SSEs by examining the history, structure, productivity, andchanging position of the small-enterprise sectors in Korea and Taiwan. The

study indicates that both the size and composition of the small-enterprisesector undergo significant changes as the economy develops. At the earlystage of development, nearly all non-agricultural activities take place inthe small-enterprise sector and a preponderant share of it is non-factoryproduction. The evidence from Taiwan shows that when it began its transi-tion from a traditional to a modern economy, the small-enterprise sectormonopolized manufacturing, and within small industry, non-factory manufac-turing predominated over factory manufacturing. As the economy developed,the position of non-factory manufacturing declined, but the small-enterprisesector as a whole continued to remain important. As Taiwan approaches theend of its transition to a modern economy, the position of non-factory manu-facturing has become relatively unimportant. Both household and craft pro-duction are gradually disappearing in Taiwan. The most important componentof the small-enterprise sector in Taiwan and Korea is now the small factories.Currently, about a third of the manufacturing employment in Korea and Taiwanis in the small-enterprise sector, with the majority employed in small fac-tories (establishments with 5-49 workers). The importance of small factoriesis of course even greater if its definition is broadened to include factory

establishments up to 100 workers. Besides manufacturing, SSEs are importantin several other non-agricultural sectors, particularly construction, trade,and services. In contrast to manufacturing, where the distribution of employ-ment by size of enterprise has undergone significant changes over the years,the distribution of employment by size of enterprises in trade, construction,and services has remained relatively stable.

In Korea and Taiwan, SSEs in manufacturing appear to be concentratedin the food and textile and textile products industries. In addition,SSEs are of some importance in the metal products and plastic products in-dustries. Confirming what is found in other countries, the SSEs in Koreaand Taiwan serve primarily the domestic market, although, reflecting theoutward-looking development policies of the two countries, significant numbersof SSEs (particularly those in the 50-99 size range) also export their out-

puts. Nevertheless it is safe to say that in Korea and Taiwan in the 1960sand the 1970s, SSEs with fewer than 20-30 workers produced almost exclusivelyfor the domestic market.

The evidence from Korea and Taiwan suggests that the degree of

spatial concentration among large establishments and that among small estab-lishments (except for those with fewer than 10 workers) are positivelycorrelated, reflecting perhaps the linkages between small and larger manu-facturing enterprises. In Korea, both large and small establishments aregeographically concentrated, and in Taiwan both are geographically lessconcentrated. One reason why industry is geographically less concentratedin Taiwan than in Korea is that Taiwan's rural infrastructure was developed

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earlier and distributed more evenly. The wider dispersal of industry inTaiwan has had important and positive effects not only on the developmentof rural and regional industries but also on employment and income distri-bution in the countryside.

In the postwar period, the emergence of new and large manufactur-ing plants and the growth of small manufacturing units into medium or largeestablishments have combined to reduce the relative importance of smallfactories in Korea and Taiwan. Because the importance of economies of scalediffers across industries, the position of small scale manufacturing at theaggregate level is partly determined by the composition of the manufactur-ing sector. One reason for the decline in the relative importance of smallfactories in Korea and Taiwan is the rapid growth in recent years of indus-tries where scale economies are important.

Because the importance of SSEs in an given manufacturing industryis likely to be influenced by the presence or absence of scale economies, itis important to have estimates of minimum efficient plant size for variousindustries. Using Korean data, "efficient" plant size is determined for 63four-digit manufacturing industries by the survivor technique, and in only7 of the 63 industries were establishments with fewer than 50 workers foundefficient by this criterion. Efficient plant size, as determined by thesurvivor technique, is not, of course, the same as the plant size correspond-ing to the lowest point on the long run average cost curve. Rather it isthe smallest plant size that can cope successfully with the total economicenvironment. Nevertheless, the findings are at least suggestive that inKorea scale economies appear to be present in most manufacturing industries.In any case, in the Korean environment the most efficient plant size is notsmall but in the range of 100+ workers.

While the presence of scale economies favors LSEs, there are alsoforces that favor small and medium size production units, and these forcesare sufficiently strong in some industries to offset the advantages of largesize. In some industries, locational factors such as high transport costsand the need for frequent face-to-face contact between producers and theircustomers work in favor of SSEs. SSEs also tend to be competitive when pro-duction technology is simple, production runs short, production versatilityimportant, or specialization in operation or parts possible. A third groupof factors favoring SSEs is market influences, the most important being smalltotal markets. Small total markets are important to SSEs because it reducesthe potential advantages from scale economies.

In terms of the three major influences that favor SSEs -- location,production process, and market -- it appears that locational and productionfactors are most important in favoring small-firm predominance in Korea'sand Taiwan's manufacturing industries. A comparison of the Korean data overtime also suggests some interesting changes in the competitive bases of SSEs.The evidence suggests that in the early stages of industrialization, thecompetitive bases of SSEs are primarily those related to locational factors,particularly high transport costs. As transport costs decline in the process

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of development, this source of competitiveness weakens. In its place,production influences become more important in determining the competitivebases of SSEs. Initially, SSEs are predominant in industries engaged insimple assembly, mixing, or finishing that tend to be developed first inless developed countries. However, small-firm predominance in these indus-tries is likely to be temporary. As the markets of these industries expand,the potential advantages of even relatively minor scale economies make itworthwlhile for large firms to enter these industries and for existing smallfirms ito expand. Finally, as the economy develops and becomes more complex,SSEs in some industries may become competitive through specialization andcooperation with larger firms. This development has not as yet become wide-spread in Korea or Taiwan.

Of the many issues related to the small enterprise sector, perhapsthe single most important is whether SSEs are efficient users of resources.If SSEs are more labor intensive than, and use less capital to produce thesame goods as, large enterprises, then strong economic justification wouldexist for promoting small scale industries in labor-abundant less developedcountries. Our current interest in SSEs is at least in part the result ofa belief that SSEs generally are not only labor intensive but also quiteefficient. However, the evidence from Korea and from Taiwan reveals manyexceptions to these generalizations.

It has often been noted that low-volume technique is usually thelabor-intensive technique, and that the capital/labor ratio rises with firmsize. But, judging by the Korean data, low-volume techniques do not alwayshave capital-saving attributes. Furthermore, our findings show that thecapital/labor ratios in a wide variety of industries in Korea do not vary inany consistent manner as firm size increases. Another important finding isthat many of the industries in Korea not dominated by small establishmentshave low capital/labor ratios, often considerably lower than the average forthe manufacturing sector as a whole or the average for the small-enterprisesector. Furthermore, these industries are major employers. Apparently,the success of Korea's and Taiwan's manufacturing sectors in absorbing laboris due, to a large part, to the development of industries that producelabor-intensive products rather than to any special attention to small-scalemanufacturing.

Total factor productivity measures by size of establishment wereconstructed for 213 four-digit manufacturing industries in Korea. Ouranalysis of the results suggests that establishments in the size range 5-99are most productive in only a limited number of industries, and in half ofthese cases, the most productive size is the "small-medium" category of 50-99.More important, the employment impact of these industries, particularly thosethat are efficient for establishments with fewer than 50 workers, is limited.It appears that, at least in Korea, establishments with fewer than 50 workerscannot be relied upon to generate a large number of jobs efficiently. Thisis because small establishments are efficient in only a few industries, andwhere they are efficient, the industries do not absorb large numbers of work-ers. Thus, if the objective is employment creation, the development of thesmall-enterprise sector may not be the most appropriate policy to pursue.

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It is widely believed that factor markets in less developed eco-nomies are imperfect, so that SSEs and LSEs face very different factor prices.If so, this would help explain the observed differences in factor proportionemployed by small and large enterprises in the same industry. The evidencefrom Korea and Taiwan lends some support to this view. The labor markets inKorea and Taiwan appear to be relatively free of major imperfections. Thewage gap between small and large firms, once the characteristics of workersare standardized, is fairly small. The serious distortions are in the capitalmarket.

In Korea and Taiwan SSEs operate within a fragmented capital market,and have only limited access to institutional (government and commercialbanks) credit. Financial institutions are the source of a very small shareof the initial capital invested in the small-enterprise sector, althoughthey do provide SSEs with some working capital. The bulk of the capital andoperating funds in the small-enterprise sector are financed apparently fromthe accumulated savings of the small entrepreneurs and loans from friends,relatives, and private lenders. The rates of interest on the informal marketare, of course, significantly higher than the regulated interest rates chargedby the public and commercial banks. The higher rates of interest paid bythe small-enterprise sector reflect in part, of course, the higher costs ofservicing small borrowers and the higher risks of lending to small enter-prises. However, the differences in interest rates paid by SSEs and LSEsreflect more than the differences in cost and perceived risk. In any case,the evidence strongly supports the view that SSEs pay higher interest ratesthan LSEs so that the small enterprise sector has a greater incentive toeconomize on capital. Capital scarcity and the lack of access to commercialcredit also explain why so many SSEs are undercapitalized and operate withinadequate working capital. These difficulties are frequently cited by smallentrepreneurs themselves and may be a major cause of business failures amongSSEs.

The fragmentation in the capital market can be attributed in partto the difficulty and high cost of administrating loans to small borrowers.But, since the allocation of credit is government-regulated in Korea andTaiwan, another reason for the fragmentation is that both governments havepaid little attention to the small-enterprise sector and consequently haveneglected its financial needs. The lack of access to institutional creditshas turned small entrepreneurs in Korea and Taiwan to other sources for funds.It appears that considerable funds have been mobilized by the small entre-preneurs from their own personal savings and borrowing from relatives, friends,and private lenders. In other words, SSEs have provided a channel throughwhich small savings can be put to productive uses. In Korea and Taiwan,the lack of bank credit, though a handicap, have not been an insurmountableobstacle to SSEs.

From a policy viewpoint, it would be desirable to remove the imperfec-tions in the capital market and to give SSEs the chance to compete on equalterms with LSEs for credit. However, given the fact that our findings suggestthat few small establishments in the 5-49 workers range are efficient and that

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it is extremely difficult to assess the capability of small entrepreneurs,making large sums of credit available to the small-enterprise sector is notlikely to be very productive. In particular, a general subsidized creditscheme for SSEs is likely to be a wasteful use of scarce resources. Ifinstitutional credit is to become more accessible to SSEs, it should beat competitive terms or made available to achieve well-defined objectives.Furthermore, to help ensure that capital is utilized effectively, managerialand technical training and extension should also be made more available toSSEs.

Finally, the evidence from Korea and Taiwan suggests that thesmall enterprise sector has been strongly but indirectly influenced by thegeneral development strategy pursued in the two countries. In particular,the relative and absolute decline of the small enterprise sector has beenaccelerated by the outward-looking policies adopted in Korea and Taiwan.Exports have substantially enlarged the markets faced by Korean and Taiwaneseproducers. With larger markets, scale economies and other advantages of sizehave also become more important and have encouraged large plants to emergeand small plants to expand and leave the small-enterprise sector.

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APPENDIX A

THE SURVIVOR TECHNIQUE

The purpose of this appendix is to describe the procedure usedto select industries for analysis by the survivor technique and to explainhow the survivor criterion was applied. The first step taken was to identifythose industries for which it is suitable to apply the survivor technique.On the guideline that industries should be defined as precisely as possible,all industries which contain the words "miscellaneous," "other," or "notelsewhere classified" in their title were excluded. In addition, dataavailability also influenced the choice of industries. The data used in theanalysis are from the 1968 census and the 1975 survey of the Korean manu-facturing sector. Between 1968 and 1975 the Korean Standard IndustrialClassification (SIC) changed in important ways. Industrial activities wereorganized into 213 four-digit industries in 1968 and into 373 five-digitindustries in 1975. Because of the definitional changes, it was not possibleto apply the survivor technique to all industries. Of the 373 industriesidentified in 1975, only 92 were similarly defined in 1968. In addition,8 of the four-digit industries in 1975 were found to be comparable in coverageto 8 three-digit industries in 1968. These 100 industries form the popula-tion on which the analysis was based. Finally, it should be noted that censusconvention classifies all establishments according to the primary productproduced, and that all activities of an establishment are classified into asingle industry. This means that industries are not as homogeneous as theirtitles suggest.

After the 100 industries were identified, the share of each indus-try's shipment by size of establishment in 1968 was compared with that in1975. Those size groups that experienced increases in their shares werepresumed to be efficient sizes. To avoid drawing inferences from smallchanges in the shares, percentage differences between +0.5 and -0.5 wereconsidered zero changes. When the share of one size category or that of acontinuous range of size categories increased, that size category or range ofsize categories was considered efficient. For example, in table Al, theefficient plant size categories for the meat and dairy products industry are5-49, 50-99, and 100-199. However, if a size class was contiguous to otherefficient size classes but registered a zero change (when establishmentsexisted in this category in both 1968 and 1975), it is also included in theefficient range. This occurred in one case, lime production. These instanceswere the only cases when an efficient size or size range was identified; allother possibilities were considered ambiguous. In particular, in many indus-tries, the increases in share occurred in two or more non-contiguous sizecategories. While it is possible that an industry may have two distinctranges of efficient plant size, the more likely reason for the ambiguousresult is that the industry was too broadly defined and included severaldistinct industries.

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Table Al. SURVIVOR ESTIMATES OF EFFICIENT PLANT SIZES FOR 463

KOREAN MYANUACTURING INDUSTRIES: 1968-1975

Industry Chaiges in the Pe--entage Shore of VoIce of Shipment Minimum efficeot plant1968 Desrription by Size of Etablishneot 1968-1975 Size as % of Indostry 1975 employment 1975 -mployveotCede 5-49 50-99 100-199 200-499 508+ Size (eploys-ent) (tho--ands) 1968 employve-t

Food2010 Meat dairy products 8.6 3.1 49.5 -58.7 .3 1.7 1.432022* Canning of fish & nra food -3.3 -2.4 -7.4 5.0 8.2 1.0 20.9 2.252031* Rian mills -47.9 1.6 1.2 45.1 .5 9.1 .7020427 Bisu-it & dry bakery pruducts -24.3 -12.4 -1.9 -12.5 51.2 9.1 5.5 2.112071* Soybean Sloo & poste -11.5 -5.1 16.6 7.8 1.3 .842080-* Ice Manufactoring -28.0 -3.7 27.5 4.2 4.7 2.1 1.542092-* Starch -42.1 13.1 -1.9 57.1 6.4 3.1 1.012093** Blan cord & ito produnto 14.9 -5.1 -9.9 .7 .6 .582097 Feed -38.4 1.1 32.8 4.4 1.4 3.6 5.36

Beverage2111* So-jo -27.0 -5.4 -1.4 12.1 21.7 3.3 6.1 1.362121* Ysg-ju & Tog-jo -13.0 9.5 3.5 4.6 10.9 .85

Tastile peoducts2312 Wolleo, spinning nill 5.9 13.0 37.4 11.4 -67.7 .2 3.0 .482316* Thread -10.1 2.7 20.2 9.7 -22.5 .7 7.6 1.632321* Catton fabrics -18.3 -5.1 12.0 1.9 9.5 .6 15.7 .6823232* Woolen & worsted fobrias 0 -4.2 -1.4 -7.1 12.5 2.7 18.7 1.042325 NSrrow Fabrics 11.1 9.1 -20.3 .6 .8 .102326* Syntbetia fabrics -12.2 -15.0 -1.2 10.4 18.0 .3 57.2 2.0123303* Bleahiag,Dyning, finishing -21.0 -13.9 -8.5 -13.5 57.0 1.7 29.5 3.712341'* So-ks & Stonking -16.2 -17.3 -5.5 30.6 8.4 2.0 10.0 5.752343* Cnittnd onder--ar -43.3 -20.5 -3.2 4.7 62.3 1.8 11.2 1.542351 Rope products -2.5 -21.1 -2z.8 -9.6 58.0 9.5 5.3 5.3

Wearing apparel footwear. made-up te-tile goods2411* Leather footwear -36.1 -2.9 4.9 5.2 28.9 .9 11.2 2.022432* Women's outerwear -44.7 -2.7 6.2 25.1 21.7 .5 19.3 1.0924.33 Infant's outerwar -40.5 -2.1 9.3 33.4 6.2 1.6 .8g2434** UIde--ear -46.3 -6.6 5.8 24.8 22.3 2.0 5.1 2.652437 Hats -14.9 -32.4 20.9 13.8 59.1 9.0 1.1 2.19

F-urniture & Fiatures26103 Woode- fornitore -34.1 8.7 25.1 .4 .7 7.3 .812620-c Motal furnitore -10.0 -9.0 3.9 15.2 3.9 2.6 1.58

Paper & Paper Praducts

2714 Kraft paper .5 2.4 14.1 11.8 -28.8 .2 2.2 1.13272 -e Products of paper & paper board -5.3 -2.4 -5.8 13.4 1.8 10.9 1.98

Printiog & pobliehiog28100- Newupapern -1.1 -2.9 -3.8 -15.3 23.3 6.1 8.2 1.00

Lea..tk rLea.th C1 pIcacnlt?intiog -24.7 -3.7 -. 7 -7.4 36.4 3.9 12.9 1.12292 Leather Produots excloding footwear -40.9 -15.7 8.9 30.1 17.710.0 7.73

Robber prud-ats 10.07.73020 Rubber footwear -. 9 -. 4 -2.9 1.5 2.6 .4 50.8 2.51

Che-icul cad cheuical products3112 I-orga-ia booical%S -30.1 -3.0 -4.5 37.7 5.3 33.8 2.653160 P-rfames, cosoetics 12.5 15.6 17.8 -16.2 -29.7 .1 5.0 2.083192 Ag. pestiuides 0 -22.8 -2.3 -29.1 54.2 11.1 4.5 2.603195 Matohas -23.1 -15.0 -19.8 2.1 5.8 1.7 .88

Petruleum a-d coal products3220* Coal briqu-tte- -24.7 -. 54 11.1 2.9 11.2 .8 12.4 .99

onmetallic mineral products3312* Clay roofing tiles -61.2 38.9 22.3 6.0 .8 .443313 Tileu -. 3 -. 7 -1.6 -14.9 17.5 7.8 6.4 2.733314 Refr-ctori-s -22.4 -2.9 - .3 -51,7 77.3 19.9 2.5 1.48333* Pottery, china, earthenware -24.1 4.9 9.4 14.8 -5.0 .7 7.3 .823350* Concrete products -10.0 -3.5 10.5 13.4 -10.9 .8 12.6 .813391 Lion 36.1 -10.0 44.2 0 1.8 5.1 2.0 2.503392* Cut st... & ito prodacts -7.1 29.49 -22.4 2.2 2.3 1.92

Bausia -tals3412 Rolling of pcrchased iron and oteel -3.1 -3.3 -2.9 -4.6 13.8 2.5 20.2 1.28

Metal products3521 Cutlery & tablewaee -27.2 -18.0 45.2 11.0 .9 1.213522 Haodtools, excluding farm tools -25.1 -5.3 -4.9 35.4 14.7 1.4 2.453540* Structural prnducts -17.5 -9.5 1.3 19.2 6.5 1.0 10.2 2.36356**- Wire pr-docts -10.7 -6.8 -29.5 -19.7 66.6 20.0 2.5 1.00

Machinery eucloding nectrica-l3620* Farm machinery excluding tools -26.9 5.3 .9 9.2 11.5 .8 6.4 2.193640* Motel worbkig machinery -38.6 -4.3 13.3 29.6 3.0 3.3 1.36

Electrical machinery & equipment3710* Electeic mabhi-e & indotrial equipment 2.0 4.7 .33 19.4 26.4 .05 11.0 1.593730** Coommni-ation e-uipment -7.3 -4.6 -4.9 3.5 13.3 .2 94.1 10.573750** Light bulbs -2.7 -6.4 -7.7 16.8 4.5 4.4 1.25

Transport e-uipment3812 Steelship (in-ladiog r-pairs) -9.1 -14.8 -5.5 -. 7 30.1 2.6 19.2 4.133813* Woodoo ship (including repairs) -8.1 -3.0 11.1 8.5 1.2 .57383r Motor vehicles (i-cluding ropairns -1.8 1.7 1.6 1.0 -2.6 .2 20.9 1.63

Other - anafaturiog3912 Sciemtific instranents -8.2 -17.1 -5.1 -14.0 44.4 12.1 4.1 3.143970 Watuhes & Clocks -4.6 -1.3 -12.5 -. 6 19.0 7.9 6.3 4.103991* Umbrella -42.1 1.4 39.3 1.3 1.9 2.6 1.373993** Toy 4 sportiog goods -51.6 -18.6 26.7 27.2 16.2 .9 11.4 7.63

*D-eotes 103 or core ustablishments in the indastry. .*Dnontes 50 or moe- entabliusments in the industry.

Sources: Report an Miming and M-afuact-ring Conus 1968 (Seoul: Ec.onomi Planning Bgard, 1970) and Report o Miniog amd M-nufacturingSurvey 1975 (Socal: Ecanomic Planning Board, 1976).

- 107 -

After eliminating all the ambiguous cases, 63 industries remained.The results for these industries are presented in table Al and analyzed intable 3.5. To compared the minimum efficient plant size with industry size,minimum efficient plant size (in terms of employment) as a percentage of totalindustry is calculated and reproduced in table Al. Finally, two measures ofthe market size of each industry -- the ratio of 1975 employment to 1968employment and the absolute number of employment in 1975 -- are also providedin table Al.

