The limited fungibility of the Korean miracle 

The host country for the annual meetings of the African Development Bank (AfDB) has a good story of economic transformation to tell, and we heard yesterday the narrative in detail from Koreans at two separate sessions. GNP per head has multiplied from US$1,000 in 1977 to US$29,700 last year. In the period of the seven five-year plans running from 1962 to 1996, annual GNP growth averaged 9.3%. South Korea emerged from a highly destructive war in 1953 and is now the tenth largest economy in the world, having joined the OECD in 1995 and G20 in 2008. The state’s planning role has been central to the transformation. 

The core theme of the annual meetings is industrialization: manufacturing in South Korea started with export-oriented light industry in the 1960s, migrated to chemicals, shipbuilding and heavy industry in the 1970s, embraced high tech and knowledge-based industry in the 1990s and is now also a pioneer in the fourth industrial revolution. 

 In a session entitled The Role of Infrastructure as a Catalyst of Industrialization: Korea’s Experience and Lessons, we learnt of remarkable development in roads, and housing. Investment in transport has fuelled urbanization, which has risen from 35.8% in 1960 to as high as 91.0%. The entire population is said to live within 30 minutes of an expressway. 

Due to fiscal constraints, public investment in housing only accelerated once manufacturing had entered its second phase (heavy industry). The focus had first been transport. Koreans have been housed in new towns and administrative cities, with the next stage of smart cities on the drawing board.

At the second session entitled Pathways to Industrialization, Sung-Soo Eun, the president of Korea’s Eximbank saw the Korean miracle as the harmonious collaboration of the government, enterprises and individuals. In the absence of natural resources, the miracle depended on good government and leadership and the hard work of Koreans to lift themselves out of poverty. Eun was asked by the mediator to confirm that Korean schoolchildren regularly studied until 10pm: almost peeved, he pointed out his deadline had been closer to 11.30pm. 

It is unclear that the miracle can be replicated in full. We joined a lively debate on the floor as to the extent of US aid at the end of the Korean War. 

Tarek Amer, Egypt’s governor at the AfDB, said that attitudes to work had to change dramatically, that discipline was often lacking and that many African societies were fragmented. He noted that unemployment was high while companies could not recruit people with the right skills. Egypt saw a financial crisis every ten years but he detected the turning of a corner. 

Finally, Eun acknowledged that the conditions in which to replicate the model are more challenging than in the 1960s and 1970s. Korea (and Japan) expanded rapidly when the trade system was opening up to the world.

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