[Viewpoint] Explaining the Korea-Philippine gap

Why did Korea became rich, leaving behind other countries in si-milar or better condition in the 1960s, such as the Philippines? What explains the gap in economic and social performance between these two countries in East Asia? What are the implications to economic development models?

These questions sound simple, even tedious and useless. Yet these issues are often topics for dinner conversation, an appetizer in confidence building between Koreans and Filipinos who want to be serious friends, business partners or even spouses.

Aside from economic indicators such as income, trade, investment, productivity or employment, social and cultural factors should be important explanations. Variations in work ethic, values such as pride in one’s nation and culture, and even climate and geography are likewise significant. Differences in history and politics should not be ignored as well.

Raw discussions of the gap between Korea and the Philippines often reveal one’s prejudices and ignorance. Korea and the Philippines have had 60 years of diplomatic relations, since 1949. Serious scholars need to explain the gaps between Korea and the Philippines, to promote better relations in business, economics and culture.

The Philippines, named after a Spanish king no one remembers for doing anything useful, has 7,100 islands with numerous ethno-linguistic groups. In contrast, South Korea is a peninsula, with Korean as a common language acting as a strong unifying force. The Philippines attracted three foreign colonizers: Spain for 330 years, the United States for 45 years and Japan for three years. Koreans are most bitter at Japan’s colonization from 1910 to 1945. Korea’s strong national unity is a legacy of the Joseon Dynasty rulers, while Filipinos had fragmented, ethnic-led, and failed rebellions against colonizers.

Harmonious relations emphasized by Confucianism and Buddhism make up the religious culture of Korea. The virtues of cannibalism, suffering, poverty, and forgiveness of sins in Spanish Catholicism dominate the Philippines. Korea has favorable weather and few natural disasters, while the Philippines is vulnerable to numerous devastating typhoons and volcanic eruptions all year round.

In the late 1950s, the Philippines had average per capita income of about $1,100, while Korea had $900 per capita. The war with the North devastated Korea’s economy. After the Korean War, international assistance, mostly from the U.S., and industrialization propelled South Korea’s economy. South Korea’s per capita gross domestic product grew from $1,226 in 1960 to $1,745 in 1980, an increase of 42 percent. Korea’s GDP per capita then jumped to $11,347 in 2000 - a giant 550 percent leap! Korea’s GDP per capita is estimated at $16,450 in 2009. South Korea’s transformation into a developed country during this short time period is known popularly as the “miracle on the Han River.”

In contrast, the Philippine economy has experienced repeated boom-and-bust cycles in the five decades since the nation became independent from the United States in 1946. Philippine per capita GDP was $672 in 1980, growing to just $718 in 1990 (7 percent growth), $987 in 2000 (37 percent growth), and $1,720 in 2009 (74 percent growth). In the 1950s and early 1960s most statistics show that the Philippine economy ranked as the second-most-progressive in Asia, next to that of Japan. However, the U.S. continued to wield power and influence through compliant political and economic elites ?? the “comprador bourgeoisie” - parasites benefiting from American trade and business. Attempts at agrarian reform failed as big landlords continued their feudal practices in agriculture, limiting domestic market development and capital accumulation.

In Korea, agrarian reform carried out in the wake of the Korean War supported local capital accumulation. Land redistribution was accomplished swiftly after the war. Land ownership gave farmers incentives to increase productivity, incomes and savings which sustained capital accumulation and domestic markets.

After 1965, when Ferdinand Marcos became president, the Philippines experienced economic problems and social unrest. Corruption and cronyism - social plagues also known as “bureaucrat capitalism” - worsened, as friends or relatives of the elite were appointed to well-paid posts even without merit or qualifications.

In 1972, with America’s blessings, Marcos declared a dictatorship under martial law to stifle unrest and achieve a “new society.” Democratic institutions disappeared, as huge foreign debts and peso devaluations brought down the economy. The Philippines became the “sick man of Asia.”

The power of the Philippine landlords, however, continued, and their parasitic hold over economic and social policies preventing capital accumulation and efficient, competitive markets from taking root. Economic policies such as industrial and anti-poverty programs failed from one landlord-dominated presidency to another: Aquino in 1986 to the current Arroyo administration.

After the Korean War, with U.S. support, the military, as the most organized social unit, became the leading force in Korea’s society and economy. After the coup d’etat by General Park Chung Hee in 1961, the military government intervened systematically and comprehensively in many areas of economic life. Yet, after his assassination by his intelligence chief, Park died relatively poor, with no evidence of illegal wealth. Today, the South Korean economy is dominated by large business groups known as jaebeol - family-owned business conglomerates. These include companies such as Samsung, LG, Hyundai, Daewoo, Kia and SK. The jaebeol are government-supported multinationals.

Most important, there is a strong national passion throughout Korean society to get even with Japan and catch up with the West through technological innovation. In contrast, people in the many isolated Philippine islands have still to build a strong nation, overcome social divisions and structures and adopt continuous innovation and hard work as patriotic values for growth and development.

*The writer is a professor of business at Hanyang U. & a member of the PhilRPG.

by Maragtas S.V. Amante