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APPENDIX B

TYPES OF SMALL-SCALE INDUSTRIES

A small-scale industry is one in which small firms (those withfewer than 100 workers) account for half or more of the industry's employment.Staley and Morse, in their classical study on small industries, grouped intoeight categories those factors that help determine small-plant predominancein manufacturing industries. These are listed in chapter 3. Small industriesin Korea and Taiwan were classified into these eight categories. The purposeof this appendix is to discuss each of the factors that help determine small-plant predominance in Korea and Taiwan. To avoid repetition and becauseKorean data are more detailed, our discussion will focus primarily on Korea.The Taiwan data are presented in table B1 and the Korean data in table B2.

Under category IA, dispersed resource processors, we find mostlyfood and agricultural resource industries. Farms are typically widelydispersed, and in any given district only a limited supply of agriculturalraw materials is available for processing. These facts plus the high costof transporting raw materials to central locations combine to keep mostprocessors of agricultural products from growing beyond a given size.Besides food and agricultural resource industries, the only other industriesof importance included in this category are sawmills and cut-stone products.The rationale for including these industries in category IA is the sameas that for agricultural resource industries. Finally, in all the industriesin this category, processing usually reduces the weight of the principalraw material substantially, making the final product much cheaper to transport.

The characteristics of industries in category IB, market orientedindustries, are that they serve local and regional markets and produce bulkyor perishable goods that are difficult and costly to transfer. The Koreanindustries in this category fall roughly into the following types: (1) agri-cultural supplies and equipment, such as animal feeds and agricultural handtools; (2) perishable consumer goods, such as ice cream, ice, and bean curd;(3) durable household goods, such as house furnishings, furniture, and cane-ware; (4) construction materials, such as carpentry and joinery, structuralclay products, cement products, and structural metal products; (5) bulky finalproducts, like containers, cans, boxes, sheet metal products, and boiler shopproducts, and (6) transport equipment and services, such as wooden shipbuilding and repairs, manufacture and servicing of engines and other parts forships. It may be noted that, in terms of capital investment and technicalrequirements, it is relatively easy to enter most of these industries.

The service industries, category IC, are those in which enterprisesperform specific jobs on request from their customers, usually another busi-ness or industrial enterprise. Often the jobs involve processing or repairs.In Korea, service establishments are found primarily in two areas: printingand its allied industries like typesetting and photoengraving, and in the

- 109 -

metal and metal product industries, such as metal casting and metal coatingand plating. As service establishments tend to be quite small (in fact, mostrepair shops are tiny), probably more industries would have been included inthis category had the coverage of the 1975 manufacturing survey not excludedestablishments with fewer than 5 workers. Because they depend on otherenterprises for business, the service industries are likely to be located inthe large manufacturing centers.

In industries that use production processes in which scale economiesare relatively unimportant, SSEs can be very competitive. Staley and Morsegrouped such production processes into three main categories: separablemanufacturing operations (IIA), craft handwork (IIB), and simple asembly,mixing, or finishing (IIC). In Korea, industries that fall into category IIA,separable manufacturing operations, are primarily those in metalworking. Thehallmark of the metalworking industry is that its production process can bebroken down into many separate operations, thus permitting a high degree ofspecialization and division of labor. In this environment, small firms canprevail by specializing. However, at present small firm predominance in themetalworking industry in Korea is probably explained not by specializationbut by their versatility and ability to respond to the special demands oftheir customers.

In less developed countries, many industries still operate in smallestablishments because they are involved in producing handicrafts. In Korea,rapid industrialization has greatly reduced the importance of crafts.Table B2 identifies only two industries involving crafts in which SSEs werepredominant in 1975: handmade paper and lacquerwares. Undoubtedly, othersexisted but they were aggregated with non-craft industries to form largerindustry groups such as caneware and wood products, and placed elsewhere.

The characteristics of industries in category IIC, simple assembly,mixing, or finishing, are that (1) they use relatively simple technologythat does not require large investment in machinery and equipment, (2) theyare labor intensive (labor content in value added is high), (3) they producegoods with relatively low transfer costs, (4) they are highly competitive(easy entry and low profit margins). In Korea, as table B2 shows, industriesin this category produced primarily two types of goods in 1975: textilesand clothing (for example, knitted fabrics, narrow fabrics, and outerwearfor children) and chemicals and chemical products such as pigments, paints,ink, and drugs.

In some 60 of the 175 Korean industries in which small establish-ments were predominant in 1975, small plants produced less than W 200 million(about US$412,000). In other words, these industries produced goods thathad very limited total demand. Thus, a small total market, more than anyother reason, explains small firm predominance in these industries. Astable B2 shows, a wide variety of industries are included in this category.

Although the nucleus of the small industry sector is composed ofindustries in which small plants predominate, the total number of workersemployed and the total value-added produced by small firms in Taiwan and in

- 110 -

Korea are nearly as great or greater in those industries where they do notpredominate. For example, in Korea in 1975, small establishments in the 198industries in which small plants do not predominate employed 15.9 percentof all manufacturing workers and produced 9.3 percent of the total manufac-turing value added, significantly greater than the total volume of small-firmactivity in the 175 industries in which they were predominant. In tables B3and B4, the positions of small establishments in industries in which they donot predominate are summarized, and the summaries show that in many of theseindustries small plants were clearly competing on fairly even terms with largefactories. In other industries, small plants played a relatively minor role,but their output and employment were substantial. Apparently, in these indus-tries, small establishments were able to "fill the cracks" not occupied by thelarge factories. For examples of industries in which small establishments aremoderately important, or "fill the cracks" not occupied by the large factor-ies, the reader should consult appendix tables B3 and B4. Not surprisingly,they include many industries involved in simple assembly, mixing, or finishing(for example, textiles and wearing apparels) and industries where locationinfluences were particularly strong such as bread, coal briquettes, andvarious non-metallic mineral products.

- 111 -

Table Bl Taiwan Industries in Which Sma1l Enterprisesa Employed 50 percent or more ofThe Workers in the Particular Industry in 1971, by Type of Industry

Value added in smallWorkers in small enterprises enterprises

N4o. of small Share of industry Mil'ion Share of industryenterDrises Persons worker, NT $ VA, t

IA. Resource processorsMeat processinq 158 1,014 74 21.8 84Dairy products 327 1,760 58 39.8 41Vegetable oil 521 3,751 80 31.0 44Rice milling 6,899 18,031 100 389.3 100Tea processing 234 3,715 95 56.3 96Tanning & leather finishing 115 1,016 53 26.7 63Sawmrills and planing mills 1,291 12,222 52 338.6 30

18. Market oriented industriesAnimal feeds 1,078 3,921 64 76.7 aFood, n.e.c. 2,401 13,562 81 208.6 81Furniture and fixtures 909 6.212 67 148.3 63Agricultural insecticides 65 1,496 68 49.7 59Glass'and its products 147 4,514 53 95.8 29Structural clay products 1,066 22,347 90 332.2 88Cement products 633 4,490 67 89.3 58Nonmetallic minearal

products, n.e.c. 379 5,512 60 133.2 77Metal furniture 147 1,572 100 35.2 100Tin cans and boxes 76 1,315 82 30.9 76Aluminum products

(e.g., door, window frames) 282 4,262 71 93.4 61Manufactured ice 658 3,610 58 114.4 74

IC. Service industriesPrintino 1,261 13,201 85 345.7 64Metal processing 414 3,183 100 72.4 100

II.A. Separable ifo. operationsIron and steel products 1,650 14,802 70 374.2 64

for industrial useManufacturing and repair

of machinery and equip.,excluding electrical 4,161 40,882 67 1,031.4 58

Transport equipment. n.e.c. 272 3,058 68 73.5 61Metal products, n.e.c. 288 3,798 92 74.3 77Special electrical apparatus 59 1,289 56 23.8 47Professional, scientific

equipment 165 2,359 50 52.9 51

17B. Simple assembly, mixing or finishingFlavoring exc.

monosodium glutamate 528 2,828 79 62.2 72Products of wood, bamboo,

cane, n.e.c. 1,399 15,024 78 300.4 81Processed paper & its prods. 304 3,928 72 74.3 92Bookbindino 159 1,554 94 34.7 92Acids and alkalis 185 3,693 52 98.9 42Paint, color, ink 176 2,676 75 77.0 77Medical, pharmaceutical

preparations 544 8,456 72 228.7 49Soap, detergent, cosmetics 412 4,255 55 126.1 73Chemical products, n.e.c. 300 3,841 66 27.5 19Textile products, n.e.c. 108 1,791 57 25.0 51

0118. Small total marketCanning, preserving of meat 36 716 87 9.1 75Animal fats 19 148 100 3.2 100mills,n.e.c. 334 1,810 94 20.0 97Silk textiles 51 934 67 14.4 70Leather apparel 1 25 100 1.3 100Wood preservation 2 181 100 14.0 100Paper bags 55 493 62 11.2 48Publishing 2 19 100 .3 100Engraving and etching 77 695 100 16.0 100Inedible oils and fats 54 426 70 2.6 99Coal products 6 78 100 2.2 100Asphalt materials 3 43 100 1.3 100Rubber and synthetic rubber 54 705 100 13.3 100Rubber sole 43 783 65 8.89 77Copper 59 761 61 14.4 bBasic metal, n.e.c. 13 126 100 2.6 100Electric insulators and

insulation 1 14 100 .2 100Motorized tricycles 84 836 72 17.2 92

aThose with fewer than 100 workers.

bIndustry's value added was negative in 1971.

Source: The Report of the 1971 Industrial and Commercial Censuses of Taiwan and Fukien Area, Republic of China.

TABL B2KOKE A INDLJSTR IES IN WHIC H S>¶ALL tl,TABL SiiD.,,iCTS I 5[ 99 riOhhJk S ) EU 'j 9 P; R. YOR MORE OF THiE WORKERS IN THE PARTICULAR INDUSTRY IN 19.75. BY TYPE Or- I4DJST Y.

WORKERS IN SMALL VALJE AnDEE IN SAALLE ST.2'ISaN`Pi:NTS LSTAELISiZ'-;TS

NUMBER OF t SHARE Cf V A t SHARE CFINDUSTRY SMALL PERSONS INDUSTRY 1000 INDUSTRY

ESTABLISDIZNTS W9RKERS WON) VA

IA RESOURCE PROCESSORS

PRESERVING FRUITS, VEGETABLES 33 5e? S5 391009 71VEGETABLE OILS AND FATS 56 d60 70 1015993 39HUSKING, POLISHING CEREALS 705 8367 92 5519294 93STARCt1ES 64 1930 63 879683 15BREWER'S REQUISITES 17 396 71 460760 97DISTIL, RECTIFY, BLEND N E C a 284 68 689051 78RICE WINE 1084 10727 98 21347986 96WINE 10 183 52 32J3)t2 27SAWMILLS 833 8083 66 10745528 41PULP 5 179 100 290895 100CUT-STONE PRODUCTS 178 2164 96 1935263 98

TOTAL 33845 44095506

IS MARKET ORIENTED INDUSTRIES

ICE-CREAM 45 738 56 422533 19ICE,EXCEPT DRY ICE 113 1619 76 112J22G 66BEAN CLURD, SIMILAR PRODUCTS 68 650 100 542356 100OTHER FOOD PRODUCTS, N E C 12 348 100 733510 10OPREPARED ANIMAL FEEDS 82 2400 67 10325670 53HOLSE FURNISHING 69 1297 62 1916705 78BUILDER'S CARPENTRY, JOINERY 95 792 100 571103 100CANE WARE 23 471 100 240691 100FURNITURE EXC UPHOLSTERED 503 4843 73 2943260 61UPHOLSTERED FURNITURE 15 502 79 605393 90CORRUGATED PAPER BOARD, BOXES 124 3542 51 3558079 46PAPERnBOARD BOXES EXC CORRUG 39 644 54 526869 39PAPERBOARO CONTAINERS N E C 20 522 52 373233 50PLASTIC FURNITURE 18 420 54 578921 59CLAY BUILDING BRICKS 47 1336 58 693238 56CLAY ROOFING TILES 58 581 70 393237 70ClAY REFRACTORY GOODS 55 1470 59 143J789 15QUICK, SLAKEO, HYDRAULLIC LIME 38 1079 55 9Ž2419 44CEMENT, CONCPETE PRODUCTS 742 664t 53 5057164 36NON-METAL MINERAL PRODS N E C 17 396 76 1072887 9&HAND TOOLS, AGRICULTURAL 84 1106 7d 77049n 74METAL FURNITURE, FIXTURES 92 1853 73 1704.13 70ARCHIT , ORNAMEN METAL WORK 21 221 68 5135b8 9'3SHEET MFTAL PRODUCTS 28 503 100 373o5J lCOBOILER SHOP PRODUCTS 36 1047 69 1572943 49ENGINE AND PAkTS FOR SHIP 60 1337 88 11042?6 33TIMBER SHIP BUILDING, REPAIRING 76 1073 91 103 U800 80SHIP BUILDING, REPAIRING N E C 32 5tS2 100 655638 tO0

TOTAL ffu-C 41_81_6_8

(Table B2 con't) WOuRK -s IN SALL VALJE. ADDEO IN SMALLES'TABLISHMN11TS ESTABLISHMEN'TS

NIJMBER JF % SHARE OF VA X SHARE OFINDUSTRY SMALL PERSGNS INDUSTRY (1000 INDUSTRY

ESTABLISHMENTS WORKERS WON) VA

IC SERVICE INOUSTRIESIRON & STEFL CASTING, EXC. PIPES 139 3574 54 2498152 46PUBLISHING PERIODICALS 42 1066 100 1150771 100

PRINTING, PUBLISHING N E C 673 7589 59 6748800 34

PRINTING ALLIED IND N E C 35 999 90 992757 85METAL PLATING, COATING SERVICE 37 40C 100 ?03379 100NONi'EiROUS FOUNDRE13 28 57k' 83 770963 85TOTAL 14202 I129822

IIA SEPARABLE MANIJFACTURING OPERATIONS

INDUSTRIAL, MECHANICAL GOODS 73 2045 57 2449228 53

PRESS AND HAMMER FORGINGS 6 137 100 210631 100HAND TOOLS EXC AGRICULTURAL 40 685 50 583231 27

GENERAL HARDWARE 102 1477 73 1197325 74HARDWARE. CUTLERY N E C 35 895 69 522793 80WIRE PRODUCTS 63 1543 62 1576508 19METAL CUTTING MACHINERY 49 1174 56 1125342 37METAL FORMING MACHINERY 37 703 64 957957 51

WGCD WORKING MACHINERY 22 341 77 320984 94

INTERCHANGEABLE CUTTING TOOLS 8 261 100 361745 100MACHINES FOR METAL, WOOD N E C 64 138b 76 1567055 88MACHiNERY--TEXTILE INDUSTRY 169 3376 56 3538903 60 H

MACHINERY-- FOOD. TOBACCO IND 68 1412 100 1590328 103

MACHINERY--CHEMICAL,PETRO IND 25 596 60 746524 54

MACHINERY-RUBBER PLASTIC INn 32 410 100 398863 100MACHINERY--PIJLP AND PAPER IND 22 389 100 487173 100

MACHINERY--PRINTING INDUSTRY 30 533 77 573866 71MACHINERY--GLASS, CERAMICS IND 50 851 69 1113132 76INDUSTRIAL MACHINERY N E C 108 1021 79 648071 109WEIGHING MACHINERY, NON-PRECISE 10 278 100 225004 100PUMPS AND COMPRESSORS 60 1312 51 1967511 49POWER TRANSMISSION EQUIPMENT 49 118S 52 1254376 28

SWITCHGEAR, PROTECTIVE EQUIP 38 1029 82 991975 50

ELECTRICAL EQUIP FOR ENGINES 8 260 100 423238 100IND ELECTRICAL EQUIP N E C 16 311 71 539969 96TRANSPORT EQUIPMENT N E C 29 326 100 344881 100

TESTING, CHECKING INSTRUMENTS 13 374 63 317430 74MEDICAL INSTRUMENTS 25 708 66 543395 75

TOTAL 2 26577438

IIB CRAFT HiANDWORK

HANDMADE PAPER 113 1322 60 472359 81LACQUERED WOOD ARTICLES 19 344 100 327654 100

TOTAL 1666 800013

2)k M i :S i N CS'ALL VALiJ; A5.,,ii) I S:-5ALL(Table B2 con't) J 3LLIll oTADLISl,;42NT'S

NUMBER OF % SHARE OF VA t SHARE OFINDUSTRY SMALL PERSCNS INDUSTRY (1003 INDUSTRY

ESTABLIS1D4iTS WORKERS WON) VA

IIC SIMPLE ASSEMBLY, MIXING, AND FINISHING

SOY-SAUCE, SOY BEAN PASTE 70 S45 74 1201947 52MADE-UP CANVAS GOODS 25 322 72 298475 70KNITTED GLOVES MILLS 45 750 71 568527 70KNITTED FABRICS MILLS 47 1834 57 9s4128 33CORCAGE, ROPE, TWINE N E C 12 335 100 215620 103NARROW FABRICS 32 811 100 499968 100WEAVING TEXTILES N E C 23 579 65 529613 57PAODING, FILLING 75 1116 79 1311350 81BCNDED FABRICS, INCLUDING FELT 6 310 100 298369 100OUTERWEAR-YOUNG CHILO 96 1133 70 562956 49FUR DRESSING, DYEING 6 338 100 2J7951 100HOUSEHOLD ARTICLES 54 922 81 722023 CSBUILDING PAPER, BOARD 59 1848 90 3032015 79WALL PAPER, LINCRUSTA 30 729 66 904323 65OFF-MACHINE PROCESSED PAPER 22 635 52 1362220 42STATIONERY 20 306 100 376155 100INDUSTRIAL GASES 51 864 86 1503593 78DYEING, TANNING MATERIALS 4 121 54 260319 64PIGMENTS, COLOURING MATERIALS 15 466 75 499301 45GUM, WOOD CHEMICALS Z 94 100 343070 100SYNTHETIC MATERIALS N E C 25 518 80 1074173 90CELLOLOSE BASE PAINTS 9 168 100 278o806 100WATER PAINTS 9 180 100 784962 100PAINTS ETC N E C 4 145 100 368534 100MECICINAL CHEMICALS 9 306 100 1838989 100DRUGS, MEDICINES N E C 26 420 52 968852 45ADOESIVES, GELATIN 23 491 79 1105480 52PREPARED PHOTOGRAPHIC GOODS 17 644 85 132776Z 101PRINTING, WRITING INK 19 376 100 1032929 100ESSENTIAL OILS 6 119 100 294992 103OTHER CHEMICAL PRODS N E C 38 847 57 1249983 47LUBRICATING OILS, GREASES 19 760 100 2960830 100REBUILDING OF TYRE 13 240 100 220842 130OTHER PRODUCTS N E C 53 1016 60 792264 48HOUSE ARTICLES OF PLASTIC 85 1559 55 1209930 29GLASS FIBRE, ARTICLES 4 205 100 555296 100ABRASIVE ARTICLES 16 484 77 811025 83METAL SANITARY WARE 14 337 100 333659 100SPACE HEATING ECUIPMENT 53 1278 64 1208495 45FANS AND BLOWERS 10 333 100 399657 100BUTTONS 20 533 71 610639 75PAINT, RELATED PRODUCTS 2 45 100 231950 100

TOTAL 25462 32597572

1 K , S1 N1 L L VAL. J 0~): I10 S ~ [LL(Table B2 con't) h (LHNT6 6SYALO)-IW2S

NUMRER JF 4 SHARE OF VA t SHIA-RE 3rINOUSTRY SPALL PERSCNS INOUSTRY (100J IN DST,tY

ESTABL1i.M124TS WORKERS W0 l) vA

iruB SMALL MARKET

SLAUGHTERING POULTRY 3 59 100 2 36 100BULTER AND CHEESE 2 24 100 -21 794 100DAIRY PRODUCTS, N E C 2 35 100 S95O0 100

SUGAR FACTORY, REFINFRY N E C 7 61 100 4z 829 100SUGAR, OTHER THAN SUCROSE 33 293 63 172367 9GINSENG WINE 2 45 103 2121 I0OOHfMP SPINNING 3 28 100 26179 100

CARPETS 4 145 100 150822 100FEMP FABRICS 5 80 100 46176 100STRAW-WORKS 19 178 1)00 119026 1(00OT8ER TEXTILES N E C 9 250 100 12708 100MACHINE LEATHER ARTICLES 4 116 100 91616 100WOOD MILLS N E C 9 184 100 90212 100COCPER 3 38 100 36413 100WOODEN CASES EXC PACKINGS 14 2Z2 100 190142 100WOODEN TOOLS, APPLIANCES 31 393 67 L12653 49OTHER WOOD PRODS N E C 3 31 100 17762 10

WOOD STCRE FIXTURES 3 20 100 9467 100SANITARY FOOD CONTAINERS 4 99 130 63465 100CCMMERCIAL PRINTING 3 37 100 41547 100FERTILIZERS, PESTICIDES N E C 3 66 100 147466 100WAX, PCLISHES 4 65 100 9947-2 10

PETROLEUM REFINERIES N E C 3 86' 100 148990 100

HARDENED RUBBER, ARTICLES 4 107 100 3t419 100LAB, INDUSTRIAL CERAMIC WARES 7 93 100 49013 100POTTERY, CHINA N E C 16 439 71 175277 5iSAFETY GLASS 4 18 100 96333 100OPTICAL GLASS, BLANKS 2 99 100 94401 100STRUCTURAL CLAY PRODS N E C 11 102 100 53579 100CDOMESTIC APPLIANCE--FOOD 4 49 100 34790 100SAWS AND BLADES 8 150 100 142712 100SAFES 10 157 100 109236 tooST'EAM, GAS TURBINES 3 G3 100 73950 100ENGINES, TUR81NES N E C 6 67 100 53979 100METAL TRFATING MACHINERY 12 154 100 155066 IGOHANOHOLD POWER DRIVEN TOOLS 10 IZ6 100 162215 100DATA PROCESSING EQUIPMENT 3 90 100 143961 100

TYPEWR (TERS 4 104 100 65963 100CCMPUTING MACHINES N E C 3 118 100 78450 100WORK TRUCKS, STACKERS 2 59 100 39418 100SERVICE INDUSTRY MACHINES 9 103 1C0 67917 100ELECTRIC INDUSTRIAL CONTROLS 5 150 100 163031 100WELDING AND CUTTING MACHINES 4 59 GO0 80J95 100ELECTRIC ALARM, SIGNAL SYSTEMS 11 242 65 182531 68ELECTRO-MEDICAL APPARATUS 4 92 100 77494 100LCCOMOTIVE 2 20 100 6263 100RAILROAD EQUIPMENT N E C 3 67 100 158465 100AIRCRAFT AND REPAIR 2 32 100 19746 100DRAWING INSTRUMENTS 3 40 IGO 21998 ICOSCIENTIFIC EQUIPMENT N E C 10 196 60 163937 81

(Table B2 con2t)

WORKERS IN SMALL VALUE ADDEO IN SMALL

ESTABLISlI'ETS ESTABLISHVLNTS

NUMBER OF % SHARE OF VA X SHARE OFINDUSTRY SMALL PERSONS INDUSTRY l1000 INDUSTRY

ESTABLISHIT.S WORKERS WON) VA

OPHTHALMIC LENSES 3 5S 100 35009 ICOPHOTOCOPYING APPARATUS 5 100 100 116953 100t'ICROSCOPES AND TELESCOPES 3 113 100 78134 100OPTICAL ELEMENTS 4 159 100 135596 100OPTICAL GOODS N E C 2 18 100 10005 100KEYBOARD WIND INSTRUMENTS 3 152 100 L36495 1COWIND INSTRUMENTS 3 152 100 63976 100GYMNASIUM, PLAYGROUND EQUIP 9 92 100 71624 100

TOTAL 6k?4 5037295

NOTES AND SOURCE: BASED ON DATA IN REPORT ON MINING AND MANUACTURING SURVEY, 1975.0l

TABLE B3 KOREAN INDUSTRIES IN WhiICH SMALL EST8,bLISHIENT:; r'dPLOyED 25 TO49 PERCENT OF THE WORKERS IN TUE PARTICULAR INh.USTRY IN 1975.

