Presentation on theme: "Lessons from the ‘Seoul Alternative’ of Development and Development Cooperation: Republic of Korea’s Experience from Recipient to."— Presentation transcript:
1 Lessons from the ‘Seoul Alternative’ of Development and Development Cooperation: Republic of Korea’s Experience from Recipient to Donor of AidDSA Annual ConferenceNovember 5, 2010Eun Mee KimProfessor, Graduate School of International StudiesDirector, Institute for Development and Human SecurityEwha Womans University
2 Table of Contents Introduction South Korean Development Experience South Korea and Official Development Assistance (ODA)South Korean Alternative for Development CooperationConcluding Remarks
3 I. Introduction South Korea’s phenomenal economic development 2010 Ascension to OECD/DAC2010 G20 Seoul Summit: November 11-12, 20102011 Busan HLF-4 (High-Level Forum on Aid Effectiveness): November 29-December 1, 2011New challenges for South Korea in the global arena“South Korean Model of Development Cooperation”
4 Three questions:What are the key factors of South Korea’s development experience ( )?Challenge 1: What are the changes in the global political economy in the 21st century?Challenge 2: What are global guidelines for development assistance (donor guidelines)?
5 II. South Korean Development Model Post-WWII key questions in development studies:Why are some nations underdeveloped?How do nations attain development?Modernization theory: sDependency theory: sEast Asian cases treated as anomalies in Modernization and Dependency theories:Japan, S. Korea, Taiwan, Hong Kong, Singapore, and China
6 II. South Korean Development Model Institutionalism and the Developmental StateFocus on key institutions to explain economic developmentEast Asian nations became key examples for theory-building (first among development studies)Japan and the MITIFour Asian TigersEmphasis: Earlier phase of industrialization
7 II. South Korean Development Model S. Korean scholarship on economic developmentHighlighted political and social problems associated with developmentAuthoritarian and dictatorial rule of the military regimeSuppression of democracyExploitation of laborUnequal development between urban and rural areas and between large business groups and SMEsCapitalist development without democratization during early phase of growthPost AFC: Emphasis shifted to the changes/ transformation of the developmental state
8 II. South Korean Development Model (1960s-80s) Key InstitutionsPolicies/InstrumentsDistinct FeaturesDevelopmental State:Economic Planning Board (EPB)Ministry of Finance (MOF)Ministry of Commerce and Industry (MOCI)Long-term comprehensive planning and projectionProvider and intermediary for capital & technologyProvider of indirect assistance and subsidiesExport-oriented industrialization (EOI)Sustained economic developmentLow income inequalityLow inflationHigh employmentAuthoritarian StateMilitary, police, tax, and intelligence usedLimited civil libertiesLabor oppressionCollusion with chaebol for HCILocal Capital:Large Business Groups (Chaebol)Heavy and Chemical Industrialization (HCI)Trading CompanyLarge chaebol as the state’s partner for development vs. MNCs, SOEs or SMEsForeign Capital:ODA grantsConcessional loansGrants and loans over FDIState-guarantees for repayment for loansForeign capital (grants/loans) behaving like domestic capital
9 III. South Korea and ODA - Recipient Received ODA fromBegan in 1945: US Government Appropriations for Relief in Occupied Area (GARIOA) and Economic Rehabilitation in Occupied Area (EROA)GARIOA: Emergency relief aid to assist with US-occupied areas in need of basic subsistence including food, medicine and fuel after WWII.EROA: To assist with infrastructure in US-occupied areas after WWII.Republic of Korea established in August 1948.Korean War ( ) devastated over 80% of the Korean peninsula.
