The greatest incentive to increased industrial productivity in South Korea lies only 25 miles north of the capital Seoul. A 2.5-mile-wide "demilitarized zone" meandering along the 38th parallel -- pockmarked with bunkers, tank traps, barbed wire entanglements, and mine fields -- is a constant reminder of the unfinished business left over when the "hot war" phase of the Korean conflict ended with an armistice in 1953.
Fear that the North Koreans will once again pour across that line, as they did in June 1950, dominates southern thinking even today. It is one of the reasons why south has had a succession of strong rulers (military generals turned civilians).
The perceived threat from the north, in fact, acts both as a drag and a powerful motivating force on the South Korean economy. Despite infusions of aid from the United States, intelligence studies estimate the South will continue to be militarily inferior to the North for several more years.
By almost every measurement, North Korea is far ahead in quantity and quality of tanks. It is estimated to have a 3-to- 1 advantage in first-line quality tanks, for example.
The two Koreas are approximately equal in ground troops -- 520,000 in the South, 600,000 in the North. But American studies conclude that without continued US combat and logistics support (currently 38,000 troops based in the Republic of Korea), Seoul could not be successfully defended against a surprise attack.
In the air the disparity is much worse. The South has a 33,000-man Air Force with 424 combat aircraft. The North has 51,000 men with 724 aircraft.
It is against this background that, with American encouragement, South Korea devotes 6 percent of its gross national product and 35 percent of its annual budget to defense.
Prof. Kim Sujinof of the War College in Seoul, who has made a study on the issue, says that by comparison North Korea officially claims to have spent 31.3 percent of its GNP on defense in 1970, shrinking to 15.1 percent in 1979, and 14 .5 percent last year.
'My own estimate is that the current figure is, in reality, 28.7 percent of the GNP, and between 65 and 75 percent of the annual national budget."
(rea's is estimated at less than a quarter that figure).
Professor Kim believes there have been some beneficial effects in contributing to the development of civilian industry and stimulating the national economy.
For example, he cites the fact that to meet the external threat, the defense industries have to stress high precision and high technology. This has created a considerable pool of highly trained technicians and managers skilled in organizing large-scale industries engaged in high quality work which can then be tapped by civilian industries.Many of Korea's leading industries have already benefited from this impetus.
At the same time, he admits the considerable drag on the financial side by having to constanly respond to North Korean initiatives in military spending.
"This has been a constant constraint on our economic expansion for the past 25 years. In fact, when you consider this, I think the Korean economy should get a lot more credit than it does," says Il Sakong, research director of the Korea Development Institute, a body that does medium and long-term economic research for the government.
"Without the threat from the north, we could be like Japan . . . spending less than 1 percent of our GNP on defense and having billions of extra dollars a year to invest in industrial expansion.
"Of course, against that you have to balance the determination of both the United States and Japan to guarantee our security. The aid they provide does to some extent offset the strains imposed by our heavy military spending."
Chung Suh Whan, president of the Chamber of Commerce and Industry, however, is one of those who sees the threat from the North as something of an asset.
"I think the constant threat of invasion has been a major factor in persuading our people to work harder."
Another important factor, he says, is that the bulk of the 600,000-man armed forces are conscripts, who will be available to the labor market after 2 1/2 years of military service.
"These are young men who have been well-trained, who are accustomed to work as part of an organized team. Then, we have ROTC, which turns out well-trained officers who enter business as already proven leaders.
"This is a very important element in the Korean economy and will become even more vital in the future as events worldwide demand a greater degree of spiritual toughness."
In fact, because of a baby boom after the Korean war, not every young man is being conscripted these days. The military can afford to be choosy and is taking virtually only the best educated: high school graduates and university students.
Adds Mr. Chung, "Young people won't like this, but I would really like to see all boys trained in the military before they enter business."
Kim Ip Sam, vice-chairman of the korean Federation of Industry, views the issue from another angle: Apart from the straight military threat, South Korea is in a spirited competition with its northern neighbor to prove which is the superior society.
"They [in the North] believe they are living in a utopia. So we are under contant pressure to prove ourselves superior."
He doesn't go along with the idea that the northern threat is beneficial, however. "It's too much."
"Even without the North Korean threat we have enough incentive to build up our economy and society. We have 1 billion Chinese close by, as well as the Soviet Union. On the other side we have to compete against the giant Japanese economy. That surely is enough for any country to have to cope with."
Professor Kim of the War College cites other negative factors:
* Because of the constant threat of invasion, the South is unable to utilize agricultural land near the demilitarized zone, tap raw materials present, and certaily can't site industry there. Fishing grounds close to North Korea are also off limits.
* Again because of the invasion threat, the government cannot always site industry in the most economically advantageous spots. industries cannot be grouped together for greater effeciency and joint savings in transportation costs because of the risk of a major sector of the economy being lost to one air raid or guerrilla attack.
* More indirectly, there are the funds that have to be diverted to the intense propaganda war the two countries wage right around the globe.