South Korean flags at the International Horticulture Goyang Korea exhibition. Picture: BLOOMBERG/SEONG-JOON CHO
South Korean flags at the International Horticulture Goyang Korea exhibition. Picture: BLOOMBERG/SEONG-JOON CHO

South Korea’s remarkable transformation from a resource-poor, low-income country to an industrialised nation in just a few decades has been hailed as one of the most noteworthy developmental success stories in modern times.

South Korea accelerated its economic development through the careful management of the various stages of the country’s agricultural reform and industrial transformation and by encouraging a positive spirit of agency among its people. In a few decades, South Korea’s economic development strategy lifted the nation out of poverty and set it on a path of high economic growth.

While SA’s history and economic structure mean that it would not be possible to simply replicate the South Korean model, there are nonetheless some useful lessons that we can draw on to begin to accelerate inclusive growth in our economy.

Some of these lessons are outlined in a recently published report by the Inclusive Society Institute. Titled “Developing a New Economic Blueprint for SA — Lessons from South Korea”, the report delves into the key drivers of South Korea’s economic transformation after the Korean War in the 1950s until the mid-1990s.

Drawing on inputs from a number of thought-leaders — including the South Korean ambassador to SA, Dr Jong-Dae Park; economist Theo Vorster; University of Stellenbosch Prof Tania Ajam; and Centre for Education in Economics and Finance director Joan Fubbs — the report highlights several areas that SA should focus on.

Despite having some impressive-sounding and well-intentioned policy frameworks, SA struggles to implement policies to stimulate economic growth and development

As a resource-poor country, South Korea had to rely on the mobilisation of its people to drive development. Leaders motivated and inspired citizens to be more productive and empowered. Education became a vital tool and played an important role in facilitating a mindset change among South Korean citizens.

Investment in education — the biggest budget item after defence in the late 1950s and 1960s — delivered a capable labour force and a population willing to work hard to climb out of the poverty that they found themselves in after the Korean War.

The lesson for SA is to invest more effectively in the education and skilling of our people. Currently, the country’s education system fails to provide our youth with the skills needed to take the country’s economy forward. This is particularly concerning in the new millennium where science and technology play a pivotal role in achieving economic competitiveness.

Although SA has made efforts since the advent of democracy to improve the lives of communities and regenerate rural economies, it has had limited success. Poverty remains consistently high among South Africans living in rural areas. At the start of industrialisation, South Korea also faced a growing economic gap between urban and rural economies.

The country managed to narrow this gap through a community-based integrated rural development programme, called Saemaul Undong, or the “New Village Movement”. With a “we can do it” approach, the development programme induced locals to work voluntarily to generate resources and income on their own. Citizens faced the realisation that their fate depended on themselves. By 1975, the success of Saemaul Undong resulted in the average income of rural families surpassing even that of urban households for a number of years.

South Korea’s land reform programme, which was implemented immediately after the Korean War in the 1950s, laid the foundation for its success in rural development. While SA has a relatively strong agricultural sector, rural poverty remains a problem and rural development and land reform programmes need to be accelerated and outcomes improved.

Incentivising growth through differentiation was another factor. Economic discrimination was an important driver in South Korea’s development model. Based on the principle of meritocracy, incentives were given to those who delivered a superior economic performance, rather than a culture of universal handouts. Performing companies, for instance, gained access to low-interest bank loans, import privileges, permission to borrow from foreign sources and tax benefits, with such preferential opportunities not made available to non-performing companies.

These policies fostered a healthy degree of competition, which ultimately benefited national economic development.

SA continues to stumble when it comes to co-ordination and implementation. Despite having some impressive-sounding and well-intentioned policy frameworks, SA struggles to implement policies to stimulate economic growth and development. South Korea, on the other hand, successfully implemented seven consecutive, five-year economic development plans between 1962 and 1996.

Each plan upgraded South Korea’s manufacturing capabilities, allowing the country to emerge as a global power in the hi-tech sector. South Korea’s success at policy implementation depended on several key pillars, but ultimately boiled down to its social capital — a “can-do” spirit and the mass mobilisation of its people to put its plans into action.

Recent economic choices have not been able to propel SA into a growth phase. High levels of corruption have had an adverse impact on state capacity and on the economy’s ability to gain momentum towards inclusive growth.

The institute believes the depressed state of the economy obligates policymakers to take decisive action, to make the structural reforms necessary to ensure growth in the economy. And they would be well advised to consider Park’s caution against downward equalisation — don’t kill the goose that lays the golden egg. The essence of growth is wealth creation, not wealth transfer.

• Swanepoel is CEO of the Inclusive Society Institute, an autonomous research institute which, while being ideologically aligned with the ANC, operates independently to support and deepen multi-party democracy.

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