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[Viewpoint] Korea reaches new level as donor

For the international donor community, Korea makes a compelling case that aid can work.

Feb 01,2010
Korea’s recent accession to the Development Assistance Committee of the Organization for Economic Cooperation and Development is very significant, not only for Koreans but also for the international development community. Among the original recipients of assistance from the International Development Association, the World Bank’s fund for the world’s poorest countries, Korea is the first country to join the DAC.

Korea has come a long way from the conditions it faced a few decades ago. In the early 1960s, Korea’s per capita income was just more than one hundred dollars, lower than many countries in Africa. The country had no natural resources and was almost completely destroyed by war. Despite all these difficulties, in less than half a century Korea transformed itself into an industrialized economy (with the 15th largest GDP among 180 nations) and became an aid donor to developing countries. This year, Korea will chair the G-20, a leading country grouping tasked with addressing global economic issues.

Korea’s remarkable progress gives hope to those in the developing world that their nations can reach the same status. The country’s success in creating growth and economic opportunity, which capitalized on a motivated workforce, fiscal and monetary discipline, strong institutional capacity and stress on education and information technology, serves as a model to others.

For the international donor community, Korea makes a compelling case that aid can work. Along the way, Korea has benefited from international aid, including significant assistance from the World Bank, the largest multilateral development agency, which was established in 1944 to support reconstruction of the world economy in the post-war period. From the early 1960s through the early 1970s, when Korea was still a low-income country, the World Bank provided interest-free loans from IDA. As Korea grew to a middle-income country, the World Bank provided low-interest loans. In the late 1990s, when hit by the Asian financial crisis, Korea received extraordinary emergency support from the World Bank and the International Monetary Fund. Overall, between 1963 and 2003 the World Bank provided Korea $15 billion, along with policy advice and technical assistance.

Today, Korea is in a position to extend help to others. In fact, the Korean government has pledged to increase its Official Development Assistance from the current level of 0.09 percent of its GDP to 0.25 per cent of GDP by 2015. This is very timely and much appreciated, given the need to scale up aid to poor countries in the post-global financial crisis period.

In tandem with Korea’s enhanced role as a donor, its partnership with the World Bank has also been growing stronger. Since its graduation from IDA in 1973, Korea has been contributing to the association’s funding. In the last IDA replenishment, which reached $42 billion, Korea pledged a welcome $285 million. Korea also channels development aid through World Bank-administered trust funds to assist with crisis response, poverty reduction, public health, information and communications technologies and environment issues. We also have a partnership to support peace-building transitions in fragile and conflict-affected states.

Given its background as a former aid recipient, Korea can make a valuable contribution by sharing with developing countries the knowledge and lessons of its successful development.

Going forward, I hope we can deepen our partnership with Korea. Korea’s leadership within the G-20 can enhance this cooperation as we work together with the other development partners to provide vital assistance to developing countries.

*The writer is a vice president of Concessional Finance and Global Partnerships of World Bank.

by Axel van Trotsenburg



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