WOi(KERS IN SMALL VALUE ADDED IN StLALLESTABLISHMENITS . STABLISW-:El4TS

NUMBER OF S SHARE OF VA I SAAR. O.'INDUSTRY SMALL PERSONS INC'USThY (1000 INDUST2RY

ESTABLISHMENTS WORKERS WON) Y1

REFINING EDIBLE OILS 22 385 25 519175 18BREAD, BAKERY PRODS. 297 3595 25 2473193 17STEEL WORKS 11 320 25 440915 25UMBRELLAS AND WALKING STICKS 47 657 25 285329 12LEATHER CASES, CONTAINERS 5 234 26 135267 18MECHANICAL LIGHITERS 5 227 26 134414 11LUGGAGE 36 1202 27 756533 21METAL DOMESTIC UTENSILS 203 3213 27 1960828 20ELECTRIC TOILET, BEAUTY AIDS 3 79 27 36940 23STORAGE BATTERIES 7 235 27 224150 13THREAD 118 2288 30 2382699 25KNITTED HOSIERY MILLS 95 2983 30 2251894 23CUT STOCK, FINDINGS-BOOT, SHOE 11 325 30 370259 43PAPER BAGS 13 501 30 509877 30SEWING MACHINES 24 7i8 30 1177521 43SMALL ARMS, ARTILLERY 5 116 30 67036 25ELECTRICAL APPLIANCE, HIOUSEVARE 13 468 30 461581 19MATS, MATTING 15 454 31 257488 40SUITS, COATS FOR MEN, BOYS 971 7958 31 6946794 33SANITARY PAPER PRODUCTS 10 190 31 216135 10 HPOLYMERIZATION PRODUCTS 59 1278 31 2289078 12KNITTING MILLS, N.E,C. 10 342 32 378530 54OTHER PLASTIC PRODS. N.E.C. 191 40f0 32 3470540 25JEWELLERY AND RELATED ARTICLES 51 1218 32 1378>193 26TOYS 53 2013 32 2342801 31MADE-UP TEXTILES, EXC. APPARELS, N.E.C. 75 1476 33 960697 33EMBROIDERIES 84 1049 34 bd1964 30CLOTHES EXC. FOOTWEAR N.E.C. 28 1065 34 630369 31CIIEM. DERIVS. OF CELLULOSE 8 263 34 24938C 10INSULATED WIRES, CABLES 27 1039 34 117)737 11BRUSHES AND BROOMS 22 585 34 248208 30CORK, CORK PRODUCTS 6 82 35 275862 81PULP, PAPER, BOARD N.E.C. 38 1132 35 892024 16INDUSTRIAL CHEMICALS N.E.C. 7 174 35 240646 38OTHER OIL PAINTS 7 139 35 245523 22tETAL CANS, CONTAINERS 29 11:18 35 1459048 28MANUFACTURING INDUSTRIES N.E.C. 91 1813 35 1418458 34DISTILLING FERMENTED CEREALS 5 154 36 389644 28PRODS. OF PETRO., COAL N.E.C. 13 281 36 631054 28ELECTRIC GENERATOR, MOTOR 41 1107 36 1014316 39HOUSE ELECTRIC HEATING EQUIP. 22 745 37 468085 35MOTOR VEHICLE PARTS,ACCESSORIES 138 4587 37 4675691 24MAN MADE FIBRE FABRICS 667 21972 38 16689635 24HOUSEHOLD GLASS WARE 15 635 38 413744 27SCIENTIFIC INSTRUMENTS 7 140 38 102999 27WOODEN,CANE CONTAINERS N.E.C. 19 261 39 207243 34

(Table B5 con't) W Oi~ E W IN S .ALL V AL,Ji A 0) i<N D3 IA .LESTABLISHMENTS ESTABLISHMENTS

NUMBER OF % S'iAhE OF VA S SliAA O;-INDUSTRY SMALL PERSONS INDUSTREY 1000 INDUSTRY

ESTABLISHMENTS WORKERS WON) VA

KRAFT PAPER, PAPERBOARD 17 856 39 1371523 25BLAST FURNACE 14 363 39 622847 22BICYCLES 69 1542 39 880271 30SLAUGHTERING, LIVESTOCK 5 214 40 755727 31SYNTHETIC ORGANIC DYESTUFFS 14 4C4 40 754284 50INTERNAL COMB. PISTON ENGINES 24 257 41 157487 24AGRICULTURAL MACHINERY 166 2638 41 4142899 45ELECTRICAL APPARATUS N.E.C. 59 1916 41 1450170 41COURT AND FIELD GAME EQUIPMENT 23 816 41 50-3283 23PROCESSING COFFEE, TEA 23 674 42 755181 9WORK CLOTHES FOR WOMEN, GIRLS 1004 8092 42 5963608 37ANIMAL OILS AND FATS 5 82 43 62146 29MATCHES 27 741 43 283015 24PLASTIC CONTAINERS, BAGS 88 1934 43 1627267 43PRESERVE, PROCESS FISH ETC. 362 7357 44 6771316 48PUBLISHING BOOKS 164 3901 44 4647767 36CARBON BLACK 1 91 44 52415 3DROOING OF NON-PENUODS METALS 84 2374 44 3072916 43COTTON FABRICS 313 7007 45 5072545 34COATED FABRICS 5 142 45 95230 54CUTLERY 20 411 45 546482 58TANKS, METAL CONTAINERS 22 334 45 324219 34 '

GRAMOPHONE RECORD, TAPE 12 315 45 441084 38CERAMIC PLUMDING FIXTURES 10 29'4 46 167845 20ASBESTOS PRODUCTS 15 355 46 360965 45WOODEN PACKINGS 60 736 47 633998 70PULP, PAPER ARTICLES N.E.C. 29 660 47 731741 38METAL PRODS. EXC. EQUIP. N.E.C. 84 1995 47 2235783 31ANGLING EQUIPMENT 41 1201 47 765915 36CERAMIC HOUSEHOLD-WARES 224 2404 48 1173987 43CERAMIC INSULATORS 19 423 48 238898 44ELECTRIC LAMPS 59 2124 48 935240 35TEXTILE BAGS 15 5;5 49 553406 47BLANK BOOKS ETC. 122 2528 49 2226785 54BBIQUETTES OF COAL 367 6110 49 10610006 41NON-FERROUS INDUSTRY N.E.C. 13 402 49 551664 26METAL DOORS 151 2144 49 2391371 52INORGANIC IND. CHEMICALS EXC. GASES 61 49 2945559 27IRON AND STEEL BASIC IND. N.E.C. 55 1430 49 1877736 22

SCREW MACHINE PRODUCTS 115 2500 49 2467016 5

NOTES AND SOURCE: SMALL ESTABLISHMES ARE THOSE WITH 5-99 WORKERS.BASED ON DATA IN REPORT ON MINING AND MANUFACTURING SURVEY, 1975.

TAbLE B KOREAN INDUSTRIES IN WHICH SMALL EST:3oLISHMrNiS tMPL5YED LESS

THAN 25 PERCENT OF THE WORKERS IN THE PARTICULAR INDUSTRY IN 1975.

WDRKERS IN SMALL VALUL AD0ED IN SMALLESTABLISHMENTS ESTA,LSH .*TS

NUMBER OF 4 SHARE OF VA t SHARE OFINDUSTRY SMALL PERSONS INDUSTRY 11003 INDUSTRY

ESTABLISHMENTS WORKERS WRN) V.

CONDENSED AND DRYMILK PRODUCTS 0 C 0 0 0MALT LIQUORS 0 0 3 0 0TOBACCO STEMMING, REDRYING I 31 538339 3CCl'PCUND FERTILIZERS 0 0 0 0 0TOOTH-PASTES 0 0 0 0FUEL OILS 0 C 0 0 0RAILWAY VANS AND COACHES I a 0 4620 0

MOTOR VEHICLES 5 40 0 19965 0

GAS OR LIQUID SUPPLY METERS 0 C 0 0 0

SUGAR REFINERIES 1 7 1 2066 0TOBACCO PRODUCTS 1 47 1 317641 0

CCTTCN SPINNING 16 34t 1 177625 1

EXPLOSIVES, PYROTECHNIC PRODS. 1 12 1 3750 0

RJOBHER FOOTWEAR 20 5a7 1 361379 1

NITROGENOUS FERTILIZER 3 41 2 69466 0SILK REELING 12 437 3 426544 3

SPECIAL SHOES 6 160 3 6J6e7 2

BASE METAL FLATWEAR a 17 3 1L169

1

PRIMARY BATTERIES 4 83 3 51041 1

SOJCC 5 271 4 1315748 4LEATHER GARMENTS 12 702 4 442212 3

TYRE AND TUBE 7 277 4 23)090 1

MAN-MADE FIBRE SPINNING 81 2232 5 1955709 1

VENEER, PLYWOOD, PANNELS 55 1078 5 432469 1

NEwSPPINT 1 72 5 23)0J 0

REGENERATED FIBRES 2 17 5 31127 1PERFUMES. COSMETICS 16 259 5 1I9992 I

CEMENT 5 318 5 28419663 40STEEL SHIP BUILDING, REPAIRING 56 1026 5 1048769 2

PHOTOGRAPHIC CAMERAS 1 15 5 b134 I

PHCSPHATIC FERTILIZERS 1 45 6 14037 0

ROLLING MILLS 40 12S4 6 1325671 2

CALCULATING DEVICES 5 12C 6 83539 4RADIO, TELEVISIGN, RECEIVER 62 25g7 6 24155V8 3

SHIRTS, wORK CLOTHES-MEN, BOYS 291 5415 7 35)1113 6

BOcK BINDING, ETC. 5 106 7 S2540 11

GLASS, GLASS PRODS. N.E.C. 7 1J3 7 100432 7

CLAY WALL TILES 10 659 7 249939 3ELECTRONIC TUBES, PARTS 80 3ie0 7 1040224 5STRINGED INSTRUMENTS 3 95 7 29749 3GLASS, PRIMARY FORM 5 163 j 32 )31 1ELECThICITY SUPPLY METERS 4 >3 8 2a5456 1

CCNDIMENTS 22 311 9 24j497 2SYNTHETIC RU6BER 4 34 9 1364)6 3MINERAL wOCLS I 17 9 15475 6

DCMESTIC REFRIGERATORS 4 84 9 24L4z:s 8

FANS 1 76 9IJ34,O 3WOGLEN FABRICS 41 1840 10 131OL19 6

(Table B4 con't) E 3S I N :\TLJ 1; A lALLI-) I'

NUM8F\ OF T AIaR- (:2 dO SHA_ iINDUSTRY SM^I-L PE RSItNS IN )USTrY ( ruG:;j IDJjTRY

ESTA,LI SEnMENTS q. K KS E 4) V A

UNLERREAR-nMtLN, GIRLS 3 5IC 1 2 IL,3 43PULLISHhNG NEvSPAPERS 25 3'8C 10 ' 't7,9 4SYNTHETIC f-IBRES 14 I4 i0 37J276 2PLASTIC FOOTwEAR 27 ibc 1 22' 20 3NOODLES 107 1045 119411, SHAIS, MILLINERY, HEADGEAR 8 1 1 11 5' 11 6PESTICIDES 17 47L 11 16it 7o7 13ANTIBICTICS 7 32t 11 1062,37 10SIHI,CTURAL METAL ME MBE RS 12 30a 1 1 413 3 1 1MATEkIALS HANDL ING EOUIIMENT 10 31j 11 679 3 1 2 11TANNERIES, LEATIER FINISHING 37 1115 12 19'3274 6MILLING FLOUR FROM CEREALS 15 511 13 21 2243 4 3CHECNG-JOD 8 21E I3 8 0>Yi 7FISHING LINE, NETS 2b 6 E 13 o94 6> IIRECCNSTITUTED wooD 2 41 13 1 )36 2WIGS 62 2GCE 13 1371964 3COCOA, CHOCOLATE, SuGAR CANDY 98 1007 14 534424 3SOFT DRINKS 18 537 14 792124 ?'9LEATHER EXC. CLOTHES N.E.C. 3 2e, 14 20171 4ORGANIC CHEMICALS 28 b33 14 15OL096 4ARII-ICIAL RESIN BASED PAINTS 17 3J'7 14 72774) 10HYGILNIC ARTICLES 2 12 14 5u7.2 8TUEES, PIPES-IRON, STEEL 10 404 14 5773/I "IPAR1 S FOR RAI LWAY ROLLING STOCK 10 256 14 2716938 4PREPARING AND PRESLRVING MEAT 9 163 1 5 214.)53 22CANNING FISH, SIMILAR FOODS 16 0s5 15 57410 9 11SOAPS 44 434 15 45J199 6SMELT, REFINE NON-FERROUS METS. 27 532 15 8434j3 6TRANSFCRmMERS 3 b 885 15 940614 10SPORTING, ATHLETIC GOODS N.E.C. 5 75 15 7q968 8GLCVES 17 706 16 494941 20MEDICAMENTS 92 276E 16 4709740 1LINF TELECOMMUNICATION EQUIP. 20 910 16 7749'9 oKNITTED OUTWLAR MILLS 223 7875 17 6847S-d 14WCEEN S HANUHAGS 15 7, i 1 7 30 1 13 2 3RACIO COMMUNICATION EQUIP. 20 598 17 98v i23 17HOUSE EQUIPMENT CABINETS 14 484 1 3 2234'91 15SIRINGLD KEYBOARD INSTRUMENTS 13 43/ 18 237300 7SURFACE-ACTIVE AGENTS 4 96 19 1552411 82SILK SPINNING 19 b7l 20 390320 9BICLOGICAL PRODUCTS 5 104 20 49Z614 48COATED IRON, STEEL SHEETS 14 210 20 211773 3DISTILLING OF ETHYL ALCOHOL 4 326 21 21i91845 21SPECTACLES 13 401 21 381343 22FLUID MILK 15 425 22 4693071 39CANNING FRUITS, VEGETABLES 39 1850 22 129D25o 21BLEACH, DYE, FINISH TEXTILES 201 6622 22 93Uz2226 21RE4CY-MIXED CONCRETE 3 161 22 551269 7CCNSTRuCTION, MINING EQUIPMENT 37 6B8 22 1111940 29MOTORCYCLE 5 41 22 26310 14WATCHES AND CLOCKS 44 1414 22 160J750 loWAICH AND CLOCK CASES 14 421 22 370195 26DRY BAKERY PRODUCTS 139 1263 23 924297 12

(Table B4 con't) WORKERS IN SMALL VALUE A0!)LD IN SMALLESTAbLISHMENTS ESTABLISHMENTS

NUMBER OF % SHARE OF VA £ SHkARE OFINDUSTRY SMALL PERSCNS INDUSTRY 1U3 3 INDUSTkY

ESTABLISHMENTS WORKERS WO;41 VA

PCLYCONDENSATION, ADDITION 25 356 23 273470 13INDUSTRIAL GLASS WARE 47 1472 23 1535563 14ASBESTOS, CEMENT PRODUCTS 17 561 23 632525 9TUBES, PIPES-CAST IRON, STEEL 6 246 23 338732 6GRAIN MILL PRODUCTS, N.E.C. 5 40 24 15750 16 -KNITTED UNDERWEAR MILLS 121 26b2 24 180837d 7CORDACE, ROPES, TWINE, CABLES 22 664 24 567286 16MACHINERY EXC. ELECTRIC N.E.C. 58 1cE6 24 147dd72 20WOOL SPINNING 16 751 24 539249 20LEATHER FOOTWEAR 154 1678 24 1380143 26OFFICE AID ARTISTS MATERIALS 39 985 24 1051605 26

NCTES AND SOURCE: SMALL ESTABLISHMENTS ARE THOSE WITH 5-99 WORKERS.BASED ON DATA IN REPORT ON MINING AND MANUFACTURING SURVEY 1975.

Hl

- 122 -

APPENDIX C

CENSUS MEASUREMENTS OF CAPITAL, LABOR.AND VALUE-ADDED IN KOREA AND TAIWAN

Because capital and labor estimates are central to much of theanalyses in chapter 4, how they are measured in the Korean and the Taiwancensuses must be discussed. In Korea, labor is the sum of the averagenumber cf employees for the months during which establishments are in opera-tion plus the number of working proprietors and unpaid workers on the dateof the census. Unpaid workers are family members who worked for more than24 hours per week without regular wage payments. In Taiwan, labor is the sumof employees (regular and "casual"), working proprietors, and unpaid familyworkers on the date of the census. While neither is an ideal measure of laborinput, the one for Korea is probably slightly better. The major weakness withthe labor measure in Taiwan is that it makes no adjustment for seasonal varia-tions in employment, which can be important in some industries.

The 1968 manufacturing census in Korea collected from each manufac-turing establishment, the value of its tangible fixed assets and tabulatedthe data by size of establishment. The 1971 industrial census in Taiwan pro-vides two measures of capital by size of enterprise: the value of tangiblefixed assets in operation and total assets in operation. In both censuses,tangible fixed assets include land, buildings and structures, machinery andequipment, and transport equipment. However, the Taiwan census reported bothfixed assets owned by the enterprise and those borrowed. Because smallestablishments are more likely to rent fixed capital, the exclusion of rentedfixed capital in the Korean census probably affects the capital statisticsfor small establishments more than those for large establishments. The valueof fixed assets is the book value as of the census data. When book valueswere not available, both censuses reported the "cautiously" estimated currentmarket values. Total assets in operation include fixed assets in operation,inventory, and financial assets (primarily cash). The problems associatedwith capital measures based on book values are well known. No attempt ismade here to adjust the book values of fixed assets for depreciation andobsolescence. Finally, there is evidence from surveys that fixed capital isutilized more fully in large than in small manufacturing enterprises. 1/ Tothe extent this is the case, the capital measures for Korea and Taiwan aresubjected to another source of bias.

1/ For example, a 1975 survey in Korea found that 85 percent of the manufac-turing enterprises with 100-199 workers operated at 90+ percent ofcapacity while only 60 percent of the manufacturing enterprises with 5-9workers operated at 90+ percent of capacity. See the Medium-SmallIndustry Bank, Report on the Status of Medium-Small Industries, 1975,table 2.2.

