[Korea’s 60th Anniversary Special Contributions]Korea as a model of economic development

Korea, with its outstanding pattern of economic development, has proved itself a good model for many developing countries.

Apart from Japan, Korea is indeed a unique example of a non-Western country becoming a member of the Organization for Economic Cooperation and Development as a major trading nation. What, then, are the principal factors contributing to Korea’s economic success?

The most predominant factor was the effectiveness of the “triangle” formed by the government, industries and financial institutions. The jaebeol, the banking sector, and the government formed a solid triangle of economic development. This triangle would not have led to shining results, however, had it not been for certain favorable external factors.

The rapid economic development of Japan as well as Japanese economic and technical cooperation contributed significantly to the early stages of Korean economic development. Then came the waves of globalization. The export-led pattern of growth of the Korean economy rode successfully on the waves of globalization and Korean development was, in turn, an aspect of globalization, epitomizing the growing interdependence in the world economy.

With its economy based on this triangle, however, Korea became the victim of its own success. This was witnessed very clearly during the so-called Asian economic crisis of the late 1990s. The solid triangle had led to excessive dependence on short-term capital from abroad and had left intact the structural rigidity of the economy.

Here again, however, Korea proved itself to be a good example of a developing country overcoming external financial difficulties combined with internal rigidities. The courageous opening of the Korean financial as well as commodity markets to foreign investors and traders, coupled with the restructuring of jaebeol and of the labor market, contributed a great deal to Korea’s efforts to overcome the crisis.

More than the introduction of various new economic measures, however, what should be emulated by developing countries is the political skill of appealing to national solidarity and the determination to restore international credibility by faithfully observing the International Monetary Fund’s “conditionalities.”

Looking back at the history of Korean economic development over the last 30 years or so, one might today wonder whether Korea can become another model of economic progress in the coming decade and, in that regard, what major tasks remain ahead.

To become, for the third time, a good model of development for other similarly situated economies of the world, it appears that Korea should at least be able to deal successfully with the following problems or tasks:

The first is the growing income gap between the rich and the poor not only within Korean society itself, but around the world. To what extent the Korean government will be able to provide an effective safety net to the underprivileged is a serious problem to be tackled, particularly in view of the rapid demographic changes of Korean society.

Second is the question of agriculture. Farm subsidies and the international competitiveness of Korean agriculture could become serious obstacles for Korea in its efforts to promote free trade agreements with its trading partners. In other words, instead of asking for various types of exceptions for its agriculture, Korea can make use of the opportunities of free trade negotiations as an instrument to carry out structural reform of its own agriculture.

The third task will be the dismantling of its developing country status. Korea has, in trade and other areas - such as importation of rice or greenhouse emissions control - advanced the argument that Korea still remains a developing country. In view of Korea’s economic progress, this argument has increasingly been viewed in the international community as more or less outdated.

All in all, Korea faces a great task for the future: the de-Koreanization of its own economy - further integrating its economy with that of the rest of the world, thereby contributing significantly to sustainable growth of the world economy.

Korean political development

Korea experienced a long period of military authoritarian government. The military shouldered political responsibility due to the need for a government-initiated development strategy and security requirements in the face of the threat from the North. The prolongation of the military regimes was, therefore, linked both to domestic and international factors. Strategic considerations, both economic and politico-military, weighed heavily on the political process in Korea.

One should not, however, lose sight of the activities of the democratic forces which were not negligible even under the military governments. Student movements, labor union activities and the political opposition by Kim Dae-jung and other personalities paved the way for a transition from a military to civilian government.

In other words, the democratic forces that survived the Park government checked the Chun Doo Hwan presidency, and paved the way for the presidency of Roh Tae-woo ... whose regimes could therefore be considered as transitional governments that paved the way for a more democratic political process.