10 III. South Korea and ODA - Recipient 1995: S. Korea graduated from being a recipient by paying off the World Bank loanThe S. Korean government was able to utilize ODA funds to support its industrial policiesSignificant in world history that a major aid recipient became an emerging donor of ODA in less than 5 decades
11 Summary of South Korea as a Recipient of ODA Time PeriodVolumeUSD billion (Current USD)Major DonorsUS, UN , Japan(US : 44% of total grant aid in , % of total ODA in )
12 III. South Korea and ODA - Donor 1963: Participated in a training grant with USAID1987: Economic Development Cooperation Fund (EDCF)Established in 1987 to handle concessional loansHoused in the Korea Export-Import Bank1991: Korea International Cooperation Agency (KOICA)Established in 1991 to handle grant aid2009: South Korea’s ODAVolume: $816 millionODA/GNI: 0.1%DAC members’ average ODA/GNI: 0.28%UN goal for ODA/GNI for MDGs by 2015: 0.7%2010: G20 Summit Meeting – Development Agenda2011: HLF-4 Meeting in Busan2015: South Korea’s Promise for ODATotal volume: $ 3 billionODA/GNI: 0.25%
13 III. South Korea and ODA - Donor It was never a colonizer of other nations, thus freeing it from the “white man’s guilt”Its successful economic development in less than a generation from being one of the poorest nations in the world sends out a strong message of “possibility” and “hope” to other developing countries
14 IV. South Korean Alternative for Development Cooperation 1. South Korea’s own development experience from the 20th centuryCountry ownership in its development planning and usage of ODAState-intervention in the marketIndustrial policies, effective use of carrots and sticks (performance-based incentive structure), prevention of moral hazard and corruptionExtensive use of authoritarian state apparatus for development2. Global political economy & Global norms for ODAEnd of the Cold WarWTO RegimeOECD/DAC Guidelines for ODA
15 1. Changes in the Global Political Economy TimeperiodGlobal PoliticalEnvironmentGlobal Economic EnvironmentS. Korea1960s-1980sCold War: Military aid;Economic aid to LDCsOpen Market (US);Relatively FewPlayers with CheapExport Products;Trade Protectionism (high in NICs)Developingnations2010 -Post Cold WarPost-CommunistReconstruction;Democracy;US: War against Terrorism;China: Non-interference(Communist)WTO;Learning Effect re/EOI;Cyclical and GlobalFinancial/Economic Crisis
16 2. Domestic Political System for Development Domestic Political System: 20th vs. 21st CenturiesPolitical SystemGovernmentSouth KoreaDevelopmental StateAuthoritarian State (Military-based Authoritarianism)Severe restrictions on civil libertiesBureaucracyDevelopingCountriesLess tolerance for non-democratic political systemsGlobal and local demands for democracy is highGovernance crisisCorruptionBudget dependency on aid is high
17 3. Global Norms for ODAGlobal standards and norms for development cooperation as exemplified in the OECD/DAC guidelines must be taken into consideration when South Korea is developing its own “model” of development cooperationOECD/DAC donor guidelinesParis Declaration for Aid Effectiveness
18 OECD/DACThe Development Assistance Committee (DAC) is a key forum of major bilateral donors. They work together to increase the effectiveness of their common efforts to support sustainable development.The DAC concentrates on two key areas:How international development co-operation contributes to the capacity of developing countries to participate in the global economy, andThe capacity of people to overcome poverty and participate fully in their societies.Members of the DAC are expected to have certain common objectives concerning their aid programs -> DAC provide Guidelines, Manuals and Reports for development practitioners.
19 OECD/DAC Guidelines on National Development OECD/DAC guidelines recommend capacity building for national development.Capacity developmentto empower women economically, politically and sociallyWomen Empowerment:to promote economic growthPrivate Sector:Good Governanceto monitor government and address public needsCivil Society Organizations:Economic DevelopmentPolitical Development
20 Paris Declaration for Aid Effectiveness (2005) BackgroundThe 2nd High Level Forum on Aid Effectiveness Conference to efficiently manage increasing aid volumeParis, France, March 2005Endorsed by 107 countries, 26 development institutions, 14 civil society organizations (UN, WB, EU, etc.)Five Key PrinciplesOwnershipAlignmentHarmonizationMutual AccountabilityManaging for Results
21 4. Other Alternatives for Development Cooperation Washington Consensus: Capitalist market, economic liberalizationParis Model: Traditional donor’s model of foreign aid (national interest -> humanitarian needs of recipients); Colonial pastBeijing Model: National interest of donor (energy, resources) + Recipient sovereigntySouth Korean Alternative?