- 123 -

The 1971 Taiwan industrial census defines gross value-added asannual total production minus the costs of raw materials consumed, the costsof fuel and power, estimated value of materials supplied by others forprocessing, and other expenses. Net value-added is gross value-added minusdepreciation. The value-added figures used in the text and in all calcula-tions are net value-added. The 1968 Korean manufacturing census definesvalue-added as the value of gross output minus production costs. Gross outputis estimated by adding the net addition to inventories (finished goods, semi-finished goods, and work-in-progress) to the value of annual shipments. Pro-duction costs refer to "direct charges actually paid or payable for materialsand services consumed or put into production." Included in production costsare the costs of raw materials, costs of fuel and power, costs of contractwork, and costs of repair and maintenance. Excluded are depreciation charges,domestic consumption duties, and overhead costs. It appears that the Koreancensus value-added is roughly equivalent to the gross value-added as definedby the Taiwan census.

- 124 v

Appendi-p I)

Supporting Tables

- 125 ,

Table D1 The Importance of Contract Sales to Small-Medium (5-199 workers) ManufacturingEnterprises by Industry, Korea, 1975

Contract sales as percent ofPercent of small-medium total sales of

enterprises with contract sales small-medium enterprises

Manufacturing 17.4 17.0

Food 7.6 4.0

Beverages .7 14.3

Textiles 34.2 19.4

Wearing apparel and footwear 4.2 6.8

Wood and its products 20.4 14.0

Furniture and fixtures 7.0 4.5

Paper and its products 36.9 30.1

Printing and publishing 5.5 12.6

Leather and its products 36.1 7.6

Rubber products 56.6 40.3

Chemicals and their products 41.0 30.0

Petroleum and coal products 1.3 3.9

Non-metallic mineVral products 8.7 6.5

Basic metals 50.0 40.3

Metal products 22.9 29.3

Machinery 31.3 49.9

Electrical machinery and apparatus 43.1 28.0

Transport equipment 40.0 44.8

Other manufacturing industries 15.5 11.6

Source: The Medium-Small Industry Bank, Report on the Status of Medium-Small Industries, 1975.

- 126 -

Table D2 Manufacturing Employment and Value Added By Size

of Establishment and by Industry, 1973, Korea

Emp.To000) Distributed by size (workers) of establishment, percentItem VA (billiont) Total 1-3 4-19 20-49 50-99 100-499 500+

Manufacturing Employment 1,315 100 7.9 14.7 7.3 7.4 24.2 38.5value added 1,426 100 2.0 6.6 4.4 6.5 27.8 52.6

Food, bever-ages, tobacco Employment 207 100 21.5 24.9 6.0 5.4 16.1 26.2value added 267 100 3.9 10.4 3.9 5.4 22.9 53.4

Textiles, apparel, and Employment 441 100 7.7 11.6 6.0 7.1 29.1 38.5leather products value added 318 100 3.7 7.0 4.1 5.0 25.2 55.0

Wood and its products, Employment 63 100 11.7 28.0 5.9 2.7 7.1 44.6furniture and fixtures value added 67 100 3.2 14.1 4.2 2.4 6.2 69.8

Paper and its products Employment 60 100 2.4 20.5 13.0 12.1 35.5 16.4printing and publishing value added 62 100 .5 10.4 7.6 8.9 54.2 18.4

Chemical, petroleum, coal, Employment 141 100 .5 8.2 6.7 7.0 22.1 55.4rubber, and plastic products value added 276 100 .1 2.8 3.8 5.6 39.3 48.4

Nonmetallic minearal products Employment 60 100 9.2 23.6 9.3 9.2 22.1 26.6value added 73 100 2.0 6.5 3.7 27.2 30.9 29.6

Basic metals Employment 37 100 .9 4.6 8.4 9.2 29.5 47.4value added 104 100 .1 .9 2.9 3.1 28.8 64.2

Metal products, machinery, Employment 234 100 1.4 11.0 10.0 8.9 23.1 45.6and equipment value added 226 100 .4 6.0 6.1 6.3 19.7 61.4

Other manufacturing Employment 70 100 10.1 9.7 5.7 8.8 29.8 35.9industries value added 32 100 2.4 5.5 4.8 8.4 35.6 43.3

Source: Report on Mining and Manufacturing Census (Series I) 1973.

- 127 -

Table D3 Manufacturing Employment and Value Added by Size of

Enterprise and by Industry, 1971, Taiwan

Total Distribution by size (workers) of enterprise, percent

Industry Item VA(million NT$) Total 1-3 4-19 20-49 50-99 100-499 500+

Manufacturing Employment 1,250 100 4.9 13.9 10.3 8.9 27.2 34.7value added 42,430 100 3.3 8.7 5.9 5.6 20.0 56.4

Food, beverages, tobacco Employment 146 100 12.0 15.0 7.3 5.3 18.7 41.7value added 4,568 100 9.2 9.7 2.9 1.1 1.7 75.4

Textiles, apparel, and Employment 323 100 2.8 5.9 6.3 6.9 34.1 44.0leather products value added 7,121 100 2.7 5.4 5.1 6.1 35.9 44.7

Wood and its products, Employment 82 100 3.0 20.2 10.9 9.0 21.1 35.8furniture and fixtures value added 2,825 100 2.3 14.2 7.0 5.7 14.8 55.9

Paper and its products, Employment 52 100 1.8 26.1 15.8 9.1 26.8 20.4printing and publishing value added 1,887 100 1.2 15.6 10.1 6.6 24.1 42.4

Chemicsls, petroleum, coal, Employment 192 100 1.1 11.3 11.4 10.2 33.3 32.7rubber and plastic products value added 11,170 100 .4 4.0 3.3 5.2 20.6 66.6

Nonmetallic minearal Employment 63 100 1.4 20.5 24.2 17.3 20.6 15.9products value added 2,056 100 1.1 10.9 13.6 9.1 20.6 44.7

Basic rmtals Employment 30 100 .4 5.7 13.2 9.4 28.4 42.9value added 527 100 .6 7.8 15.7 1.5 -1.3 75.7

Metal products, machinery, Employment 309 100 9.0 19.2 11.2 9.6 20.8 30.1and equipment value added 10,950 100 5.6 12.2 7.6 6.2 17.0 51.4

Other manufacturing Employment 53 100 2.3 13.3 9.2 11.4 41.0 22.8industries value added 1,327 100 1.2 9.1 7.1 11.1 31.0 40.4

Source: The Report of The 1971 Industrial and Commercial Censuses of Taiwan and Fukien Area, Republic of China.The data have been adjusted to include repair and tailor shops. Value added is at factor cost.

- 128 -

TableD4 Number of Establishments by Location and by Size of Establisnment,Taiwan, 1966 and 1971

Size of establishment (workers)

Total 1-3 4-9 10-19 20-49 50-99 100-499 500+

Manufacturinr, 1966istributed by location, ° 28,771 11,271 9,323 3,919 2,605 782 719 149

Taipei area 22 11 22 33 40 42 36Taipei and Keelung cities T0 Ta TY17 17 TO 13 1Taipei Hsien 12 7 12 16 22 28 29 24

Other major citiesa 16 10 20 20 18 18 15 18Rest of Taiwan 62 79 58 47 7 3T6 7- 176

Manufacturing, 1971 44,092 15,495 14,560 5,951 4,335 1,676 7,707 368Distributed by location, l

Taipei area 22 10 22 33 39 37 34 34Taipei and Keelung cities TO 4 10 17 19 1S 12 12Taipei Hsien 12 6 12 16 20 22 21 22

Other major cities 17 13 23 18 14 14 17 20Rest of Taiwan 6-l 77 73S 178 77 4T 49 46

Construction, 1966 4,752 1,402 1,079 742 804 369 314 42Distributed by location, %

Taipei area 26 1' 30 28 32 30 28 31Taipei and Keelung cities 179 3 UT 22 24 3 26 29Taipei Hsien 7 7 9 6 8 5 3 2

Other major cities 14 11 16 14 18 1S 17 SRest of Taiwan 59 79 31 57 T0 _ 7;5 64

Construction, 1971 5,848 1,349 1,397 1,060 1,180 540 291 31DOstributea by location,

Taipei area 26 18 36 38 28 29 33 42Taipei and Keelung cities 20 12 29 31 22 20 28 36Taipei Hsien 6 6 7 7 6 9 5 7

Other major cities 15 11 15 13 16 18 26 16Rest of Taiwan 59 713 49 49 56 63 42 24

Trade, 1966 124,532 109,213 13,265 1,562 373 79 38 2Distributed by location, %

Taipei area 25 22 44 63 68 52 53 100Taipei and Keelung cities 17 13 39c 60 66 52 47 100Taipei Hsien 8 9 5 3 2 0 5 0

Other major cities 13 12 14 11 8 6 24 0Rest of Taiwan 62 76 472 3 2i 47 N I

Trade, 1971 160,797 136,651 20,330 2,824 761 151 75 5Distnibuted by location, %

Taipei area 30 25 57 73 75 67 67 60Taipei and Keelung cities 23 17 52 71 71 64 63 4-0Taipei Hsien 7 8 5 3 4 3 4 20

Other major cities 14 14 17 14 15 16 16 0Rest of Taiwan W4 67 3F T7 TO 17 T7 4l)

Other industries,b 1966 61,234 44,572 11,611 2,570 1,799 495 203 34Ostr6ibuted by location, X

Taipei area 22 21 37 37 37 41 49 62Taipei and Keelung cities T1 TI E6 TO 7 38 747 K3Taipei Hsien 9 9 9 7 6 3 2 0

Other major cities 14 13 19 20 18 18 15 18Rest of Taiwan 63- 66 '44 47E 47 7 36 20

Other industries, 1971 67,920 46,483 13,633 3,710 2,855 833 344 62Dis-cributed by location, %

Taipei area 27 20 40 41 38 45 54 42Taipei and Keelung cities 3 TT 3 3 47 7 319Taipei Hsien 7 7 7 4 5 4 4 3

Other major cities 15 13 18 20 25 23 20 13Rest of Taiwan a6 7i 423 39 7 23 6 F75

aThe cities of Taichung, Tainan, and Kaohsiung

bIncludes hotels, restaurants, transport and storage, financial and commercial services, recreation services,personal services, and unclassified industries.

Sources: General Report on the Third Industrial and Comnmercial Census of Taiwan, The Republic of China and The Reportof the 1971 Industrial and Cownercial Censuses of Taiwan and Fuklien Area, Republic of Xh.na. n ot censuses, repairestablishments and tailor shops are included in other industries.

- 129 -

Table D5 Manufacturing Establishments and Employment by Location and by Sizeof Establishment, Korea, 1958 and 1975

Size of establishments (workers)

Total 5-9 10-19 20-49 50-99 100-199 200-499 500+

Establishments, 1958 12,971 7,019 3,192 1,917 518 210 89 26Distributed by location, %

Seoul and Busan areas 46 43 44 50 62 66 78 66Seoul Tg 5& T8 R T& 25 38Busan 8 5 7 13 19 22 19 236yeonggi Do 10 11 9 7 10 8 13 8Gyeongsangnam Do 10 11 10 9 7 11 8 0

Rest of Korea 54 57 55 50 37 34 21 35

Establishments, 1975 22,787 9,641 5,146 3,739 1,764 1,148 872 477Distributed by lopation, %

Seoul and Busan areas 54 41 56 62 71 74 73 80Seoul f4 T 27 N- T5 33 31 TBusan 11 8 12 14 11 13 15 17Gyeonggi Do 12 8 11 1S 19 20 21 20Gyeongsangnam Do 7 8 6 5 6 8 6 9

Rest of Korea 46 58 44 37 28 26 27 19

ET, y ment, 1958 260,427 44,064 40,969 54,871 33,880 28,555 27,002 31,086Distributed by location, S

Seoul and Busan Areas 58 42 45 52 63 66 78 79Seoul F5 1S T9 2 T6 25 36 40Busan 16 5 8 14 20 23 19 29Gyeonggi Do 9 11 9 7 9 8 14 10Gyeongsangnam Do 8 11 9 9 8 10 9 0

Rest of Korea 42 58 55 48 37 34 21 21

Employment, 1975 1,420,144 62,621 69,242 115,270 124,126 163,078 266,472 619,335Distributed by location, %

Seoul and Busan Areas 74 41 57 63 73 74 74 82Seoul 30 T8 7- 2§ 36 33 30 o Busan 18 8 13 14 11 13 15 23Gyeonggi Do 18 8 11 16 20 20 22 17Gyeonsangnam Do 8 7 6 5 6 8 6 11

Rest of Korea 26 57 44 37 27 26 26 17

Sources: Final Report - Census of Mining and Manufacturing 1958 and Report on the Mining and Manufacturing Survey 1975.

TABIE D6 CAPITAL-LABOR RATIOS FOR INDUSTRIES IN WHICH SMALL ESTA4L ISHMENTSPREDO)MINNTE. BY TYPE OF IN0USTRY Ah0 BY SIZE Of ESTABLISHMENT(WORKERS), KOREA, 1968, 000 WONZPFRSON.

TOTAL 5-9 10-19 20-49 50-99 100-199 200-499 5)4+

TOTAL MANUFACTURING 476.0 296.0 374.5 388.4 3d7.0 380.2 519.5 655.8

SMALL INDUSTRY 363.6 286.6 362.5 378.2 382.5 385.3 511.6 325.6


CAN, PRESERVE FISH, SEA FOODS 237.8 47.1 192.4 186.6 345.2 517.5 272.0 --RICE MILL PRODUCTS 457.3 367.6 666.5 501.1 19d.1 96.9 -- --WHEAT, BEANS FOR FLOUR 688.6 403.2 696.9 316.5 897.5 400.0 978.9 --STARCHES 296.7 1066.7 673.4 237.8 344.2 545.3 -- --RICE WINE 292.8 281.4 313.1 321.6 41.4 -- -- --FRUIT WINE 235.1 394.8 351.1 422.0 321.2 262.8 43.4 --OTHER LIQUORS MODIFIED 658.2 -- 475.9 118.2 877.8 -- -- --YEAST 595.3 490.1 361.7 455.1 -- 1714.0 -- __SAWMILLS 735.5 717.1 772.1 812.0 447.2 480.1 1 809.8 447.2VEGETABLE OIL AND FATS 667.7 757.1 811.8 742.5 337.4 -- 399.4 --BRIOUETTES OF COAL 405.7 398.2 449.0 383.1 516.1 321.9 285.0 --LIME 371.3 191.5 278.6 368.8 484.7 -- -- --CUT STONE AND STONE PRODUCTS 116.7 99.2 138.3 93.3 189.0 145.3 -- __

IB MARKET-ORIENTED INDUSTRIES

DRY BAKERY PRODUCTS 231.0 190.6 211.9 948.3 243.5 42.0 472.0 59.1ICE, EXCEPT DRY ICE 1463.9 1915.2 1531.0 1783.0 241.5 240.0 -- --BEAN CURD AND ITS PRODUCTS 275.9 339.3 392.7 223.7 20.1 113.2 -- -- wPREPARED ANIMAL FFEDS 643.2 526.1 597.5 393.6 1082.2 -- -- --OTHER FOOD PRODUCTS N.E.C. 1287.5 411.3 850.7 695.0 990.S 6423.6 565.1 --SOFT DRINKS 526.4 427.4 415.7 296.8 163.7 1856.6 -- 272.0BAMBOO, VINE AND CORK PRODUCTS 125.1 112.6 121.7 50.5 419.0 -- -- --WOODEN FURNITURE 230.9 239.0 268.7 215.9 157.6 -- 1*40.5 --AETAL FURNITURE 230.7 365.5 310.5 293.5 186.6 110.0 -- __PAPER8OARD BJXES EXC. CORRUG. 297.1 508.1 185.1 333.5 182.5 322.3 -- --CORRUGATED PAPER BOARD, BOXES 359.4 264.5 376.2 290.5 210.4 -- 477.1 --CLAY BUILDING BRICKS 382.6 447.0 346.1 367.3 438.6 467.3 278.7 --CLAY ROOFING TILES 153.1 101.3 155.9 309.2 -- -- -- --REFRACTORIES 193.0 2C8.5 247.8 379.6 168.8 128.4 107.1 --EARTHENW4RE 77.1 74.4 82.3 86.0 -- -- 0.1 --CONCRETE PRODUCTS 340.9 228.1 303.5 222.5 1084.6 569.1 567.5 323.7TIN CANS, OTHER TIN WARE 485.8 192.3 1408.1 846.0 210.3 360.2 579.1 --HAND TOOLS, AGRICULTURAL 346.2 220.5 29t,.2 508.7 460.0 471.8 -- __STRUCTURAL PRODUCTS 331.4 292.7 421.5 371.6 350.6 237.3 -- 352.8ENGINE AND PARTS FOR SHIP 386.0 382.0 459.9 385.9 163.6 -- 349.6 --WOODEN SHIP BUILDING, REPAIR 476.0 664.9 59t3.7 493.3 105.5 181.2 -- --OTHER MANUFACTURING N.E.C. 490.5 702.0 23o.3 1333.3 372.2 402.1 -- 274.3

IC SERVICE INDUSTRIES

CCMMERCIAL PRINTING 432.4 348.9 455.6 497.2 318.3 403.0C 5',1. 543.1GALVANIZING AND PLATING 230.5 268.7 186.0 220.1 -- 238.5 REPAIR OF MOTOR VEHICLES 378.3 404.6 443.3 392.4 33S.7 193.6 4 5.2 __

(Table D6 con't)TOTAL 5-9 10-19 20-4i 5C-99 100-199 200-499 508-

IIA SEPARABLE MANUFACTURING OPERATIONS

ROLL,DRAW,EXTRUDE NON-FER. MET. 596.3 569.9 893.0 507.1 535.1 MOLDING OF ALUlINtUM 473.8 888.1 494.5 388.5 585.1 -- --

ALUMINUM, ALUMINUM-ALLOY PRODS. 229.0 273.4 273.4 315.6 274.3 384.5 176.5 92.4PRESSED, ENAMELEO) MTFAL PRODS. 234.3 24d.3 1)8.6 285.2 262.5 68.0 241.4 --

WIRE PRODUCTS N.E.C. 317.4 482.8 418.6 286.6 17 .9 273.7 438.3 --

METAL PRODUCTS N.E.C. 682.3 191.5 545.7 1486.2 463.7 530.5 95.9 --

PRIME MOVERS 395.9 376.7 545.7 289.9 8a 0.5 288.8 250.2 --

AGRICULTURAL MACHINERY 326.9 331.9 373.4 271.3 337.3 95.6 -- 377.4CCNSTRUCTION, MINING EQUIPMENT 662.3 376.1 1097.7 407.3 485.8 -- 809.2 -

METAL WORKING MACHINERY 456.5 357.9 621.8 454.5 360.8 385.0 -- --

MACHINERY--TEXTILE INDUSTRY 325.5 257.4 338.6 524.6 422.3 ?1Z.4 130.7 --

GENERAL MACHINERY, EQUIPMENT 432.7 397.3 507.9 495.4 507.5 414.5 180. --

OTHER MACHINERY. EOJIP., PARTS 405.4 Z90.3 314.5 435.7 307.0 191.8 497.7 758.8

BICYCLES AND THEIR PARTS 246.6 201.5 195.4 445.7 262.7 195.2 77.2 --

SCIENTIFIC INSTRUMENTS 463.2 461.3 534.5 519.4 563.9 208.9 401.4 --

FOOD PRODUCTION MACHINERY 459.5 586.4 521.6 504.1 415.4 102.5 -- --

SPECIAL IND. MACHINERY N.E.C. 470.2 641.9 479.2 485.7 462.0 135.7 0 0 0 0

118 CRAFT HANOWORK

KOREAN STYLE PAPER 38.3 37.0 45.6 27.0

JEWELRY AND RELATED ARTICLES 474.7 1l1.1 179.2 1418.4 556.5 -- -- --

IlC SIMPLE ASSEMBLY, MIXING, AND FINISHING

SOY-SAUCE, SOY BEAN PASTE 487.0 724.1 533.1 471.4 60.7 156.1 -- -- H

COTTON FABRICS 305.3 113.0 223.0 264.4 230.6 121.8 542.9 428.8 H

NARROW FABRICS 539.0 192.3 417.4 245.7 559.0 1078.9 -- --

MAN MADE FIBRE FABRICS 358.2 145.8 277.9 373.2 385.8 297.4 481.3 312.0

BLEACH, DYE, FINISH TEXTILES 448.0 302.9 370.2 412.3 417.3 586.4 450.7 --

KNITTED HOSIERY MILLS 416.9 253.0 348.6 480.5 394.9 599.8 265.2 --

KNITTEO UNDERWEAR MILLS 307.7 296.7 393.0 357.5 306.1 190.9 110.1 235.9KNITTING MILL PRODUCTS N.E.C. 295.4 218.4 207.3 386.3 336.3 237.2 -- --

MANUFACTURE OF TEXTILES N.E.C. 317.1 433.3 527.8 276.5 134.7 t13.8 693.0 --

LEATHER FOOTWEAR 186.0 150.5 199.8 214.2 160.8 298.8 269.8 117.5MEN'S OUTERWEAR 199.7 176.3 239.6 240.3 268.5 236.8 133.a 253.9WOMEN'S OUTERWEAR 158.3 130.1 165.6 267.7 161.6 -- -- 138.0OUTERWEAR--YOUNG CHILD 185.7 166.9 162.8 224.5 262.3 -