The Kim Young-sam government played a decisive role in cracking the fusion of politics and economics. During this period, the roles of political parties were consolidated and, in the truest sense, democratic forces were integrated into the institutionalized political process. This process was completed when Kim Dae-jung, long considered the opposition symbol, was elected president. His presidency was also significant, as people from the South Jeolla area, traditionally viewed as “outsiders” in the political process, took center stage in Korean politics.

Active for a long time as an outsider, Kim and his group of politicians tried to project the image of responsible politicians as soon as they took over the helm of the presidency. In this process they relied upon, rather than destroyed, the traditional aura of authority attached to the presidency, government ministers and professors.

This aura of traditional authority attached to the presidency and other “titles” or positions was politically targeted during the Roh Moo-hyun presidency. The thread of populism that ran deep and wide during Roh’s presidency should be understood in the wider historical context of Korean politics, namely, the degree of maturity of the democratic process.

This implies that the immediate national task in Korean politics is to ensure the growth of healthy, sound opposition parties which can present practical alternatives instead of having recourse to regionalism or populism.

Korean diplomacy

The most important diplomatic issue for Korea after the Korean War has been the international aspect of the North Korea problem - namely, how to secure international support for Korean security and, at the same time, obtain the blessings of the major powers for easing tensions with the North.

These two objectives have to be pursued with careful balance, particularly after the dissolution of the Soviet Union. The creation of the six-party talks is an important device to “internationalize” the North Korean problem, thereby securing a delicate balance between containment of the North and rapprochement with it.

Despite occasional frictions with the United States, the Republic of Korea has, in general, deployed skillful diplomacy through which the Korean government has obtained international support both for its “soft” policy towards the North and “pressure diplomacy” against it.

There are some signs, however, that may disturb the delicate balance of soft and hard policies towards the North. This is related to growing ethnic nationalism in Korea. The revival of a strong ethnic identity with the North, particularly among young people, presents the risk of giving rise to frustration over American policies toward the Far East as well as its troop presence.

There is also the danger that such nationalism can be diverted, consciously or inadvertently, toward an anti-Japanese movement.

The U.S. and Japan should view the rise of Korean nationalism with cool but sympathetic eyes because Korea, which faces the gigantic task of reunification, has a strong need for ethnic nationalism. The U.S. and Japan should stay “cool” at times of occasional eruptions of such Korean nationalism. At the same time, the Korean government should refrain from diverting the antigovernment sentiment of the people toward targets such as the U.S. or Japan. The promotion of a free trade agreement or new economic accords may help mitigate such risks of political diversion.

Then there is the issue of building an East Asian association or community. One has to note, above everything else, that an East Asian Community is already in the making in the functional sense of the word. The degree of interdependence in trade among East Asian countries Korea, Japan, China, Taiwan and the Association of Southeast Asian Nations has already exceeded the degree of interdependence among countries under the North American Free Trade Agreement and has, more or less, reached the level of the European Union at the beginning of the1970s.

Such trends towards an East Asian community should be welcomed and encouraged by Korea for several reasons. Firstly, moves towards building an East Asian community will help hold in check the rise of China-centralism and the parochial nationalism of East Asian nations. Secondly, it can help strengthen the sense of international responsibility for China to act as a conscientious major power in the world. Finally, efforts to build an East Asian Community will help form a vision of a stable, peaceful East Asian politico-military geography after Korean reintegration.

There are a few tasks that Korea must deal with in the process of forming an East Asian community.

First of all, Korea must soften the “colonial” mentality of fanning anti-Japanese sentiment for the sake of consolidating national unity or identity. As Korean society becomes more and more mature both politically and economically, freedom of expression, even on issues concerning Japan, is expected to be secured socially and politically, not to mention legally.

*Kazuo Ogoura is president of the Japan Foundation and a former ambassador to Vietnam, Korea and France. He served in various positions in his country's Ministry of Foreign Affairs, including Deputy Vice-Minister for Foreign Affairs and Japanese G7/G8 Sherpa [the personal representative of the head of state, who prepares the way to summit meetings].

by Kazuo Ogoura