korea ’ s development path kang, kyung shik. 1. 1. why korea ? one of the poorest in the world ...
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Korea’s Development Path
Kang, Kyung ShikKang, Kyung Shik
1. 1. Why Korea?? One of the poorest in the world 12th largest e
conomy in 50 yrs Per capita income: $87 in ’62 surpassed $10,0
00 in ’95 Portion of agriculture to GDP: 46.5% 5.5% Portion of manufacturing to GDP: 11% 37% Portion of trade to GDP: 16% 70% Succeed in overcoming poverty, but financial cr
isis in the process of democratization and economic opening
2. Basis for development 2-1 Nat’l division & choice of political system
2-2 Destruction of system & economic facilities
2-3 Zeal for education
2-4 military coup and political stability
2-5 Favorable external environment
2-1 National development & choice of political system
S. Korea separately forms free democratic gov’t and capitalist economy amid chaos following the ’45 independence
Intense S-N Korea competition in military, economy
S. Korea’s per-capita income in 1960s half of N. Korea 25 times more in 2000
Reasons for the gap lie in different political systems Private property ownership + meritocracy vs. principle of “do
what can be done and distribute as needed”
2-2 Destruction of system & economic facilities
Manufacturing plants destroyed during Korean War (‘50-‘53)
Farming land reform and war destroy traditional society
Massive migration and social flexibility
Remove barriers to social mobility
Overall downgrade and same starting point
Transform into thoroughly competition-driven society
2-3 Zeal for education
Delay drafting of univ students during Korean War Increase i
n univ students and universities, backbone for fast-paced growth
from 1960s on
Passion for education, and overseas study, especially to U.S. su
pply high-caliber manpower
Education during mandatory military service, at workplace and t
hrough national “saemaul” (new town) campaign
Education as ticket to wealth, social climb and power
2-4 Military coup & political stability
Aggressive seek economic development for 18 yrs
Economic setback since switch to single 5-yr presidential term
outbreak of ’97 financial crisis
Mexico: one party, 6-yr single term
Advanced countries: Despite ruling party changes, continue re
forms as in Australia and New Zealand
2-5 Favorable external environment
Cold War necessitates assistance ahead of economic reasons
Favorable environment (GATT launch, World Bank, IMF & A
DB assistance)
U.S. aid, utilization of preferential tariffs & other mechanisms
Diplomatic ties with Japan and modeling after the Japanese ec
onomy
3. Overcoming poverty: challenges & policy response
3-1 End vicious cycle of extreme poverty
3-2 Export drive, int’l orientation for develop
ment
3-3 Gov’t-led development
3-4 Industrialization strategy
End cycle of low incomelow savingslow growthlow inco
me
Dependence of U.S. aid: aid on the decrease
Mindset of devoid of hope: self depreciation
Creating atmosphere for “can-do” spirit
3-1 End vicious cycle of extreme poverty
3-2 Export drive, int’l orientation for development
Strategy to substitute exports failed in early 1960s
Adjustment of monetary, foreign exchange policies in mid-196
0s
Choose to target external market rather than internal market
Switch capital resource from domestic savings to FDI/foreign
borrowing (N. Korea adheres to self-reliance, market closure)
3-3 Gov’t-led development
Lack of high-caliber entrepreneur or corporations
Gov’t maps out business plan, provides low-interest capital, res
tricts exports for domestic market share, tax breaks, and constr
ucts SOC with gov’t budget
Pool gov’t resources: selective choice & focus
Gov’t-private sector united: success goes to businesses, risk sh
ouldered by gov’tdrives entrepreneurial energy
3-4 Industrialization strategy
Focus on labor-intensive industries with export competitivene
ss(e.g. textile, shoes, plywood, shoes, wigs)
Narrow gap in urban & rural areas: increase food production
& national “new town” movement
Fast-forward petrochemical industry development in the after
math of the fall of Vietnam and U.S. pullout
4. Task: implementation & management
4-1 Establish Economic Planning Board
4-2 Implement 5-yr Development Plan
4-3 Fast resolution to problems
4-4 Presidential leadership
4-1 Establish Economic Planning Board
Launch gov’t body for overall management of economic planning & policymaking
Centralize planning, budgeting and foreign borrowing into one body
Statistics, inflation, and science & technology included EPB head as deputy Prime Minister for coordination among ec
onomic ministries DPM exercises strong leadership and coordination at economi
c ministers’ meeting Reports directly to president on economic issues (bypasses Pri
me Minister)
4-2 5-yr economic development plan
Acts as banner that economic development is first priority on n
at’l agenda
Pool nat’l resources for economy and means for gathering Kor
ean people’s united efforts, energy
Starts as economic plan, develops into socioeconomic plan an
d then as indicative plan
Differs from planned economy (e.g. construction of Seoul-Pus
an highway, petrochemical industry development)
4-3 Fast resolution to problems
President’s frequent visits to construction sites
President chairs monthly economic monitoring meetings
Monthly export meetings, addresses difficulties faced by industries
Quarterly monitoring of major projects
Task force teams for major projects
4-4 Presidential leadership
Awareness as public figure, strong sense of historical mission
Capacity to identify and utilize high-caliber manpower (Employs experts & technocrats, key coup members retreat)
Nat’l land development: tends like gardening, President himself maps out the construction plan for Seoul-Pusan highway
Decision-making style: listens to attendants before reaching conclusion, thorough execution
5 Crises & responses in development process
Early stage: excessive motivation, lack of U.S. attention lead to failure diplomatic ties with Japan and dispatch of troops to U.S.-Vietnam war improve Korea-U.S. relations
Excessive investment: exit troubled companies, 8.3 emergency measures
First oil shock: threat for nat’l bankruptcytakes part in Middle East construction boom
End of Vietnam war, U.S. pulloutseek petrochemical development
6. Shortcomings in compressed growth
Economic difficiency: ‘picking the winner’ approach goes against market economy, undermines free competition
Simple, small economy: challenges in developing into complex, larger economy
Concentrated power at Office of President: National Assembly as auxiliary body
Political stability: difficult to attain in democratic system with singular terms
Oct. 26 and 2nd oil shock: policy shift for stabilization
7. Conclusion: problem solving capacity as key
Small, open economy: ability to adapt to chang
es
Businesses, gov’t need fast, decisive adaptabili
ty to changes
Strong political leadership Forming social c
onsensus through problem solving ability, impl
ementation key to success