OTHER MAOE-UP TEXTILE GOODS 417.1 158.2 103.6 296.3 725.6 391.9 823.2 --

OTHER WOOD PRODUCTS 312.0 598.4 209.1 321.6 7.8 -- -- --

PROCESSED PAPER 283.2 287.6 186.1 303.8 313.5 636.8 47.9 --

NOTEBOOK, LEDGER, SIMILAR PROD. 349.8 472.1 286.8 523.0 479.5 90.5 -- --

LUGGAGE AND BOOK BAGS 205.7 203.4 163.6 289.6 292.7 117.3 -- --

OTHER RUBBER PRODUCTS 324.9 344.3 313.7 427.4 13s.1 782.1 80.6 --

ACID AND ALKALI PRODUCTS 4753.1 554.7 596.8 837.5 916.2 -- 11123.6 --

INORGANIC CHEMICALS 551.2 952.3 0J1.3 370.2 394.0 763.3 -- --

INDUSTRIAL GASES 1343.5 1823.1 1011.7 1622.4 -- -- -- --

MATCHES 209.3 264.0 426.6 218.1 224.6 117.7 125.8 --

CHEMICAL PRODUCTS N.E.C. 572.7 613.4 355.5 566.1 731.4 1150.9 249.8 --

NON-ELECTRIC HEAT, LIGHT APPAR. 500.9 308.9 394.8 669.4 493.3 490.7 460.9 __

ELECTRIC LIGHT BULBS 285.3 762.2 401.3 269.0 343.2 254.9 229.8 TOY AND SPORTING GOODS 219.0 384.9 192.1 251.1 157.7 235.5 -- --

(Table D6 con't) TOTAL 5-9 10-19 20-49 50-99 100-199 200-499 500-

IIIA SMALL TOTAL MARKET

BEAN SPROUT 157.4 222.4 207.4 174.5 __ 18.8 -- __ABGA R-AGAR 364.5 -- 75.5 429.1 iO.5 732.. KORYANG-JU 939.0 -- 1092.9 775.8 -- -- -- --OTHER BEVERAGE INDUSTRIES 174.4 267.1 84.8 220.4 125.7 183.7 __HEMP FABRICS 156.3 -- 59.0 300.0 -- -- -- --KNIT GLOVE MILLS 157.0 220.2 182.3 118.6 65.8 -_ __ __FOOTWEAR N.E.C. AND REPAIR 49.7 38.0 49.1 53.1 -- -- GLOVES 54.3 13.3 -- -- 55.7 __ __ __HATS AND CAPS 238.7 156.8 191.4 298.3 281.7 -- -- --OTHER APPARELS 253.3 191.4 164.8 209.3 420.4 275.5 -- __FIXTURES 186.9 178.2 196.0 246.0 -- __ __FURNITURE AND FIXTURES N.E.C. 232.0 358.2 5.5 204.4 160.7 -- -- --ONE SIDE PAPER 281.3 -- 317.2 315.7 113.1 263.4 -- --BUILDING PAPER 953.8 863.9 1000.0 1378.6 402.3 -- -- --PAPFR, PAPER BOARD PROD. N.E.C. 3456.7 158.5 550.9 371.9 752.6 __ 7815.1 --OTHER PUBLISHING 4014.8 583.7 4750.0 -- -- _- --TYPESET, ENGRAVE PRINTING 198.8 121.7 300.5 -- -- --BOOK BINDING ETC. 298.5 603.3 226.2 143.5 236.6 723.6 -- __INDUSTRIAL LEATHER PRODUCTS 161.5 161.5 -_ __REBUILDING OF TYRE 509.1 306.9 821.3 -- -RECLAIMED RUBBER 858.4 897.7 840.5 854.9 -- __ _ RUBBER BELTS 542.5 265.6 621.8 583.4 110.2 735.7 -- --ANIMAL OIL AND FATS 236.7 142.3 314.7 -- _- __ _ __OIL AND FAT PRODUCTS 521.5 595.6 524.6 293.9 -- -- -- --.PIGMENTS 466.6 264.3 2223.1 616.5 227.1 -- -- --PRINTING INK 475.7 522.2 452.8 387.1 524.1 LO __ _ OTHER STRUCTURAL CLAY PRODUCTS 272.7 99.9 235.6 344.2 -2 -- -N

PROCESSING DF PURCHASED GLASS 205.9 211.0 135.9 249.8PORCELAIN ELECTRICAL SUPPLIES 203.4 __ 167.8 97.7 462.0 101.8ABRASIVE ARTICLES 481.3 -- 1031.8 415.8 307.8 -- __ARTIFICIAL STONE 132.2 86.1 155.2 133.9 -- NON-METAL MINERAL PRODS, N.E.C. 589.6 506.8 1448.8 731.7 304.4 -- -- --MOLD NON-FERROUS EXC. ALUMINUM 412.0 414.5 408.3NON-FERROUS BASIC IND. N.E.C. 283.8 960.0 178.6 -- 261.3CUTLERY AND TABLE WARE 301.8 284.3 269.8 328.2 -- 296.6 HAND TOOLS EXC. AGRICULTURAL 185.9 196.1 168.3 253.0 123.1 177.4 -- -OTHER HARDWARE 233.8 254.7 312.9 201.7 154.5 287t5NAILS AND SPIKES 385 .4 500.4 563.3 180.2MACHINERY--RUBBER PLASTIC IND. 225.2 165.6 307.7 - --STORAGE BATTERIES 399.4 288.0 165.8 325.6 435.5 512.0 -- __ELECTRICAL APPARATUS N.E.C. 372.0 194e2 148.4 1080.7 99.0 146.0 65.9 -REPAIR OF BICYCLES 255.4 255.4 --TRANSPORT EQUIPMENT N.E.C. 408.0 315.6 365.0 1023.8MEDICAL INSTRUMENTS, SUPPLIES 287.5 180.2 399.0 335.8 170.3LACQUERED WOOD ARTICLES 68.5 118.3 58.4 61.8RECORD 1282.7 433.3 750.0 1717.6RICE STRAW MILLS 80.2 75.3 82.2 -- UMBRELLAS ANO PARASOLS 148.6 122.0 85.2 310.0 0 0 1.6 154.8 0 0

(Table D6 con't)

NOTES AND SOURCES: SMALL ESTABLISHMENTS (THOSE WITU 5-99 WORKERS) ARECONSIDERED TO PREDOMINATE IN AN INDJSTRY IF THEY ACCOUNT FOR HALF ORMORE OF THE INDUSTRY'S EMPLOYMENT. THE CHARACTERISTICS OF THE MAJORTYPES OF INDUSTRY ARE DISCUSSED IN CHAPTER 3. THE CALCULATIONS ARE BASEDON DATA IN PEPORT OM MINING AND MANUFACTURING CENSUS, 1968.

l-

IA8LED7 CkPI TAL-LA80R RATIOS FOR I NDUSTRIES IN WH I CH SPALL ES I A L. IS!iME:NTSEMPLOYED 25 TO 49 PERCENr OF THE WORKERS IN TWE PARTICULARINDI,STRY IN 19689 KOREAe BY SIZE OF ESTABLISFMENTS IWOPRVERSJ.000 WON/PERSON.

TOTAL 5-9 10-!9 20-49 50-9' 10-1I99 200--49; 9OD

INDUSTRIAL CHEMICALS N.E.C. 1098 .5 2074.0 766 -62.2KITCHEN, TABLE UIENSILS 173.1 42./ 138.4 203.9 136.6 166.2 Z15. 18.8ELEC. MACHS.-INDUSTRY APPARATUS 484.4 332.9 505.7 276.5 359.6 169.6 -- 550.4OPTICAL INSTRUMENTS, LENS 467.0 306.7 129.1 622.0 -- -- 515.8 --SOAP AND DETERGENTS 483.0 395.4 300.8 523.0 45t .1 428.8 530.4 --PERFUMES, COSMETICS 347.0 640.1 358.6 442.3 451.0 192.4 70?.1 181.2INSULATED WIRES.CABLES 992.2 527.7 739.8 433.8 27b.5 640.2 1844.9 1089.2AGRICULTURAL PESTICIDES 308.4 1495.6 459.U 457.5 674.1 326.7 136.7 --GLASS PRODUCTS EXCEPT GLASS 331.8 191.3 375.5 117.4 208.1 236.8 159.4 939,3IRCN, STEEL BASIC IND. N.E.C. 865.6 360.0 1943.3 213909 5't5.3 1376.3 565.2 --WATCHES AND CLOCKS 195.3 80.0 144.1 144.0 333.6 92.5 220.9 --

EYEGLASSES 354e0 331.9 187.5 129.7 -- 427.1 -- --MEAT AND DAIRY PRODUCTS 511.0 661.0 300.8 22.8 1091.6 -- 390.1 --PAINTS 44U.3 1163.2 566.5 445.4 431.1 323.5 425.8 --NON-INDLSTRY ELECTRIC APPARATUS 318.6 197.2 738.4 225.1 383.4 312.5 306.3 --BOOKS AND PERIODICALS 334.0 529.0 632.6 330.2 378.6 174.4 249.4 337.4TANNERIES, LEATHER FINISHING 1227.7 463.9 751.3 1154.2 13620.4 -- 280.6 --CCKDAGE, ROPE, TWINE, CABLES 175.5 358.3 105.0 139.2 82.0 300.6 64.5 --MCTOR VFHICLE PARTS,ACCESSORIES 427.3 513.4 765.6 505.1 627.6 2d4.4 230.3 495.2MCLDING, CASTING OF IRON, STEEL 539.1 330.0 616.9 522.8 65b.1 396.9 570.0 427.3OFFICE,SERVICE,HOUSEHOLD MACHS. 298.6 413.0 441.1 420.1 230.0 362.1 321.4 193.4WF-EAT-GLUTEN 324.5 281.2 272.1 I181.4 753.o --THREAD 1873.5 216.2 338.9 473.8 540.2 89,5 768.6 3540.7 .OFFICE AND ARTISTS MATERIALS 201.3 197.4 237.2 375.3 306.9 138.6 110.8 --SPIRIT 791.1 -- 25.9.9 4303.1 857.8 709.2 576.1 --BOLT, NUT, WASHER, RIVET, SCREW 271.3 345.2 369.5 398.3 275.1 351.8 143.3 92.1PLASTIC PRODUCTS N.E.C 534.4 318.6 270.2 496.8 663.1 365.1 2284.2 412.3SGJiO 324.8 537.4 485.9 437.1 162.8 363.0 15.1 444.7TISSUE PAPER 1556.3 -- 1516.7 419.3 -- 2425.9 --PAPERBOARD 619.1 - 452.8 477.9 197.7 291.3 797.6 1027.1CAN, PRESERVE FISH, VEGETABLES 490.3 779.1 271.4 896.9 478.3 320.2 627.3 --NOODLES 410.2 460.9 1407.2 444.8 377.5 -- 216.3 261.5PAPER BAGS AND ENVELOPES 228.1 S4.3 84.2 407.4 110.5 284.2 128.6 --BREAD, BAKER'S WARES 160.8 249.8 197.4 167.3 393.5 -- 198.6 87.0UNDERWEAR 213.1 218.4 215.8 253.0 557.o -- 124.6 129.5CTHER POTTERY,CHINA,EARTHENWARE 212.1 224.2 114.9 77.5 337.3 264.9 -- --PROCESSING OF BRISTLES 179.8 -- 92.7 622.9 199.1 67.1 44.4 --

NOTES AND SOURCE: SMALL ESTABLISHMENTS ARE THOSE WITH 5-99 WORKERS.BASED ON DATA IN REPORT ON MINING AND MANUFACTURING CENSLS, 1968.

T ABLE D8 CAPITAL-LASR RATIOS FOR INDUSTRIES IN wlICH SMALL ESTABLISwIENTS

EMPLOYED LESS THAN 25 PERCENT OF TlE WOKKERS IN THE PARTICULARINDLSTRY IN 1968, KOREA, BY SIZE OF ESTABLISHMENTS (WORKERS),000 WON/PERSuN.

TOTAL 5-9 10-19 2?0-49 50-57 1OJ-159 200-'4'9 500+

CCTTON YARN 86.8 -- -7 107.8 552.3 387.6 79.1RAW SILK 372.0 114.3 5202.0 11.8 -- 415.7 375.J 293.1NITROGEN 5593.3 - -- 5593.3

MIXED FERTILIZER 11658.8 -- 5C0.0 -- -- __ 11755.9

TYRE AND TUHE 370.4 361.5 695.3 -- -- -- 549.7 271.3SYNTHETIC FIBRE 1355.3 -- -- 119.0 752.8 6081.9 23 9.4 1132.1RUBBER FOOTWEAR 201.9 380.8 538.7 275.6 179.8 29b.6 40.4 ) t' .t)CEMENT 1393.1 -- 445.0 7115.0 874.. -- 1693.8 1275.2E PLOSIVES 541.5 -- 16.9 148.1 -- -- -- 555.18

kAILROAD FOUIrPMENT 749.6 -- 64B.7 145.6 -- 511.7 -- 781.6

McTOf VEH4ICLES 876.2 -- 230.7 458.4 228.5 -- 934.9SUGAR MILLS, REFINERY PRODUCTS 1612.8 -- -- -- 601.5 -- 2056.6 1757.1ODEER SEASONING, ARTIF. SUGAR 599.2 o91.2 -- 32.1 43.3 -- 111d.4 504.5VENEER, PLYWOOD, PANELS 503.3 1932.0 370.8 264.9 304.6 -- 417.3 512.7

MANUFACTURE OF IRON AND STEEL 346.4 -- 1346.1 448.5 -- 394.0 279.8 305.1PRIMARY FATTERIES 176.6 -- 280.0 153.9 62.5 125.0 242.4 177.3POLLING OF IRON AND STEEL 475.9 1123.8 894.0 757.3 414.3 086.7 263.3 464.7

WOCL SPINNING 811.4 -- -- 519. 1 648.7 35.1 635.2 dd6.9PRINTING PAPER 807.6 -- -- 461.4 527.9 732.2 674.5 1310.1oYES 90o.? -- 395.0 4 63.3 -- 414.2 1142.9 --

SMELT, REFINE NON-FERROUS METAL 723.0 334.7 555.2 338.2 139.9 1462.3 -- 696.6

WOOLEN FABRICS 413.2 113.1 0 . 8 l14.0 433.5 369.6 469.0 391.3WIG 59.8 -- I1. 115.5 115.8 53.5 63.) 45.5MAN-MADE FIBRE SPINNING 2356.0 377.8 1918.0 627.4 1843.7 1793.5 2125.5 2777.0NEwSPHINT 2194.0 -- -- -- 2180.9 -- 2818.3 1126.0

GRASS-FLOOR COVERINGS 37.D 547.4 186.9 296.2 -- 10.3 2.3 1.3GTHER CHEMICAL FERTILIZLRS 950.7 -- 91.3 71.0 34.8 51.3 15b0.4 578.0FISHING NETS 209.9 -- -- 50.0 283.2 272.4 214.5 116.1PETROLEUM REFINING 4140.9 1441.3 __ 347.1 1176.3 601.6 12I5.6 6000.3PU8LISHING NEWSPAPERS 409.1 91.3 262.9 346.0 195.5 347.9 359.7 533.6STEEL SHIP BUILDING, REPAIR 722.5 2625.1 29t.4 490.6 495.4 1119.2 98.3 742.8KNITTED OUTERWEAR MILLS 139.8 175.8 223.6 3b5.2 143 . 99.1 168.1 112.1WOUDEN bOXES AND BARRELS l1.9 211.1 205.3 246.2 -- 267.5 -- 4.9CLAY WALL TILES 265.8 -- 18a.1 185.5 33.3 168.8 264.0 384.CGRAWING OF IRON AND STEEL 407.5 1679.3 660.0 393.5 11'4.1 383.2 244.1 --

COCOA, CHOCOLATE, SUGAR CANDY 197.0 300.9 284.2 323.2 109.4 31.9 __ 186.1MUSICAL INSTRUMENTS 31S.5 64.5 -- 17G.1 1 1o. 1 337.i 378.2 --

SILK FABRICS 240.7 413.1 332.4 398.9 315.8 314.3 61.8 192.7ChJUNG-JU 1140.2 291.7 5o0.I 1019.9 368.4 405.0 1324.5 --MEDICAL, PHARMACY PREPAkATIUNS 328.9 486.2 595.8 3 5.1 344.3 204.9 247.9 409.9

OTH-ER INUSTRIAL RUtiBER PRODUCTS 269.9 235.9 5d6.8 733.0 479.5 369.2 -- 152.7MANUFACTURE OF SYNTHETIC RESIN 1999.6 442.2 454.7 7°5.1 7_ 7564.3 1913.3 1251.1CCOMUNICATION, RELATED ECUIP. 347.9 102.5 i92.1 247.4 401i.9 443.6 503.3 300.0KRAFT PAPER 781.4 -- t88.0 180.4 698.0 85s.6 676.8 943.6

NOTES AND SOURCE: SMAIL ESTABLISHMENTS ARE THOSE WITH 5-99 wORKERS.8AsEL) ON OATA IN REU' 4T 00 MI INO ANO M ANtUFACTURINGCE N SUS , 19e.8.

TABLED9 OUTPUT-CAPITAL RATIOS FOR INDUSTRIES IN WHICH SMALL ESTABLISHMENTSPREDOMINATE, BY TYPE OF INDUSTRY AND BY SIZE OF ESTABLISHMENT(WORKERSI, KOREA, 1968.

TOTAL 5-9 10-19 20-49 50-99 100-199 200-499 500-

TOTAL MANUFACTURING 0.924 0.662 0.663 0.668 0.816 1.454 1.169 0.912

SMALL INDUSTRY 0.711 0.673 0.668 0.639 0.808 0.825 0.655 0.961


CAN, PRESERVE FISH, SEA FOODS 0.605 1.216 0.286 0.493 0.622 0.566 1.085 __RICE MILL PRODUCTS 0.258 0.324 0.188 0.210 0.322 0.056 -- --WHEAT, BEANS FOR FLOUR 1.833 0.303 0.336 1.341 1.544 2.580 2.344 -_

STARCHES 0.323 0.088 0.168 0.329 0.662 0.187 -- --

RICE WINE 1.387 1.269 1.660 1.118 4.89Z -- __ __FRUIT WINE 2.939 0.792 1,630 1.593 2.903 1.418 15.262 --

OTHER LIQUORS MODIFIED 1.584 -- 0.979 0.091 1.706 -

YEAST 0.720 0.283 1.005 0.643 -- 0.563 -- --

SAWMILLS 0.556 0.485 0.443 0.638 2.025 0.759 0.247 1.135VEGETABLE OIL AND FATS 0.475 0.350 0.488 0.516 0.694 -- 0.176 --

BRIQUETTES OF COAL 1.009 0.598 0.658 1.085 0.885 2.063 2.998 --

LIME 0.635 0.749 0.693 0.605 0.631 -- -- --

CUT STONE AND STONE PRODUCTS 1.693 1.466 0.968 2.277 0.874 3.380 -- --

IB MARKET-ORIENTED INDUSTRIES

'DRY BAKERY PRODUCTS 0.526 0.575 0.620 0.185 0.662 1.598 0.182 1.926ICE, EXCEPT DRY ICE 0.285 0.143 0.301 0.307 1.604 1.311 -- --BEAN CURD AND ITS PRODUCTS 0.846 0.485 0.367 2.343 8.323 D.645 -- --

PREPARED ANIMAL FEEDS 1.380 0.370 1.975 1.992 0.939 OTHER FOOD PRODUCTS N.E.C. 0.398 0.411 0.276 0.676 1.529 0.039 1.415 --

SOFT DRINKS 1.222 3.283 0.833 1.073 1.980 0.722 -- 3.145BAMBOO, VINE AND CORK PRODUCTS 1.173 0.757 1.501 1.797 1.178 --

WOODEN FURNITURE 0.914 0.672 0.825 1.230 1.456 -- 1.795 __METAL FURNITURE 1.165 0.679 0.797 0.944 1.417 2.554 PAPERBOARD BOXES EXC. CORRUG. 0.927 0.418 1.038 1.010 1.535 0.826 -- --

CORRUGATED PAPER BOARD, BOXES 0.685 1.175 1.697 0.733 1.031 -- 0.332 --

CLAY BUILDINS BRICKS 0.478 0.492 0.533 0.584 0.376 0.708 0.505 --

CLAY ROOFING TILES 0.666 0.914 0.657 0.423 -- -- -- --REFRACTORIES 0.878 0.856 0.799 0.480 0.646 1.071 1.740 --

EARTHENWARE 1.252 1.461 1.219 1.363 -- __ 50.281CCNCRETE PRODUCTS 0.758 0.575 C.438 2.174 0.758 0.462 0.585 2.069TIN CANS, OTHFR TIN WARE 0.821 0.733 0.248 0.390 0.755 1.200 1.346 --HAND TOOLS, AGRICULTURAL 0.610 0.759 0.771 0.314 0.939 0.955 -- --

