The bus moves at a snail’s pace through vast and clogged central Seoul. Laptops and mobile gadgets sitting on different counters inside offer blazing Internet connections. “KT, the ubiquitous wonderland, is waiting for you,” a smiling female breathily intones from the giant screen at the front.

A little cheesy, but it’s still an apt description of what Korea Telecom and the government is aiming for as South Korea positions itself for economic growth into the next decade.

The lady on the screen was promoting WiBro, a super-fast South Korean wireless technology that provides voice, data, and video services. The bus tour was devised as a demonstration of what WiBro can do while you’re in transit—such as stream high-definition videos while video-conferencing on mobile devices—even if congestion keeps vehicles moving at a crawl. “What works for Korea will work for the world,” declared Young Kyu-noh, a deputy minister in the Ministry of Information and Communications (MIC), during a recent press lunch in Seoul.

South Korea has been at the forefront of telecommunications technologies, and not by accident. Thanks to the government’s prescriptive form of policymaking, the country claims the world’s second-highest number of broadband connections per capita—after Iceland—giving South Koreans an earlier crack at new Internet and mobile services than their counterparts in most countries, including the United States.

Right now, the government and giants like Samsung and SK Telecom are aggressively promoting WiBro in hopes of selling related hardware, software, and services to the world. It’s a point of national pride, of course, but tech is a mighty pillar of economic growth. South Korea exported $102 billion worth of tech products in 2005, up roughly 10 percent from $93 billion in 2004. The 2005 tech exports including cell phones, semiconductors, and televisions accounted for 36 percent of South Korea’s overall exports and 14.1 percent of GDP.

China is South Korea’s biggest trade partner—and biggest potential competitor. South Koreans have invested heavily in China, as much to reduce manufacturing costs as to capture market share in consumer and industrial electronics. The problem is, Chinese companies harbor similar global ambitions. “When it comes to quality, Korea is ahead,” asserted Information and Communications Minister Roh Jun-hyong during a recent press event. “Korea’s challenge would be to decrease the technology gap with Japan and increase the gap with China.”

Korea Everywhere

As it has almost since the last days of Japanese colonial rule, the government exerts a tremendous influence in shaping the country’s economic destiny, the tech industry included. WiBro was a key component of IT839, a 2004 policy document that called for creating new businesses that would generate 60 trillion Korean won by 2010.

South Koreans had been here before. Eyeing the potentially rich American export market, the country in 1996 spurned the GSM mobile technology spreading across Asia and Europe and instead became the first to commercialize CDMA, a cellular technology developed by U.S.-based Qualcomm. Qualcomm went on to become a dominant player in the wireless industry, and licensed its treasure trove of cellular patents.

Led by the chaebol, South Korea’s family-led conglomerates, tech boomed—until the 1997-1998 Asian financial crisis struck and several were found borrowing on a scale no business plan could ever sustain, and squirreling away the details in their labyrinthine structures. But despite scary business practices, the chaebol succeeded in putting South Korea on the map.

Samsung Electronics and LG, for instance, are among the top five handset makers in the world. Samsung is also the No. 1 supplier of memory chips for everything from computers to MP3 players. Hynix Semiconductor came out of bankruptcy to become the world’s No. 2 dynamic random access memory (DRAM) maker.

South Korea is now betting that next-generation wireless technologies like WiBro will keep it ahead of the competition. Another wager is terrestrial-digital media broadcasting (T-DMB), which pipes television programs and movies to portable devices. The hope, as always, is that South Korea can commercialize new technology fast enough to claim new global markets for products and services. Five years ago, people dismissed the idea of South Korea trying to create a new standard, says Young Sohn, an MIC adviser and managing director of Menlo Park, California-based Panorama Capital.

SK Telecom and KT launched WiBro commercially in Seoul two months ago, and are conducting trials in Europe and the U.S. They and other companies, including Samsung, also are pushing WiBro as a next-generation cellular technology (4G). “We expect the mobile handset will evolve into an information hub for ubiquitous communications and networking,” said Samsung Executive VP Woon Sub Kim during a recent tech conference in Seoul.

Chaebol Remain Powerful

Famous in the past for unsavory government links and loans, and for squeezing suppliers to the point of stunting the growth of South Korea’s small- and medium-sized business (SMB) sector, several conglomerates have emerged as strong contenders internationally. In June, for example, SK Telecom—which sells its Helio mobile service on U.S.-based Sprint networks—committed to invest $1 billion for a 6.7 percent stake in mobile giant China Unicom.

As for SMBs, Samsung now backs venture capitalists investing in chip, display, and software players in the mobile space, says Sun Jin, a director at STIC Investments in Seoul. (VC investment in IT edged up from $3.51 billion in 2002 to $3.67 billion in 2005, according to the Korea Venture Capital Association.)

“As Samsung and LG grow, these SMBs will grow as well,” says Mr. Jin, who reckons the government is doing a better job regulating conglomerates these days. Indeed, it’s the startup that could propel one of them into being the standard-setting tech power that South Korea wants to be. But Panorama’s Mr. Sohn adds a counterpoint—that the chaebol are just too huge to leave local startups with any bargaining power.

Mindful of the need to promote its SMBs—and deflect critics who charge that it never really reined in the chaebol—the government created iPark. The agency maintains offices in Silicon Valley, Beijing, London, and five other locations, offering business planning, marketing, and financial services to companies targeting global markets. Kevin Lee, who heads iPark’s Silicon Valley office, argues that South Korean startups lack the market savvy of their Taiwanese counterparts and could use the help. “Their technologies are good, but they don’t know how to sell into the U.S. market,” he says.

The government also is encouraging South Koreans to study abroad, Mr. Lee says, noting the role Chinese-Americans have played in bolstering tech in Taiwan and China.

China’s South Korean tech imports reached $18.46 billion in the first six months of the year, a 16.3 percent year-on-year increase. South Korea’s China market is growing faster than its world market—just as China sets its sights on many of the same markets that South Korea is chasing. “The world, as well as Korea, is worried about China’s development in the IT area,” said Lee Hyeo-eun, director of South Korea’s IT policy and information division at the Institute of Information Technology, during a recent press event.

Export-Heavy

For South Korea, the tech business is all about export markets, with the domestic market maturing faster and faster with each product that comes along. SK Telecom, for example, just posted 373 billion won ($388 million) in second-quarter net income, a 20 percent drop from a year ago.

South Korea’s top-down approach is less reliable when the country is no longer trailing but trying to lead the world into ubiquitous wonderfulness. “In the past Korea was in catch-up mode. It was possible for the government to adopt policies,” says Susan Sweet, consulting director for policy and regulation at Ovum, a London consultancy. “Now it’s in the forefront of IT development, and the government is not good at picking winners.”

WiBro and DMB compete with other wireless communications standards, and South Koreans hope the world will deem them a better mousetrap. But if that is not the judgment, Samsung and other South Korean companies will make what the world has decided it wants.

And South Korea’s developers will try their hand at the next new thing, and hope to set a world standard with that. That will be the way for South Korea, as long as there are Japanese to beat.

Contact the writers:PGanapati@RedHerring.com, UWang@RedHerring.com