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African Economic Development and the Korean Experience
AEC Think-Tanks consider Korea’s Attractive experience
Tunis, 23 November 2006 – Renowned South Korean Economist, Ji Hong Kim, has dismissed the notion that Africa has everything to lose and nothing to gain from globalization, noting that a good number of the continent’s economies can compete favorably in the global market if the right policy mix is conscientiously put in place.
"Globalisation provides immense opportunities and significant risks, and African economies should be ready to participate in the global economy," Professor Kim of the Korean Development institute said on Wednesday at the inaugural AfDB Economic Conference (AEC) in Tunis.
He said that Africa needed to adopt an outward-oriented strategy and export promotion policy to overcome its small domestic market size and to earn foreign exchange.
"By and large, the governments should seek for the industrial policy of ‘getting the basics right’ within a market-conforming framework. And both incentives and disincentives were designed to promote efficiency in the allocation of limited resources with the help of market forces as much as possible", the economist said in a lecture titled: ‘Lessons from Asia: The Experience of Korea’.
He cited institutional preconditions in African economies that needed to be improved to include committed and credible governments, merit-based bureaucratic system without corruption, interaction between the public and private sectors, secured property and contract rights and trusted judicial system.
Economic conditions in South Korea in the early sixties were similar to those of a number of African countries currently marked by a lack of resources. The country’s population then was growing at an annual rate of 3% accompanied by widespread unemployment. Per capita GNP in 1961 was US$82. Annual exports amounted to about US$ 43 million and the nation was in a chronic balance of payments deficit since its independence in 1948.
There has been a sea-change in the country’s economic prospects marked by remarkable development in the last three decades with per capita GNP ballooning to over US$ 16,000 while aggregate trade volume shot up to US$ 289 billion. The manufacturing sector’s share of GNP also increased from 14% in 1961 to 28% in 2005, while that of agricultural, , forestry and fisheries sector decreased from 37% to 3.5% during the same period. As a result of this exponential growth, South Korea is currently recognized as one of the OECD member countries.
Prof. Kim underlined the critical role played by the government in the entire process noting that throughout the 1960s and 1970s, the government in Seoul was deeply involved in the economic development process, including the drawing up and monitoring of development plans, and by ensuring that the private sector achieved the goals set in the plans that were continuously revised in response to changing economic conditions.
He cited two key factors that contributed to Korea’s success: One of the reasons was that the country continued to make efforts to build up national consensus regarding the direction of major economic policies while the other factor involved proper government support and guidance, innovative local entrepreneurship and a diligent labour force, which maximized business opportunities open to them.
"The key to the economic miracle of Korea, if there had been one, seems to lie in these two factors which enabled the Korean people to successfully adapt to the challenges while minimizing the risks", Prof. Kim emphasized.
More than 250 participants eminent researchers, economists, university professors, African Think-Tanks and representatives of international organizations including the World Bank, the WTO, UK-based DFID, the Kenya-based African Economic Research Consortium (AERC), the UN Economic Commission for Africa (UNECA) and senior government officials are attending the three-day event.
The conference is featuring presentations and discussions on a variety of issues including ‘Sources of Growth in Africa: Agriculture, Manufacturing, Services, ICT, Technology Base’ by World Bank Director, Alan Gelb. Others are: ‘Export Capacity Constraints: Taking Advantage of Market Access, Branding, Networks, Supply/Value Chains’ by Professor Ademola Oyejide of the University of Ibadan in Nigeria, ‘Africa in the World Trading System by Mr. Patrick Low of the WTO, ‘Capital Markets: Roles and Challenges’ by Professor Victor Murinde of the University of Birmingham; ‘Commercial Banks in Sub-Saharan Africa’ by Professor Colin Kirkpatrick of the University of Manchester, among others.