STRUCTURAL PRODUCTS 0.887 3.697 0.580 0.755 1.112 2.047 -- 0.368ENGINE AND PARTS FOR SHIP 0.649 0.489 0.494 0.793 1.877 __ 0.690 --WOODEN SHIP BUILDING, REPAIR 0.659 0.272 C.493 0.688 4.433 1.213 -- --

OTHER MANUFACTURING N.E.C. 0.372 0.296 j.727 0.131 0.884 0.508 -- 0.486


COMMERCIAL PRINTING 0,667 0.590 0.601 0.553 0.911 0.756 0.802 0.831GALVANIZING AND PLATING 1.148 0.662 1.586 1.201 -- 1.100 REPAIR OF MOTOR VEHICLES 0.603 3.413 0.447 0.536 0.510 0.682 2.737 __

(Table D9 contt)TOTAL 5-9 10-19 20-49 50-99 100-199 200-499 500+

IA SEPARABLE MANUFACTURING OPERATIONS

RnLL,ORAW,EXTRUDE NON-FER. MET. 0.464 0.470 0.313 0.507 0.530 -- __ __MOLDING OF ALUMINUM 0.528 0.225 0.516 0.541 0.791 -ALIJMINUM, ALUMINUM-ALLOY PRODS. 0.630 o.676 0.628 0.403 0.833 0.146 1.06( 0.608PRESSED, ENAMELED METAL PRODS. 0.993 0.645 1.066 1.091 1.123 1.570 0.858 --WIRE PRODUCTS N.E.C. 0.932 0.280 0.583 0.393 1.756 1.864 0.650 --METAL PRODUCTS N.E.C. 0.456 0.740 0.577 0.220 0.456 1.t74 1.330 --PRIME MOVERS 0.645 0.550 0.413 0.875 0.319 1.006 1.086 --AGRICULTURAL MACHINERY 0.590 0.416 0.517 0.717 1.063 1.876 -- 0.524CCNSTRUCTION, MINING EQUIPMENT 0.779 0.654 0.654 0.923 0.416 -- 0.933 --METAL WORKING MACHINERY 0.501 0.649 0.381 0.557 0.69? 0.316 -_ __MACHINERY--TEXTILE INDUSTRY 0.831 0.768 0.587 0.550 0.719 1.009 2.565 --GENFRAL MACHINERY, EQUIPMENT 0.539 0.456 0.555 0.530 0.717 0. 331 0.735 __OTHER MACHINERY, EQUIP.. PARTS 0.879 0.524 0.691 0.560 1.062 3.970 1.326 0.746BICYCLES AND THEIR PARTS 0.650 1.033 0.653 0.328 0.7.01 0.654 2.04 --SCIENTIFIC INSTRUMENTS 0.65B 0.640 0.387 0.470 0.832 2.090 0.613 --FOOD PRODUCTION MACHINERY 0.620 0.433 0.487 0.506 0.851 3.734 -- __SPECIAL IND. MACHINERY N.E.C. 0.776 0.397 0.958 0.898 0.770 0.388 --

118 CRAFT HANDWORK

KOREAN STYLE PAPER 1.790 2.076 1.282 2.817 -- -- -- --JEWELRY ANO RELATEO ARTIcLES 1.8Z? 2.699 4.918 1.270 2.253 -- -- --

IIC SIMPLE ASSEMBLY, MIXING. ANO FINISHING

SOY-SAUCE. SOY BEAN PASTE 0.776 0.271 0.776 0.483 9.476 4.443 -- -- wCGTTON FABRICS 0.689 1.157 0.640 0.640 0.703 1.214 0.37? 0.754NARROW FABRICS 0.417 0.694 0.382 1.189 0.289 0.354 __ __MAN MADE FIBRE FABRICS 0.582 0.756 0.511 0.493 0.483 0.741 0.592 0.973BLEACH, DYE, FINISH TEXTILES 0.647 0.483 0.611 0.857 0.904 0.467 0.514 -_KNITTED HOSIERY MILLS 0.646 0.546 0.470 0.350 0.805 07452 1.811 --KNITTED UNDERWEAR MILLS 0.591 0.593 0.498 0.521 0.733 0.780 0.783 0.584KNITTING MILL PRODUCTS N.E.C. 0.490 0.575 0.633 0.400 0.538 0.552 -_ __MANUFACTURE OF TEXTILES N.E.C. 0.766 0.329 0.326 0.899 1.915 3.201 0.605 --LEATHER FOOTWEAR 1.325 1.364 1.760 1.930 0.936 1.298 0.957 0.967MEN'S OUTERWEAR 1.Z99 1.187 1.443 1.495 0.943 0.946 1.705 1.093WCMFN'S OIJTERWEAR 1.501 1.480 1.635 1.007 6.423 -- -- 1.549OUTERWEAR--YOUNG CHILD 1.011 1.223 1.047 0.906 0.796 -- -- --OTHER MADE-UP TEXTILE GOODS 0.808 1.081 1.825 0.622 0.228 0.403 1.025 __OTHER WOOD PRODUCIS 0.513 0.327 0.849 0.543 8.d48 --PROCESSED PAPER 1.106 0.529 0.759 0.821 1.560 1.474 0.689 --NOTEBOOK, LEDGER. SIMILAR PROD. 0.498 0.396 0.568 0.556 0.364 0.769 _ LUGGAGE AND BOOK BAGS 1.529 0.917 2.421 1.125 1.565 1.765 __ __OTHER RUBBER PRODUCTS 1.395 0.518 0.598 0.590 3.243 1.726 3.751 __ACID AND ALKALI PRODUCTS 0.068 1.775 0.572 0.472 0.547 -- 0.005 --INOPGANIC CHEMICALS 0.639 0.253 0.464 0.957 0.858 0.469 -- --INDUSTRIAL GASES 0.621 0.103 1.183 0.332 -- -- --MATCHES 0.608 0.210 0.351 0.827 0.883 0.ass5 0.54 --CHEMICAL PRODUCTS N.E.C. 0.777 0.535 0.977 0.854 0.621 1.i16 0.197 --NON-ELECTRIC HEAT, LIGHT APPAR. 0.589 0.617 0.734 0.288 0.948 0.572 0.467 -ELECTRIC LIGHT BULBS 0.778 0.307 C.351 0.492 0.651 1.034 1.179 --TOY AND SPORTING GOODS 1.013 0.439 1.025 0.954 1.674 0.194 -_ __

(Table D9 con't) TOTAL 5-9 13-19 20-49 53-99 1 -199 230-49 50 0+

IIIA SMALL TOTAL MARKET

BEAN SPROUT 1.566 0.708 1.322 2.111 -- 6.)2 --4

AC AR- AGAR 0.270 -- 0.153 0.196 0.796 0.172 -

KORYANG-j U 0.360 -- 8.;66 3.649 -- -- --

OTHER BEVERAGE INDUSTRIES 1.169 2.753 14.649 0.420 1.231 0.4'5 --

HEMP FABRICS 0.938 -- 2.849 0.383 KNIT GLOVE MILLS 0.635 0.314 0.605 1.081 0.972 _- __

FOOTWEAR N.E.C. AND REPAIR 4.256 2.502 2.336 5.989 --

GLOVES 3.629 21.475 - -- 3.481 -- --

HATS AND CAPS 0.574 0.699 0.739 0.604 0.373 -- --

OTHER APPARELS 0.789 0.601 1.234 0.610 0.279 1.023 3 -FIXTURES 0. 759 0.798 0.723 0.561 -- -- -_

FURNITUJRE AND FIXTURES N.E.C. 0.574 0.302 21.745 0.521 1.167 -- --

ONE SIDE PAPER 0.762 -- 1.051 0.600 1.163 1.200 --

BUILDING PAPER 0.097 0.135 0.014 0.079 0.196 PAPER, PAPER BOARD PROO. N.E.C. 0.154 0.954 0.269 0.574 0.169 -- 0.135OTHER PUBLISHING 0.205 1.348 0.175 -

TYPESET, ENGRAVE PRINTING 1.221 1.692 0.970 -- -- -- --

BOOK BINDING ETC. 0.590 0.768 0.417 1.287 0.428 0.462 --

INDUSTRIAL LEATHER PRODUCTS 1.443 1.443 -- -- -- -- --

REBUILDING OF TYRE 0.42Z 0.514 0.370 -- -- -- --

RECLAIMED RUBBER 0.351 0.197 0.395 0.440 -

RUBBER BELTS 1.034 0.459 0.405 0.393 4.040 1.202 --

ANIMAL OIL AND FATS 1.002 0.657 1.131 -- -- -- -- --

OIL ANO FAT PRODUCTS 0.493 0.314 0.840 0.105 -- -- -- --

PiCMENTS 0.606 0.147 0.191 0.404 1.525 -- -- __ H

PRINTING INK 1.147 0.333 0.709 1.450 1.598 -- -- --

OTHER STRUCTURAL CLAY PRODUCTS 0.454 1.045 0.371 0.472

PROCESSING OF PURCHASED GLASS 1.210 1.054 1.739 1.071 -- -- -- --

PORCELAIN ELECTRICAL SUPPLIES 0.660 -- 0.572 0.919 0.393 1.410 --

ABRASIVE ARTICLES 0.359 -- 0.169 0.595 0.237 -- --

ARTIFICIAL STONF 2.639 4.407 0.847 3.453 -- -- --

NON-METAL MINERAL PRODS. N.F.C. 0.434 0.225 0.105 0.312 1.236 -- --

MCLO NON-FERROUS EXC. ALUMINUM 0.629 0.839 0.303 -- -- -- --

NON-FERROUS BASIC IND. N.E.C. 1.347 0.205 1.434 __ 1.584 -- --

CUTLERY AND TABLE WARE 0.669 3.469 0.566 0.729 -- 0.707 --

HAND TOOLS EXC. AGRICULTURAL 1.269 0.950 C.870 0.527 2.739 1.974 --

OTHER HARDWARE 0.659 0.604 0.564 0.651 0.688 0.817 --

NAILS AND SPIKES 0.657 0.331 0.402 1.805 -- -- --

MACHINERY--RUBBER PLASTIC IND. 2.352 0.761 3.537 -- -- -- --

STORAGE BATTERIES 0.755 0.597 1.332 0.510 1.233 0.755 --

ELECTRICAL A4'PARATUS N.E.C. 0.594 1.015 1.603 0.140 1.670 3.122 2.266REPAIR OF BICYCLES 0.374 0.374

TRANSPORT EQUIPMENT N.E.C. 0.365 0.379 0.395 0.312 -- -- --

MEDICAL INSTRUMENTS, SUPPLIES 0.816 1.673 0.737 0.783 0.471

LACOUERED WOOD ARTICLES 2.116 0.929 2.018 3.485 -- -- --

RECORD 0.214 0.479 0.300 0.182 -- -- --

RICE STRAW MILLS 0.675 1.075 0.523 -- -- -- --

UMBRELLAS AND PARASOLS 0.789 0.767 0.725 0.269 -- 7.807 1.449

NOTES AND SOURCE: SEE TAaLE D6.

TA3LE D10OUTPUT-CAPITAL RATIOS FOR INDUSTRIES IN ntiIOH SMALL ESTAbLISHMENTSEMPLOYED 25 TO 49 PERCENT CF THE WORKERS IN THE PARTICULARINDUSTRY IN 1968, KOREA, BY SIZE OF ESTABLISHMIENTS (WORKERS).

TOTAL 5-9 10-19 20-49 53-9) 100-199 20C-499 500c+

INDLSTRIAL CHE1ICALS N.E.C. 0.629 0.258 O. -7 -- O 97KITCHEN, TABLE UTENSILS 0.730 2.332 0.957 0.612 0.9Jo 0.622 0.600 0.751ELEC. MACHS.-INDUSTRY APPARATUS 0.802 0.958 0.925 0.S68 1.171 1.168 -- 0.735CPTICAL INSTRUMENTS. LENS 0.389 1.02d 2.111 0.810 -- -- 0.221 --

SOAP AND DETERGENTS 1.301 0.531 0.575 0.414 0.772 1.135 1.506 --PERFUMES, COSMETICS 1.727 0.279 0.469 0.854 1.606 2.264 1.425 3.487INSULATED wIRES.CABLES 1.1443 0.532 C.710 0.692 2.486 1.934 1.123 1.054AGRICULTURAL PESTICIDES 1 .329 0.117 0.601 0.594 1.238 1.3i5 2.277 -7GLASS PRODUCTS EXCEPT GLASS 0.905 1.184 0.5C8 1.250 0.669 0.873 1.842 0.655IRON, STEEL BASIC IND. N.E.C. 0.580 0.987 0.149 0.526 0.352 0.157 0.S82 -2WATCHES AND CLCCKS 2.917 3.696 C.766 7.861 0.769 9.230 2.047 --EYEGLASSES 0.536 0.590 1.330 0.676 -- 0.493 -- --MEAT AND DAIRY PRODUCTS 0.717 0. 256 1.459 5.214 0.131 I- 1.177 7 -PAINTS 2.277 0.158 C.575 0.973 0.914 1.954 3.324 2-NCN-INDUSTRY ELECTRIC APPARATUS 1.429 1.168 0.367 1.437 3.554 1.021 1.498 LIBOOKS AND PERIODICALS 1.839 0.742 C.968 2.935 2.901 1.960 2.033 1.464TANNERIES, LEATHER FINISHING 0.254 0.520 0.20o 0.224 0.051 I 1.108 --

CORSAGEw ROPE, TWINE, CASLES 1.224 0.180 0.486 1.799 3.507 0.528 3.576 --MOTOR VEHICLE PARTStACCESSORIES 0.746 0.577 0.511 0.483 0.594 1.416 1.025 0.734MOLDING, CASTING OF IRON, STEEL 0.941 0.584 0.496 0.413 0.566 1. 102 1.4 8 0.598OFFICE,SERVICE,HOUSEHOLD MACMS. 0.837 0.681 0.561 0.540 0.536 v.831 0.696 1.501(iWHEAT-GLUTEN 1.052 0 .565 0.437 I- -- .d893 1.027 --THREAD 0.180 0.587 0.395 0.389 0.269 0.570 0.118 0.160OFFICE AND ARTISTS MATERIALS 0.9 35 0.971 0.47° 0.424 0.663 1.599 1.841 41SP[RIT 2.003 3 - 2.610 0.698 1.542 2.988 1.653 --BOLT, NUT, WASHER, RIVET, SCREW 0.967 0.764 0.467 0.663 0.752 1.319 1.064 2.307PLASTIC PRODUCTS N.E.C 0.780 0.537 0.539 0.651 0. 7 1i 0.763 0.581 1.137SOJOD 3.004 1.760 1.450 1.487 4.108 3.229 12.487 3.345TISSUE PAPER 0.694 I- 1.878 0.776 -- -- 0.642 --PAPERBOARD 0.624 -- C.465 0.367 0.784 1.174 0.941 0.423CAN, PRESERVE FISH, VEGETABLES 0.804 0.158 0.476 0.626 0.722 1 .350 0.905 --

NCCDLES 0.999 0.315 C.119 0.409 0.551 -- 3.299 Z.384PAPER BAGS AND ENVELOPES 2.472 1.074 C.660 2.279 6.388 1.672 1.361 --

BREAD, BAKER'S WARES 1.713 0.681 0.988 0.707 1.128 -- 3.219 3.646UNDERWEAR 0.593 0.955 0.876 0.850 0.320 -- 0.461 0.436OTHER POTTERY,CHINA,EARTHENWARE 0.632 0.268 C.968 1.422 0.179 3.645 --

PROCESSING OF BRISTLES 0.406 G- C.997 0.131 0.439 1.147 1.018 -

NGTES AND SOURCE: SMALL ESTABLISHMENTS ARE THOSE WITH 5-SS WORKERS.BASED ON DATA IN REPORT ON MINING AND MANUFACTURINGCENSUS 1568.

TABLE DI11 OUTPUT-C API TAL RAT IOS FOr IN4DUST RIt S I N WHICFI SlALL FSTbt- ISt MJi SEMPLOYED LESS THAN 25 PERCENT OF THE kO2KERS IN THE PARTICULARINDUSTRY IN 1$68, KOREA. BY SIZE OF ESTABLISHMENTS (WORKEKSJ.

TOTAL 5-9 10-19 20-49 5J-99 100-1 ¾ 20u-499 500+

CCTTON YARN 3.44 -- -- -- 0.278 0.78S 3.913RAW SILK 0.853 1.167 -- 1.321 -- 0.527 1.015 0.6f8NITROGEN 0.270 -- -- -- - - -- - 0.270MIXEO FERTILIZER 0.394 - -- -- -- 0.394TYRE AND TUBE 1.644 0.519 0.142 -- -- 1.347 2.042SYNTHETIC FIBRE 0.601 -- -- 1.846 1.112 0.047 0.460 0.700RUP8ER FOOTWEAR 0.955 0.368 0.340 0.650 0.779 0.316 3.218 I05CEMENT 5.d83 -- 0.239 0.590 1.151 -- 3.77o 4.560EXPLOSIVES 0.931 -- 0.180 0.759 -- -- -- 0.933RAILROAO EQUIPMENT 0.268 -- 0.668 1.077 -- 0.495 -- 0.242MOTCR VEHIlCLES 1.480 -- -- 2.518 1.255 1.065 -- I.483SUGAR MILLS, REFINERY PRODUCTS 2.161 -- -- -- 4.813 -- 1.980 2.217OTHER SEASONING, ARTIF. SUGAR 0.881 0.210 -- -- -- -- 0.631 1.022VFNEER, PLYWOOO, PANELS 0.929 0.156 0.704 0.733 0.61 - - 1.0bO 0.936MANUFACTURE OF IRON AND STEEL 0.530 -- 0.083 0.178 -_ 0.315 0.540 0.727PRIMARY EATTERIES 0.766 -- C.666 0.598 1.112 0.574 0.533 0.827RCLLING OF IRON AND STEEL 0.196 0.164 0.665 0.475 0.902 0.642 1.419 0.762WOOL SPINNING 0.387 -- -- 0.434 0.395 0.439 0.737 0.343PRINTING PAPER 1.122 -- -- 0.225 0.404 0.707 1.3f8l 1.163DYES 0.574 -- 0.508 0.658 -- 1.255 0.484 --SMFLT, REFINE NON-FERROUS METAL 0.6d3 0.595 0.318 1.702 -- 0.543 -- 0.714WCCLEN FABRICS 0.794 0.341 0.867 0.565 0.454 0.520 0.429 1.013wIG 3.097 -- 2.507 0.742 2.273 2.619 2.771 4.341 IPAN-MACE FIBRE SPINNING 0.279 0.219 C.108 0.228 0.135 0.159 0.442 0.280 0NEWSPRINT 0.394 -- -- -- 0,131 -- 0.340 0.802 0GRASS-FLOOR COVERINGS I.j9d 0.799 0.713 1.417 -- 0.420 2.8vU 17.751OTFER CHEMICAL FEkTILIZERS 0.830 -- 2.976 1.704 2.121 1.847 0,777 0.990FISHING NETS 1.196 -- -- I.518 0.810 0.637 2.006 1.989PETPOLEUM REFINING 1.203 0.398 -- 1.295 0.d'J9 1.330 0.813 1 .209PUBLISHING NEWSPAPERS 0.911 1.758 0.426 0. 124 0.936 0.8d3 1.267 0.731STEEL SHIP BJILDING, REPAIR 0.372 0.08a 1.084 0.6/5 2.2$5 0.111 0.967 0.299KNITTED OUTERWEAR MILLS 1.020 0.999 , .995 03.176 J.330 1.196 0.949 1.150WOODEN BOXES AND BAKRELS 1.264 0.638 0.86i 1.416 -- 0.258 -- 5.102CLAY WALL TILES 0.706 -- 0.867 0.450 2.9383 1.127 0.689 0.621DRAWING Of IRON AND STEEL 0.821 0.095 0.593 0.257 0.67Z 1.040 1.167 __COCOA, CHOCOLATE, SUGAR CANDY 1.317 0.550 0.617 0.592 1.416 1.177 -- 1.550MUSICAL INSTRUiMENTS 0.798 1.815 -- 1.367 2.341 0.663 0.813 -SILK FABRICS 0.624 0.451 0.394 0.6b4 0.5 33 0.755 3.148 0.563CHUNG-JU 4.687 20.001 1.494 1.496 9.257 2.686 5.179 --

MEDICAL, PHARMACY PREPARATIONS 2.313 0.453 0.464 1.403 1.317 3.2z2 3.428 2.299OTHER INDUSTRIAL RUBBER PRODUCTS 0.916 0.799 0.381 0.261 0.531 0.760 -- 1.621MANUFACTURE OF SYNTHETIC RESIN 0.220 0.435 0.616 0.455 - 0.041 0.070 0.888CCMMUNICATICN* RELATED EQUIP. 0.933 2.389 i.

4 2 3 1.571 0.544 0.632 0.54) 1.196KRAFT PAPER 0.748 -- 0.985 0.839 0.300 1.090 0.537 0.913

NOTES AND SOURCE: SMALL ESTABLISHMENTS ARE THOSE WITH 5-99 WCRKERS.BASED ON DATA IN REPORT ON MINING AND MANUFACTURING CENSUS, 196 .

