AI transition presents both opportunity and challenge for Korea

Chung Un-chan

The author, a former president of Seoul National University and former prime minister, is the chairman of the Korea Institute for Shared Growth.

I am hardly a digital native. For most of my life, I have been more comfortable with analog tools than computers. Yet today no one can afford to ignore the sweeping advance of AI. Humanity stands at a historic turning point comparable to the Industrial Revolution.

Many people still regard AI as simply another technological breakthrough. It is much more than that. Like the steam engine, electricity and the internet, AI is a general-purpose technology capable of transforming the entire economy and society. The emergence of generative AI and AI agents marks an especially significant shift because, unlike earlier waves of automation that primarily replaced manual labor, these technologies increasingly perform cognitive work once reserved for humans. They can now assist with, and in some cases replace, sophisticated tasks such as accounting, legal review, financial analysis and research and development rather than merely organizing data or drafting documents.

The importance of the AI transition lies in its simultaneous impact on productivity, labor markets and income distribution.

AI lowers the cost of searching for and analyzing information while improving the efficiency of research, development and decision-making. The result is higher productivity for both companies and national economies. At the same time, AI is reshaping the labor market itself. In the future, competitiveness may depend less on traditional distinctions between highly skilled and low-skilled workers than on how effectively individuals and organizations can use AI.

Its influence on the distribution of wealth may prove even more consequential. AI industries exhibit powerful network effects: the more data they accumulate, the better their systems become, while a larger user base further strengthens their competitive position. As a result, AI could increase productivity while also intensifying market concentration. If a handful of firms monopolize data and technological advantages, the "superstar firm" phenomenon will become even stronger. Winners will gather more data, provide better services, attract more users and further widen the gap with competitors. Policymakers must therefore ensure that the benefits of higher productivity are broadly shared rather than concentrated among a small number of companies and individuals.

These developments carry particular significance for Korea. The country possesses globally competitive manufacturing industries, a world-leading semiconductor sector and advanced digital infrastructure, giving it considerable potential to become one of the principal beneficiaries of the AI era. Because manufacturing accounts for a large share of the economy and production sites generate abundant data, productivity gains from AI could exceed those achieved elsewhere. AI may also help offset labor shortages caused by Korea's declining birthrate and rapidly aging population.

Yet Korea already faces serious structural weaknesses. Large profitability gaps between major corporations and small and medium-sized enterprises persist. The labor market remains divided between regular and nonregular workers, while economic activity continues to concentrate in the Seoul metropolitan area. Rather than narrowing these disparities, AI could deepen them. Large companies with greater financial resources and better access to data will likely widen their lead, leaving many smaller firms behind. AI startups, data centers and venture investment are also becoming increasingly concentrated around the capital region, potentially widening regional inequality. Young people may find fewer entry-level office and analytical positions from which to build careers, while many midcareer workers could face growing pressure to retrain.

Korea's recent effort to attract a United Nations AI hub is therefore meaningful. More important than securing a building or an international organization, however, is creating institutions and an ecosystem suited to the AI era.

A successful transition requires protecting the freedom to innovate while establishing rules that guarantee fair competition. Data and computing resources should not be monopolized by a small number of corporations. Instead, the government should expand what might be called "basic AI assets," including public datasets and high-performance computing infrastructure that small businesses and startups can readily access. Education, worker retraining and vocational programs must also be redesigned around AI literacy so that workers can adapt to technological change throughout their careers.

In "The Wealth of Nations" (1776), Adam Smith argued that prosperity rests on a "system of natural liberty." Innovation and competition should flourish freely, but monopolies and special privileges must also be restrained. The same principle applies in the AI age.

AI presents Korea with both an extraordinary opportunity and a profound challenge. It could help the country escape a prolonged period of low growth, or it could deepen existing inequality and social polarization. Ultimately, the decisive factor is not the technology itself but the institutions and collective choices that shape its use.