22 V . Concluding Remarks “Seoul Alternative” for Development Cooperation South Korea’s success in attaining development has made it a Poster Child for ODA:Many less developed countries look to South Korea for a model for economic developmentOECD/DAC welcomes South Korea’s input in the donor discourse“Seoul Alternative” for Development CooperationBalance between global standards and South Korea’s distinct experience of economic developmentDevelopmental State & Country Ownership
23 South Korean Alternative Seoul Alternative for DC: Developmental State,Country OwnershipOECD/DAC Guidelines for Donors(Global Standards)South Korea's Development Experience (20c)Global Political Economy Context for Developing Countries (21c)
25 SystemIII. Overview of South Korea and ODA III-2. South Korea as a Donor of ODAS. Korea’s ODA SystemEconomic Development Cooperation Fund (EDCF)Established in 1987 to handle concessional loansHoused in the Korea Export-Import BankKorea International Cooperation Agency (KOICA)Established in 1991 to handle grant aidTotal volume of ODATotal volume: $ millionODA/GNI: 0.1%South Korea’s Promise for ODA by 2015Total volume: $ 3 billionODA/GNI: 0.25%Source: ODA Korea
26 III-2. South Korea as a Donor of ODA Japan( average)South Korea(2008)ChinaAllocationRegionAsia and Oceania (35%) Sub-Saharan Africa(18%)Middle East and North Africa (14.5%)Asia (41.4%)Middle East (19.1%)Africa (12.7%)Africa (71.56%)Southeast Asia(26.83%)Latin America (1.6%)CountryIraq, China, Indonesia, India, VietnamVietnam, Philippines, Angola, Indonesia, MongoliaSectorEconomic infrastructure & service (32%),Social infrastructure & service (excluding education, health and population) (16%)Debt Relief (15%)Social infrastructure &service (59.7%)Economic infrastructure & service (25.3%)Natural ResourcesExtraction/ Production (43.89%)Infrastructure/Public Works (42.35%)Humanitarian (1.3%)Military (0.23%)Technical Assistance (0.02%)Income GroupLower Middle-Income (52.3%), Least Developed Countries (17.9%), Other Low-Income (13.3%)Low Middle-Income(49.4%)LDCs (24.5%),Other Low-Income(12.9%)Non-specific (10.58%)( )
27 III-2. South Korea as a Donor of ODA JapanChinaOECD/DAC MembershipMember (2010--)Member (1961--)Not a memberODA/GNI0.1% (2009, OECD data)0.18% (2009, OECD data)Grant Aid vs Concessional Loans2008: Grants (68.4%),Loans (31.6%)2007: Grants (39.5%),Loans (60.5%)2008: Grants (52.8%),Loans (47.2%)Grants, Debt cancellation in kind 5% ( ),Govt. Sponsored Investment (53%), Concessional Loans (42%)Tied vs. Untied AidUntied (48.3%),Tied (51.7%)(2009, OECD data)Untied (96.5%)Tied (3.5%)(2008, OECD data)Bilateral vs Multilateral Aid71.2%; 28.8% (2009)63.3%; 36.7% (2009)
28 III. Overview of South Korea and ODA III-1 III. Overview of South Korea and ODA III-1. South Korea as a Recipient of ODASouth KoreaTime PeriodVolume(Current USD)$434.3 million$2,546.2 million$3,941.4 million$3,510.8 millionUSD billionMajorDonorsUS Grant aid $409.4 million; US Concessional loans $24.9 million; UN Relief and Reconstruction AgencyUS 77.2%;UN 22.8%US 63.6%; Japan 27.4%; Others9%US 14.6%; Japan 57.4%; Others28%US aid: 44% of total grant aid in , 63.6% of total ODA inGrants vs Loans70% of all grant aid to S. Korea was concentrated between 1945 and 1960Grant aid 50.7%; Concessional loans 49.3%Grant aid 21.4%; Concessional loans 78.6%
29 SystemIII. Overview of South Korea and ODA III-2. South Korea as a Donor of ODAS. Korea’s ODA SystemEconomic Development Cooperation Fund (EDCF)Established in 1987 to handle concessional loansHoused in the Korea Export-Import BankKorea International Cooperation Agency (KOICA)Established in 1991 to handle grant aidTotal volume of ODATotal volume: $ millionODA/GNI: 0.1%South Korea’s Promise for ODA by 2015Total volume: $ 3 billionODA/GNI: 0.25%Source: ODA Korea