- 141 -Table D12Relative Efficiency of Large and Small Enterprises in Industries in

Which Small Enterprises Predominate, by Types of Industry, Taiwan, 1971

Total assets Value added Value added Relative efficiencyper person per unit of per person of small to

engaged (000 NT$) total assets engaged (000 NTS) large enterprises1-99 1004+ 1-99 100+ 1-99 100+ A B

IA, Resource processorsMeat processing 75 23 .29 .60 21 13 1.21 .94Dairy products 134 137 .17 .33 23 45 .50 .50Vegetable oil 320 556 .03 .07 8 41 .16 .31Rice milling 116 -o .19 - 22 - -Tea processing 80 1401 .19 .01 15 13 1.30 7.63Tanning & leather finishing 131 60 .20 .29 26 17 1.27 1.00Sawmills and planing mills 110 342 .25 .21 28 71 .70 .82

IB. Market oriented industriesAnimal feeds 210 672 .09 c 20 c c cFood, n.e.c. 104 187 .15 .08 16 15 1.06 1.44Furniture and fixtures 67 131 .36 .22 24 28 1.00 1.17Agricultural insecticides 257 467 .13 .10 33 49 .86 1.06Glass and its products 67 375 .32 .15 21 57 .66 1.09Structural clay products 47 83 .32 .13 15 11 1.38 1.76Cement products 77 124 .26 .23 20 29 .77 .88

> Nonffetalli; mine~ralproducts, n.e.c. 84 254 .29 .04 24 11 2.11 4.40

Metal furniture 69 - .33 - 22 - -Tincans and boxes 84 75 .28 .45 23 34 .68 .66Aluminum prods.

(e.g. door & windowframes) 81 144 .27 .24 22 35 .67 .82Manufactured ice 207 109 .15 .14 32 16 1.67 1.34

IC. Service industriesPrinting 71 384 .37 .22 26 8 .55 .73Metal processing (spraying, 67 - .34 - 23 - -

electro-plating, etc.)

IIA. Separable mfg. operationsIron & steel prods for 95 199 .27 .17 25 34 .89 1.11

industrial useMfg & repair of machinery 71 192 .36 .19 25 37 .89 1.14

and equip., exc. elec.Transport equip., n.e.c. 90 102 .27 .33 24 33 .75 .76Metal products, n.e.c. 69 152 .28 .45 20 68 .37 .42Special elec. apparatus 110 64 .17 .43 18 28 .60 .51Professional scientific

equipment 86 142 .26 .15 22 22 1.05 1.35

IIC. Simple assembly, mixing or finishingFlavoring exc.

monosodium glutamate 216 152 .10 .21 22 31 .66 .56Prods. of wood, bamboo, 47 45 .43 .37 20 17 1.18 1.17

cane, etc. 73 97 .26 .04 19 4 4.79 5.49Processed paper & its prods. 71 144 .31 .19 22 27 .94 1.13Acids & alkalis 278 402 .10 .10 28 40 .71 .87Paint, color, ink 198 115 .15 .23 29 26 1.00 .79Medical & pharmaceutical

preparations 153 290 .18 .25 27 72 .47 .55Soap, detergent, cosmetics 165 192 .18 .07 30 13 2.25 2.46Chemical products, n.e.c. 142 197 .05 .31 7 62 .12 .14Textile products, n.e.c. 76 90 .18 .20 14 18 .77 .83

IIIB. Small total marketCanning, preserving of meat 91 49 .14 .55 13 27 .43 .21Animal fats 81 - .26 - 21 - - -Mills, n.e.c. 67 91 .16 .06 11 5 1.96 2.42Silk textiles 57 113 .27 .12 15 14 1.10 1.57Leather apparel 98 - .51 - 50 - - -Wood preparation 265 - .29 - 78 - -Paper bags 46 226 .49 .18 23 41 1.02 1.35Publishing 319 - .06 - 18 - -Engraving & etching 78 - .30 - 23 - -Inedible oils and fats 206 .34 .03 .54 6 .2 d .34Coal products 155 - .18 - 29 - -Asphalt materials 113 - .26 - 29 -Rubber & synthetic rubber 89 - .21 - 19 -Rubber sole 71 36 .16 .17 11 6 3.20 1.39Copper 100 926 .19 c 19 c c cBasic metal, n.e.c. 42 - .49 - 21 - -Electric insulators

and insulation 420 - .03 - 12 - -Motorized tricycles 52 40 .39 .12 21 5 4.06 3.78

aThe ratio of total factor productivity of small enterprises to that of large enterprises in a given industry.The actual factor shares are used as weights in calculation A, and the capital share is assumed to equal.2K/(.2K+W), where K is the industry's total assets in operation and W is the industry's actual wage bill,in calculation B.

b means there is no large enterprise.

cLarge enterprises produced a negative value added.dl,027,562

Source: Based on data in The Report of the 1971 Industrial and Commercial Censuses of Taiwan and Fukien Area,Republic of China.

TABLE Dl 3 RELATIVE EFFICIENCY OF ESTA8L ISHMH'TS FOP INOUSTRIF S I'J MHICHSMALL ESTA3LISHMENTS PREDOMINATE, BY TYPE OF INDUSTRY AND BYSIZE OF ESTABLISHMENT (WORKERSI. KOREA. 1968.

