Sugath Kulatunga

The rapid development of South Korea from a backward nation whose per capita income was less than that of Ceylon in 1960 to a modern developed nation with a per capita income of US$ 42500 is considered an economic miracle. Do we have any lessons of experience to learn from that sensational achievement launched by President Park? The present government does not seem to think so.

The present government appears to depend on political authorities in the form of a National Council (a set of politicians who for decades failed to at least prevent the country descending  into the current economic crisis) to develop national plans whereas President Park adopted a systems change in elevating the status of economic planning in Korea and placing civilian experts in charge of it. He also created the the Economic Planning Board (EPB) and made its head the deputy prime minister. Park insisted that it be filled by a person with superb technical qualifications rather than a political figure or a high-ranking member of the military. While he created new state banks to support development, we privatized the only bank, the NDB which had been established specifically for this purpose. While most of our governments resorted to privatizing existing SOEs, South Korea invested in public enterprises which were valued at more than 9% of the GDP in 1980. Fortunately, South Korea was not subjected to IMF conditionalities.

South Korea well into the 1960s represented a backward, desolate economy based on subsistence agriculture with all the difficulties facing a typical developing country today. It had a per capita income of less than that of Ceylon. But with the concerted development effort launched by President Park Chung-hee in 1961 the country has achieved a miracle of a per capita income of 42500 USD by 2021, whereas Sri Lanka per capita has fluctuated around 4000 USD. And then came Gen. Park Chung-hee, who became the president in 1961 through a military coup. While serving in the Japanese army he had imbibed the spirit of Bushido and wanted his country to become a developed country. Park coaxed, wheedled, intimidated, manipulated and outright threatened the companies for cooperation. But the president also offered incentives,- government and foreign loans, relaxed regulations and tax cuts.”

Though political agencies in the early Park regime were dominated by the military, economic agencies generally were not. Rather, under Park the status of experts in economics in the Korean government rose considerably. One of Park’s first acts was to elevate the status of economic planning in Korea, placing civilian experts in charge of it. In 1961 he created the Economic Planning Board (EPB), whose head was made deputy prime minister. In spite of the political title and high level of this position, Park insisted that it be filled by a person with superb technical qualifications rather than a political figure or a high-ranking member of the military.
In 1962, the EPB introduced the first of what was to become a series of five-year plans for Korea’s development. State-owned banks were created to help implement the government’s development plans, and laws were passed to force private banks effectively also to become agents of their implementation. Over the next years, the Korean government became, in the words of former EPB member and Deputy Prime Minister SaKong Il, an entrepreneur-manager” (SaKong 1993, 27). During the first and second five-year plans, the government itself was involved in industrial undertakings.
In the 1960s, more than one-third of government expenditures were for investment, and public investment accounted for close to a third of allfixed capital formation. Thus, between 1963 and 1977, public enterprises in Korea grew at an annual rate of 10 percent and the share of these enterprises in GDP grew from slightly over 6 percent in 1963 to more than 9 percent in 1980.

https://www.piie.com/publications/chapters_preview/341/2iie3373.pdf

https://www.cnet.com/tech/tech-industry/the-chaebols-the-rise-of-south-koreas-mighty-conglomerates/

Sugath Kulatunga