5-9 10-19 20-49 50-99 100-199 200-499 5OO0


CAN, PRESERVE FISH, SEA FOODS 1.?15 0.443 0.756 1.155 1.192 1.8700.917 0.427 0.725 1.232 1.364 1.914 --

RICE MILL PRODUCTS 1.141 0.854 0.846 2.221 0.112 -- _1.159 0.831 0.841 2.360 0.126 --

WHEAT, BEANS FOR FLOUR 0.155 0.1f84 0.666 0.869 1.319 1.334 --

0.125 0.185 0.487 0.968 1.059 1.537 --STARCHES 0.428 0.698 0.941 2.160 0.720 --

0.433 0.7D3 0.939 2.163 0.724 --

RICE WINE 0.908 1.212 0.820 2.436 -- -- --0.194 1.243 0.850 1.163 --

FRUIT WINE 0.286 0.581 0.581 1.024 0.489 4.262 --0.374 0.715 0.785 1.203 0.518 1.785

OTHER LIQUORS MODIFIED -- 0.597 0.048 1111 -- -- ---- 0.532 0.026 1.229 -- -- -

YEAST 0 373 1.220 0.830 -- 1.0430.357 1.091 0.782 -- 1.323 -

SAWMILLS 0.867 0.907 1.176 3.228 1.230 0.554 1.8090.863 0.813 1.194 2.981 1.149 0.639 1.670

VEGETABLE OIL AND FATS 0.761 1.080 1.117 1.225 -- 0.325 --0.773 1.106 1.132 1.128 -- 0.305 --

BRIQUETTES OF COAL 0.591 0.668 1.061 0.928 1.936 2.735 --0.587 0.689 1.042 1.000 1.803 2.453 --

LIME 0.956 0.997 0.950 1.081 -- -- --0.846 0.945 0.949 1.135 -- -- --

CUT STONE AND STONE PRODUCTS 0.813 0.611 1.233 0.623 2.1750.764 0.652 1.133 0.747 2.362 -- __

18 MARKET-ORIENTED INOUSTRIES

DRY BAKERY PRODUCTS 0.997 1.131 0.685 1.293 1.355 0.435 1.9190.982 1.123 0.769 1.296 1.180 0.514 1.717

ICE, EXCEPT ORY ICE 0.545 1.071 1.142 3.263 2.663 -- --0.545 1.071 1.142 3.267 2.666 -- --

BEAN CURD AND ITS PRODUCTS 0.608 0.481 2.604 4.836 0.591 --

0.642 0.528 2.466 2.444 0.472 -- --PPEPAREO ANIMAL FFEDS 0.260 1.415 1.342 0.735 -- -- -

0.242 1.379 1.126 0.885 -- -- --

OTHER FOOD PRODUCTS N.E.C. 0.835 0.642 1.514 3.656 0.132 3.051 --0.758 0.620 1.437 3.576 0.152 2.846 --

SOFT nRINKS 0.226 0.663 0.821 1.413 0.685 -- 2.3820.212 0.618 0.691 0.995 1.T31 -- 1.953

BAMBOO, VINE AND CORK PRODUCTS 0.624 1.268 1.151 1.470 -- -- --0.602 1.256 0.650 2.201 -- --

WOODEN FURNITURE 0.745 0.956 1.312 1.380 -- 1.630 --0.751 0.994 1.290 1.251 -- 1.435 --

METAL FURNITURE 0.693 0.763 0.885 1.126 1.671 -- --0.797 0.838 0.955 1.G53 1.324 --

PAPERBOARD BOXES EXC. CORRUG. 0.533 0.966 1.130 1,422 0.914 --0,620 3.846 1.167 1.241 0.935 - -_

CORRUGATED PAPER BOARD, BOXES 1.545 2.517 C,996 1.254 -- 0.534I.454 2,540 0.955 lot28 - 0.555

(Table D13 conQ t) 5_9 10-19 20-49 50-99 ICO-199 200-499 500+

CLAY BUILOING BRICKS 1.103 1.C69 1.201 0.836 1.618 0.920 --1.115 1.061 1.198 0.844 1.642 0.899 --

CLAY ROOFING TILES 1.118 0.9951 0.898 -- -

1.060 0.998 0.983 -- -- -- --

REFRACTORIES 1.011 1.022 0.751 0.691 1.008 1.505 -_

1.027 1.076 0.862 0.672 0.927 1.334 --

EARTHENWARE 1.147 1.006 0.897 -- -- 1.709 --1.136 1.022 G.9?2 -- -- 0.343 --

CONCRETE PRODUCTS 0.668 0.557 2.506 1.443 0.716 0.955 2.h840.610 0.542 2.273 1.880 0.837 1.114 2.652

TIN CANS, OTHER TIN WARE 0.714 0.390 0.544 0.799 1.3hO 1.711 --0.563 0.512 0.627 0.688 1.260 1.790 --

HAND TOOLS, AGRICULTURAL 1.052 1.193 0.594 1.714 1.760 -- --

0.979 1.164 0.632 1.792 1.848 -- --STRUCTURAL PRODUCTS 0.749 0.719 0.890 1.232 2.025 -- 0.425

0.726 0.762 0.915 1.300 1.867 -- 0.432ENGINE AND PARTS FOR SHIP 0.751 0.816 1.222 2.061 -- 1.023 --

0.750 0.840 1.222 1.786 -- 1.037 --

WOODEN SHIP BUILDING, REPAIR 0.465 0.813 1.057 3.898 1.297 -- --0.494 0.847 1.064 2.962 1.088 -- --

OTHER MANUFACTURING N.E.C. 0.912 1.471 0.512 2.143 1.268 -- 1.0500.923 1.432 0.531 2.123 1.259 -- 1.029


CCMMERCIAL PRINTING 0.783 0.928 0.898 1.149 1.089 1.341 1.5610.769 0.933 0.909 1.119 1.033 1.363 1.615

GALVANIZING AND PLATING 0.602 1.299 1.032 -- 1.022 -- --

0.634 1.209 1.016 -- 1.132 -- --

REPAIR OF MOTOR VEHICLES 0.703 0.787 0.901 0.809 0.877 4.847 --

0.711 0.807 0.906 0.795 0.791 4.979 -- U

IIA SEPARABLE MANUFACTURING OPERATIONS

ROLL,DRAW,EXTRUOE NON-FER. MET. 0.997 0.783 1.029 1.070 -- -- --

0.993 0.813 1.014 1.068 -- -- --MOLDING OF ALUMINUM 0.533 0.991 0.954 1.613 -- -- --

0.578 0.997 0.930 1.658 -- -- --ALUMINUM, ALUMINUM-ALLOY PRODS. 1.145 1.064 0.720 1.409 0.376 1.536 0.691

1.180 1.096 0.760 1.453 0.411 1.470 0.593PRESSED, ENAMELEO METAL PRODS. 0.663 1.012 1.180 1.179 1.010 0.874 --

0.574 0.966 1.247 1.217 0.714 0.881 --

WIRE PRODUCTS N.E.C. 0.346 0.686 0.407 1.541 1.903 0.776 --

0.388 0.74'0 0.396 1.306 1.827 0.848 --METAL PRODUCTS N.E.C. 0.960 1.152 0.664 0.852 2.313 1.005 --

0.875 1.134 0.702 0.829 2.276 0.871 --PRIME MOVERS 0.831 0.752 1.158 0.710 1.328 1.334 --

0.826 0.780 1.118 0.770 1.281 1.266 --

AGRICULTURAL MACHINERY 0.711 0.939 1.112 1.828 1.780 -- 0.9500.712 0.954 1.090 1.835 1.554 -- 0.965

CONSTRUCTION, MINING EQUIPMENT 0.701 0.988 1.015 0.484 -- 1.277 --0.614 1.112 0.906 0.450 -- 1.339 --

METAL WORKING MACHINERY 1.178 0.858 1.111 1.259 0.590 -- --

1.149 0.886 1.110 1.228 0.580 --MACHINERY--TEXTILE INDUSTRY 0.847 0.717 0.791 0.953 1.037 2.201 --

0.802 0.723 0.885 1.013 0.938 1.776 --

GENERAL MACHINERY, EQUIPMENT 0.819 1.098 1.038 1.417 0.696 0.967 --

0.811 1.120 1.055 1.445 0.692 0.870 --

(Table D13 Con't) 5-9 10-19 20-49 50-99 100-199 200-4)9 50 0

OTHER MACHINERY, EOUIP., PARTS 0.533 0.723 0.653 1.101 3.519 1.615 1.0450.489 0.676 0.665 1.024 2.89:. 1.733 1.231

BICYCLES AND THEIR PARTS 1.444 0.8 9 C.6a8 1.111 0.90' 1.845 --

1.406 0.372 0.722 1.120 0.873 1.5d3 --

SCIENTIFIC INSTRUMENTS 0.971 0.620 0.745 1.359 2.363 0.833 --0.971 0.636 0.760 1.408 ?.053 0.861 --

FOOD PRODUCTION MACHINERY 0.763 0.823 0.844 1.327 3.546 -- --0.795 0.841 0.858 1.334 2.752 -- --

SPECIAL IND. MACHINERY N.E.C. 0.561 1.240 1.167 0.987 0.345 --0.604 1.246 1.176 0.983 0.257 -- --

[I1 CRAFT HANOWORK

KOREAN STYLE PAPER 1.139 0.788 1.299 -- -- -- --1.128 0.828 1.177 -- -- -- --

JEWELRY AND RELATED ARTICLES 1.186 2.308 0.826 1.264 -- -- --0.650 1.514 1.326 1.354 -- -- --

IIC SIMPLE ASSEMBLY, MIXING, AND FINISHING

SOY-SAUCE, SOY BEAN PASTE 0.384 1.022 0.617 7.483 4.380 -- __0.422 1.044 0.612 4.520 3.326 -- --

CCTTON FABRICS 1.199 0.835 0.885 0.935 1.291 0.656 1.2280.983 0.784 0.860 0.884 1.074 0.736 1.314

NARROW FABRICS 1.288 0.859 2.346 0.699 1.010 -- --1.171 0.839 2.181 0.7J 1 .077 -- --

MAN MADE FIBRE FABRICS 0.913 0.795 0.b60 0.854 1.183 1.142 1.5i40.805 0.767 0.865 0.862 1.153 1.193 1.553

BLEACH, DYE, FINISH TEXTILES 0.664 0.892 1.292 1.368 0.78Z 0.796 --

0.616 0.860 1.272 1.350 0.824 0.797 -- 4KNITTED HOSIERY MILLS 0.734 0.691 0.563 1.277 0.774 2.471 __

0.666 0.668 0.579 1.214 0.831 2.262 --

KNITTED UNDERWEAR MILLS 0.990 0.925 0.934 1.247 1.101 0.896 0.8930.984 3.959 0.955 1.246 1.326 0.769 0.859

KNITTING MILL PRODUCTS N.E.C. 1.036 1.116 0.914 1.116 1.029 -- --

1.009 1.082 0.936 1.119 1.009 -- --MANUFACTURE OF TEXTILES N.E.C. 0.468 0.490 1.119 1.971 3.145 0.981 __

0.504 0.553 1.093 I.oO8 2.465 1.181 --

LEATHER FOOTWEAR 0.951 1.364 1.535 0.705 1.170 0.830 0.6150.885 1.398 1.610 0.671 1.374 0.941 0.526

MEN'S OUTERWEAR 0.876 1.184 1.22 0.805 0.773 1.142 0.9150.838 1.261 1.308 0.892 0.820 0.995 0.994

WOMEN'S OUTERWEAR 0.923 1.106 0.799 4.306 -- -- 0.980.857 1.125 0.976 4.339 -- -- 0.93t

OUTERWEAR--YOUNG CHILD 1.154 0.977 0.q75 0.917 -- -- --1.124 0.945 1.022 0.999 -- -- --

OTHER MADE-UP TEXTILE GOODS 1.029 1.549 0.701 J.328 0.491 1.526 __0.806 1.092 0.644 0.378 0.433 1.811 --

OTHER WOOD PROUUCTS 0.799 1.440 1.070 4.795 -- --

0.866 1.371 1.C74 3.038 -- -- --

PROCESSED PAPER 0.481 0.614 0.756 1.437 1.653 0.389 --

0.483 0.535 0.774 1.470 2.159 3.217 --

NOTEBOOK, LEDGER, SIMILAR PROD. 0.908 1.046 1.333 0.843 0.877 -- --0.931 1.029 1.378 0.862 0.788 -- --

LUGGAGE AND BOOK BAGS 0.598 1.487 0.80B 1.126 0.999 0.595 1.356 C.927 1.298 0.78') -- --

OTHER RUBBER PRODUCTS 0.377 0.425 0.451 1.892 1.521 1.939 --

0.385 0.419 0.502 1.349 2.135 1.132 --

(Table D13 con't) 5-9 10-19 20-49 50-99 100-l'99 200- 499 500+

ACID AND ALKALI PRODUCTS 8.777 2.936 2.&77 3.486 -- 0.114 --18.956 6.177 5.360 6.290 -- 0.084 --

INORGANIC CHEMICALS 0.458 0.830 1.345 1.227 0.802 -- --

0.509 0.913 1.246 1.150 0.854 -- --INDUSTRIAL GASES 0.179 1.773 0.560 -- -- -- --

0.190 1.682 0.580 -- -- -- --MATCHES 0.375 0.737 1.380 1.489 1.211 0.352 --

0.390 0.830 1.398 1.507 1.099 0.323 --CHEMICAL PRODUCTS N.E.C. 0.700 1.121 1.096 0.640 1.701 0.233 --

0.712 0.999 1.093 0.882 2.014 0.170 --NON-ELECTRIC HEAT, LIGHT APPAR. 0.884 1.147 0.541 1.602 0.965 0.770

0.819 1.105 0.566 1.599 0.961 0.760 --ELECTRIC LIGHT BULBS 0.574 0.514 0.618 0.905 1.273 1.396 --

0.710 0.553 0.611 0.942 1.242 1.332 --TOY AND SPORTING GOODS 0.517 0.972 0.983 1.493 0.196 -- --

0.612 0.934 1.024 1.353 0.231 -- --

IIA SMALL TOTAL MARKET

EEAN SPROUT 0.492 0.90Z 1.382 -- 2.437 -- --0.567 1.011 1.44? -- 1.034 -- --

AGAR-AGAR -- 1.183 0.792 1.538 0.932 -- ---- 1.429 0.777 1.776 0.857 -- --

KORYANG-JU -- 0.481 1.713 -- --

-- 0.485 1.695 -- -OTHER BEVERAGE INDUSTRIES 2.556 10.918 0.376 0.989 0.411 -- --

2.951 8.565 0.407 0.886 0.418 -- --,HEMP FABRICS -- 2.058 0.530 -- -- -- --

-- 1.609 G.625 -- -- -- --KNIT GLOVE MILLS 0.577 1.021 1.496 1.023 -- -- --

0.604 1.041 1.441 0.912 -- -- --FOOTWEAR N.E.C. AND REPAIR 0.535 0.547 1.441 -- -- - --

0.464 0.543 1.492 -- -- -- --GLOVES 3.586 -- -- 0.968 -- -- --

1.754 -- -- 0.981HATS AND CAPS 0.971 1.144 1.184 0.739 -- -- --

0.943 1.126 1.203 0.717 -- -- --OTHER APPARELS 0.690 1.344 0.722 0.423 1.335 -- --

0.647 1.217 0.691 0.475 1.361 -- --F IXTURES 1.029 0.974 0.840 -- -_

1.020 0.982 0.881 -- -- -- --FURNITURE AND FIXTURES N.E.C. 0.629 8.156 0.862 1.749 -- --

0.666 5.006 0.848 1.667 -- -- --ONE SIDE PAPER -- 1.432 0.816 1.151 1.543 -- --

-- 1.473 0.838 0.932 1.519 -- --BUILDING PAPER 1.327 0.144 1.002 1.268 -- --

1.372 0.142 0.885 1.b94 -- - --PAPER, PAPER BOARD PROD. N.E.C. 2.476 1.012 1.921 0.696 -- 1.114 --

3.479 1.239 2.456 0.824 -- 1.018 --OTHER PUBLISHING 4.738 0.878 -- -- -- -- --

4.939 0.875 -- -- -- __ __TYPESET, ENGRAVE PRINTING 1.160 0.922 -- -- -- -- --

0.988 1.055 -- -- -- -_ __BOOK BINDING ETC. 1.809 0.620 1.549 0.651 1.184 -- --

1.958 0.601 1.427 0.634 1.307 -- --INDUSTRIAL LEATHER PRODUCTS 1.000 -- -- -- -- -- --

1.000 -- -- -- -- -- __REBUILDING OF TYRE 1.025 1.029 -- -- -- -- --

(Table D13 contt) 5-9 10- 19 20-49 50-'99 100-199 200-499 S00-

0.985 1.068 -- -- -- --

RECLAIMED RUBBER 0.569 1.119 1.252 -- -- -- --0.570 i.118 1.2?52 -

RUBBER BELTS 0.380 0.403 0.386 2.760 1.242 -- --0.304 0.421 0.395 1.679 1.366 -_

ANIMAL OIL AND FATS 0.601 1.184 __ __ __ __ __0.519 1.286 --

OIL AND FAT PRODUCTS 0.659 1.707 0.IH3 -- -- --

0.670 1.708 0.170 -- -- -- --

PIGMENTS 0.194 0.575 0.742 1.906 -- -- --0.178 0.730 0.774 1.707 -- -- -

PRINTING INK 0.298 0.611 1.201 1.428 -- -- --0.307 0.601 1.120 1.475 -- --

OTHER STRUCTURAL CLAY PRODUCTS 1.471 0.766 1.152 -- -- --1.388 0.760 1.169 -- -- -- --

PROCESSING OF PURCHASED GLASS 0.879 1.232 0.952 -- -- -- --

0.886 1.078 1.013 -- -- --

PORCELAIN ELECTRICAL SUPPLIES -- 0.792 0.983 0.891 1.539 -- __-- 0.771 0.890 0.996 1.402 -- --

ABRASIVE ARTICLES -- 0.675 1.549 0.536 -- -- ---- 0.668 1.552 0.539 -- --

ARTIFICIAL STONE 1.51. 0.333 1.312 1.211 0.36Z 1.321 -- -- -- --

NCN-METAL MINERAL PRODS. N.E.C. 0.493 0.325 0.772 2.294 -- 0.486 0.352 0.787 2.164 -- -- --

MOLD NON-FERROUS EXC. ALUMINUM 1.337 0.480 -- __ __ __ __1.338 0.479 -- -- -_ __ __

NON-FERROUS BASIC IND. N.E.C. 0.250 0.882 -- 1.131 -- -- --

0.371 0.758 -- 1.107 -_ __ __ 4CUTLERY AND TABLE WARE 0.684 0.806 1.128 -- 1.049 -- _O

0.677 0.791 1.144 -- 1.046 -- --

HAND TOOLS EXC. AGRICULTURAL 0.763 0.661 0.465 1.857 1.529 -- --0.777 v.639 0.515 1.618 1.505 -- --

aTF-ER HAROWARE 0.948 0.962 0.930 0.881 1.347 -- --

0.962 1.010 0.907 0.822 1.394 -- --

NAILS AND SPIKES 0.547 0.689 2.169 - -- -- --

0.575 0.741 1.871 -- -- -- --

MACHINERY--RUBBER PLASTIC INn. 0.304 1.601 -- -- -- -- --

0.261 1.872 -- - - -- -STORAGE BATTERIES 0.718 1.365 0.636 1.676 1.076 -- --

0.666 1.113 0.607 1.711 1.140 -- --

ELECTRICAL APPARATUS N.E.C. 1.347 1.928 0.347 1.732 3.733 2.024 --1.?18 1.672 0.410 1.411 3.230 1.548 --

REPAIR OF BICYCLES 1.000 -- -- -- -- -- --

1.000 -- -- -- -- _- __

TRANSPORT EQUIPMENT N.E.C. 0.930 1.032 1.268 -- -- -- --

0.928 1.031 1.279 -- -- -- --MEDICAL INSTRUMENTS, SUPPLIES 1.740 1.614 1.013 0.481 -- -- --

1.557 1.096 1.051 0.424 -- -- --

LACQUERED WOOD ARTICLES 0.571 0.883 1.567 -- -- -- --

0.693 0.835 1.511 -- -- -- __RECORD 1.386 1.104 0.965 -- -- -- --

1.581 1.178 0.932 -- -- -- --

RICE STRAW MILLS 1.536 0.786 -- -- -- -- --1.527 0.788 -- -- __ __ __

UMBRELLAS AND PARASOLS 0.897 0.733 C.459 -- 1.581 1.868 --

0.861 0.652 0.536 -- 0.614 1.834 --

(Table D13 con't)NOTES ANID SOURCE: SMALL ESTABLISHMENTS ITH-OSE WITH 5-99 WORKERS) ARECCNSIDERED TO PREDOMINATF IN AN INDUSTRY If: THEY ACCOUNT FUR HALF ORMCRE OF THE INDUSTRY'S EMPLOYMENT. THF RELATIVE EFFICIENCY MEASURE ISTHE RATIO OF THE TOTAL FACTOR PRODULJCTIVITY OF ESTABLISHMENTS IN A GIVENS IZF CROUP TO THAT OF ALI ESTABLISHMENTS IN THF INDUSTRY. FOR EACHINDUSTRY, THE RELATIVE EFFICIENCY MEASURES IN THE TOP ROW WERE 18TAINEOBY USING ThE ACTUA~t FACTOR SHARES OF THE INDUSTRY AS WEIGHISW AND THOSEIN THE BCTTCM ROW WERE OBTAINED BY ASSUMING CAPITAL SHARE TO BE.2K/I.2K - Wit WHIERE K IS TIIE INDIJSTRY S FIXFD ASSETS AND W IS THEINDUSTRY'S ACTUAL WAGE BILL. THE CALCULATIuNS ARE 8ASED ON DATA INREPORT ON MINING AND MANUFACTURING CENSUS, 198.

F.

TABLE DI4-RELATIVE EFFICIENCY OF ESTABLISHMENTS IN INDUSTRIES IN WHICH

SMALL ESTABLISHMENTS EMiPLOYED 25 TO 49 PERCENT OF THE WORKERSIN THE PARTICULAR INDUSTRY IN 1968, KOREA, BY SIZE OF ESTABLISHMENTS(WORKERS).

5-9 10-19 20-49 50-99 103-199 200-4939 500+

INDUSTRIAL CHEMICALS N.E.C. 0.490 1.403 __ --0.552 - 1.313 --

KITCHEN, TABLE UTENSILS 1.680 1.183 C.903 1.113 U.U36 0.908 1.0b91.329 1.140 0.928 1.070 0.831 0.942 1.085

ELEC. MACHS.-INDUSTRY APPARATUS 1.041 1.171 0.984 1.310 0.993 -- 0.9600.955 1.183 0.865 1.224 0.7U1 -- 0.989

OPTICAL INSTRUMENTS, LENS 2.000 2.309 2.521 -- -- 0.608 --2.087 2.630 2.449 -- -- 0.602 --

SOAP AND DETERGENTS 0.391 0.398 C.324 0.586 1.277 1.Id2 --0.363 0.334 0.333 0.574 1.222 1.224 --

PERFUMES, COSMETICS 0.184 0.273 C.520 0.981 1.160 0.954 1.7660.239 0.277 0.578 1.100 0.898 1.296 1.332

INSULATED WIREStCABLES 0.423 0.594 C.535 1.794 1.584 1.019 0.9350.347 0.542 0.413 1.204 1.381 1.309 0.962

AGRICULTURAL PESTICIDES 0.120 0.488 0.482 1.084 1.031 1.464 --O.Z15 0.565 C.558 1.447 1.053 1.034 --

GLASS PRODUCTS EXCEPT GLASS 1.067 0.588 0.941 0.622 0.851 1.552 1.0650.927 0.607 0.721 0.552 0.781 1.286 1.389

IRON, STEEL BASIC IND. N.E.C. 1.252 0.342 1.241 0.516 1.533 0.864 --1.094 0.387 1.427 0.430 1.647 0.809 --

WATCHES AND CLOCKS 1.057 0.247 2.534 0.294 2.710 0.720 --0.650 0.209 2.147 0.393 1.804 0.770 --

EYEGLASSES 1.068 1.853 0.795 -- 0.996 -- --1.062 1.747 C.724 -- 1.013 -- --

MEAT AND DAIRY PRODUCTS 0.381 1.777 3.287 0.222 -- 1.533 -^

0.404 1.580 1.646 0.263 -- 1.443 --PAINTS 0.087 0.268 0.429 0.401 0.797 1.448 --

0.141 0.304 0.431 0.399 0.685 1.424 --NON-INDUSTRY ELECTRIC APPARATUS 0.734 0.311 G.930 2.594 0.711 1.039 --

0.608 0.432 0.812 2.789 0.706 1.023 --

BOOKS AND PERIODICALS 0.458 0.627 1.591 1.633 0.895 1.021 0.7980.561 0.831 1.583 1.726 0.671 0.897 0.802

TANNERIES, LEATHER FINISHING 1.502 0.943 0.865 0.431 -- 2.728 --1.546 0.957 0.866 0.401 -- 2.85J --

CORDAGE, ROPE, TWINE, CABLES 0.197 0.321 1.337 2.094 0.539 1.933 --0.245 0.275 1.246 1.662 0.635 1.427 --

MOTOR VEHICLE PARTS,ACCESSORIES 0.841 U.893 0.699 0.948 1.579 1.038 1.0520.868 0.989 C.720 1.014 1.471 0.932 l.080

MOLDING, CASTING OF IRON, STEEL 0.546 0.546 0.435 0.634. 1.080 1.635 0.'970.473 0.568 0.431 3.671 0. 988 1.631 0.v53

OFFICE,SERVICE,HOUSEHOLD MACHS. 0.928 0.784 0.741 0.578 1.133 0.857 1.5080.998 0.856 0.800 0.545 1.133 0.871 1.367

WHEAT-GLUTEN 0.541 0.401 -- -- 1.60 1.148 --0.518 0.380 -- -- 1.342 1.49Z --

THREAD 1.627 1.266 1.387 0.999 1.15S9 0.491 1.0872.006 1.494 1.585 1.128 1.59'7 0. 35 1.022

OFFICE AND ARTISTS MATERIALS 1.030 0.541 0.573 0.830 1.486 1.572 --1.025 0.565 0.674 0.927 1.347 1.345 --

SPIRIT -- 1.195 0.405 0.775 1.477 0.802 ---- 0.824 0.775 0.800 1.416 0.713 --

BCLT, NUT, WASHER, RIVET, SCREW 0.351 0.531 0.771 0.781 1.476 0.905 1.7130.913 0.581 0.862 0.784 1.392 0.732 1.252

(Table D14 con't) 5-9 10-19 20-49 50-99 100-1 99 200-499 500+

PLASTIC PRODUCTS N.E.C 0.590 0.565 0.816 0.976 0.074 1.146 1.3500.521 J.46 J 8. 02 1.028 0.797 1.o24 1 .?68

SOOCO 0.613 0.500 C.508 1.286 1.085 3.650 1.1450.781 0.607 0.586 0.922 1.145 1.800 1.332

IISSUE PAPER -- 2.682 0.729 -- -- 1.0c9 ---- 2.668 0.557 -- -- I.171 --

PAPERBOARD -- u.68' C.552 0.944 1.557 1 639 0.771-- 0.650 0.526 0.761 1.351 1.c6d7 0.846

CAN, PRESERVE FISH, VEGETABLES 0.214 J.531 0.870 0.894 i.209 1.173 --

0.239 0.461 1.006 0.889 1.J91 1.2 50 --NOODLES 0.324 0.199 0.417 0.541 -- 2.B45 2.150

U.336 0.Z31 0.428 0.527 2.3 41 1.874PAPER BAGS AND ENVELOPES 0.380 0.229 1.007 2.315 0.699 0.505 --

0.244 0.139 1.346 1.610 0.781 0.379 --BREAD, BAKER'S WARES 0.449 0.610 0.417 0.844 -- l.193 1.791

0.542 0.666 0.425 1.231 -- 2.180 1.379UNDERWEAR 1.626 1.485 1.531 0.783 -- 0.632 0.607

1.632 1.488 1.570 0.902 -- 0.584 0.564OTHER POTTERY,CHINA,EARTHENWARE 0.434 1.186 1.479 0.343 1.119 -- --

0.437 1.081 1.269 0.368 1.157 -- --PROCESSING OF BRISTLES ^- 1.518 C.796 1.166 1.382 0.938 --

-- 1.656 0.676 1.150 1.573 1.091 --

NOTES AND SOURCE: SMALL ESTABLISHMENTS ARE THOSE WITH 5-S9 WORKERS.THE RELATIVE EFFICIENCY MEASURE IS THE RATIO OF THE TOTAL FACTORPRODUCTIVITY OF ESTABLISHMENTS IN A GIVEN SIZE GROUP TO TH1AT OF ALLESTABLISHMENTS IN THE INDUSTRY. FOR EACH INDUSTRY, THE RELATIVEEFFFICIENCY MEASURES IN THE TUP ROW WERE OBTAINEC BY USING THE ACTUALFACTOR SHARES OF THE INDUSTRY AS WEIGHTS, AND THOSE IN THE BOTTOM ROWWERE OBTAINED BY ASSUMING CAPITAL SHARE TO BE .2K/(.2K - WJ, WHEREK IS THE INDUSTRY'S FIXED ASSETS AND W IS THE INDUSTRY'S WAGE BILL.TIE CALCULATIONS ARE BASED ON DATA IN REPQRT ON MINING AND MANUFACTURINGCENSUS, 1968.

TABLE DI5RELATIVE EFFICIENCY OF ESTABLISHMENTS IN INDU'TRIES IN WHICH

SMALL ESTA8LISHMENTS EMPLOYED LESS THAN 25 PEfRCLNr ['F THiE WOkKESIN THE PARTICULAR INDUSTRY IN 1908, KOREA, BY SIZE OF ESTA6LISHMENTS(WORKERS).

5-9 10-19 20-49 50-99 100-199 ?00-499 500+

CCTTON YARN 0.157 0.391 1.089-- -- -- 0.390 0.a15 1.028

RAW SILK 1.012 -- 1.159 -- 0.635 1.192 C.79')0.740 -- 0.857 -- 0.654 1.195 0.7 2

NITROGEN - -1.000- _ ___ -- -- -- -- 1.0(0

MIXED FERTILIZER -- -- -- -- -- -- 1.002

__ __ __ -- -- -- 1. 00?

TYRE AND TYBE 0.314 0.098 -- -- 0.891 1.1630.311 0.128 -- -- -- 1.053 1.020

SYNTHETIC fIBRE -- -- 2.251 1.717 0.094 3.B4 1.139-- -- 1.564 1.572 0.118 0.8)7 1.108

RU88ER FOOTWEAR 0.515 0.558 0.785 0.773 0.645 1.611 1.0380.596 0.698 0.842 0.753 0.704 1.116 1.031

CEMENT -- 0.040 0.104 0.194 -- 0.644 0.774-- 0.027 0.182 0.165 -- 0.690 0.750

EXPLOSIVES -- 0.095 C.510 -- -- -- 1.012-- 0.057 0.362 -- -- -- 1.0L9

RAILROAD EQUIPMENT -- 2.268 1.383 -- 1.440 -- 0.928-- 2.330 1.873 -- 1.545 -- 0.920

MOTOR VEHICLES -- -- 1.447 0.784 0.612 -- 1.010-- -- 0.905 0.624 0.381 -- 1.034

SUGAR MILLS. REFINERY PRODUCTS -- -- -- Z.074 -- 0.927 1.024 H-- -- 1.416 0.968 1.013 U,

OTi-ER SEASONING, ARTIF. SUGAR 0.248 -- -- -- -- 0.857 1.1040.258 -- -1.O 1.054

VENEER, PLYWOOD, PANELS 0.231 0.707 0.676 0.590 -- 1.127 1.0120.341 0.652 0.562 0.511 -- 1.110 1.010

MANUFACTURE OF IRON AND STEEL -- 0.378 0.396 -- 0.647 0.8B8 1.264-- 0.371 0.394 -- 0.o45 0.890 1.267

PRIMARY EATTERIES -- 1.080 0.731 0.890 0.637 0.808 1.081--- 1.169 0.714 0.744 0.600 0.853 1.082

ROLLING OF IRON AND STEEL 0.267 1.012 0.688 1.07 0.975 2.058 0.9500.329 1.180 0.771 1.051 1.134 1.814 0.945

WOOL SPINNING -- -- 0.966 0.948 0.913 1.755 0.913-- -- 0.941 J.936 J.861 1.729 0.917

PRINTING PAPER -- -- C.180 0.331 0.618 1.188 1.142-- -- 0.150 0.288 0.599 1.119 1.338

DYES -- 0.674 0.920 -- 1.692 0.909 ---- 0.592 U.828 -- 1.496 0.943 --

SMELT, REFINE NON-FERROUS METAL 0.650 0.419 1.866 -- 1.025 -- 1.0230.562 0.398 1.615 -- 1.172 -- 1.016

WOOLEN FABRICS 0.279 0.830 0.813 0.594 0.643 0.563 1.2530.205 0.b82 0.392 0.601 0.634 0.5d3 1.237

WIG -- 0.862 C.300 0.920 0.815 0.916 1.277-- 0.945 0.417 1.2 80 0.771 0.947 1.115

MAN-MAOE FIBRE SPINNING 0.738 0.375 C.656 0.466 0.648 1.561 0.9600.709 0.373 0.638 0.464 0.644 1.557 0.064

NEwSPRINT -- -- -- 0.333 -- 0.911 1.757- __ ____ 0.333 -- 0.930 i.663

GRASS-FLOOR COVERINGS 1.448 0.892 2.076 -- 0.193 0.7J4 3.9855 139 1.604 4.409 -- 0.121 0.235 1.180

(Table D15 con't) 5-9 10-19 20-49 50-99 100-199 200-499 500+

OTHER CHEMICAL FERTILIZERS -- 2.332 1.274 1.392 1.302 1.026 1.089-- 1.302 0.668 0.611 0.630 1.163 0.963

FISHING NETS -- -- 0.867 0.734 0.617 1.637 1.421-- 0.526 0.&815 U.614 1.730 1.157

PEIROLEUM REFINING 0.318 0.976 0.712 1.41 0.64.9 1.0r00.271. -- 0.670 0.580 O 1452 0.544 1.079

PUBLISHIING hiEWSPAPERS 0.920 0.441 0.731 0.714 0.895 1.306 0.9150.683 0.431 C.701 0.616 0.866 1.273 0.965

STEEL SHIP BUILDING, REPAIR 0.615 1.51b 1.366 4.615 0.636 0.599 0.8210.501 1.745 1.453 4.930 0.594 0.822 0.818

KNITTED OUTE-RWEAR MILLS 1.090 1.232 1.225 0.325 0.939 1.021 1.0121.155 1.367 1.514 0.031 0.917 1.063 0.963

WOUDLt BOUXES AND BARiRELS 0.892 1.190 2.106 -- 0.397 -- 1.5491.385 1.031 3.432 -- 0.663 -- 0.740

CLAY HALL TILES -- I.(056 0.545 1.716 1.309 0.9174 1.033-- 0 . 96 0.513 1.209) 1.212 0.974 1.1IO0

DRAW1ING 01- IRON AND STEEL 0.214 001+8) 0.30(f 1.302 1.233 1.138 --0.286 0) '2 0.306 1.621 1.210 1 .02 --

COCCA, CHOCOLATE, SUGAR CANDY 0.459 U.508 0.501 1.111 0.591 -- 1.1620.538 0.582 C.603 1.095 0.303 -- 1*13d

MUSICAL INSTRUMENTS 1.509 -- 1.461 2.272 0.845 1.063 --1.016 -- 1.252 1.771 0.859 1.117 --

SILK FABRICS 0.936 0.738 I.152 1.002 1.375 2.622 0.8110.999 0.767 1.224 1.042 1.420 2.230 0.790

CHUNG-JU 4.042 0.310 0.318 1.888 0.554 1.112 --2.209 0.226 0.302 1.144 0.379 1.188 --

MEDICAL. PHARMACY PREPARATIONS 0.227 0.252 C.627 0.580 1.162 1.330 1.081 I0.269 0.326 C.650 0.592 0.947 1.171 1.189

OTFER INDUSTFlIAL RUBBER PRODUCTS 0.819 0.592 0.451 0.827 0.982 -- 1.3610.796 0.700 0.561 0.938 1.064 -- 1.203

MANUFACTURE OF SYNTHETIC RESIN 1.220 1.743 1.522 -- 0.290 0.314 3.4851.336 1.907 1.614 -- 0.267 0.315 3.584

CCMMUNICATION, RELATED EQUIP. 1.598 1.213 1.476 0.616 0.803 0.673 1.21!1.167 1.041 1.352 0.639 0.854 0.746 1.166

KRAFT PAPER -- 1.350 C.849 0.393 1.432 0.698 1.265-- 1.390 0.610 0.383 1.513 0.676 1.320

NOTES ANO SOURCES: FOR DEFINITIONS AND SOURCE, SEE TABLE

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