IT was one of the world's poorest countries not too long ago. In 1960, its gross domestic product per capita was $79 (about K416,000), lower than most Latin American and some sub-Saharan African countries.
Following the Korean War in 1950, South Korea remained one of the poorest countries in the world for over a decade. The growth of the industrial sector was the principal stimulus to economic development. In 1986, manufacturing industries accounted for approximately 30 per cent of the gross domestic product (GDP) and 25 per cent of the workforce.
Benefiting from strong domestic encouragement and foreign aid, Seoul's industrialists introduced modern technologies into outmoded or newly built facilities at a rapid pace, increased the production of commodities - especially those for sale in foreign markets — and ploughed the proceeds back into further industrial expansion. As a result, industry altered the country's landscape, drawing millions of labourers to urban manufacturing centres.
And like 30th US president Calvin Coolidge said, "all growth depends upon activity. There is no development physically or intellectually without effort, and effort means work".
This is true for a country like South Korea which managed to pick up the pieces from a war that left the Asian country's economy in shambles. It's the hard work and sacrifices of the Koreans that elevated this country's economy to its current level, now one of the world's developed countries.
"We love to work. We love to do our work wholeheartedly without any problems," Lee Hwang, an ex-soldier turned taxi driver, told me in not-so-perfect English on our way to Myeongdong area, Seoul's main town centre. "We make a lot of sacrifices here to develop this country. We have to work hard."
Korean government initiatives also played an important role in this process. The inflow of foreign capital was greatly encouraged to supplement the shortage of domestic savings. These efforts enabled South Korea to achieve rapid growth in exports and subsequent increases in income.
What can Zambia learn from South Korea's experiences and its growth trajectory?
"…South Korea was one of the poorest countries in this world in the 1960s…We can learn a lot from them," said President Michael Sata when he met South Korea's Prime Minister Kim Hwang-sik during his visit to the country last week.
But just how did South Korea do it?
"It is all about hard work and sacrifices. We have had meetings and met a lot of people. It is very visible just being here for a few days to see that these South Koreans people love to work. Whatever job it is that one holds, they do it perfectly and that is something us Zambians need to learn from them," said tourism minister Sylvia Masebo when she met Zambian students studying in South Korea. "It is the issue of the mindset that we need to change in Zambia. For example, if someone is working hard, the next thing others will think that person is a bootlicker and is seeking favours. That is something we need to deal with. Hard work has helped the Koreans develop and it can also work for Zambia."
With the rapid growth from 1960s to 1980s, South Korea's real gross domestic product ambitiously expanded by an average of more than eight per cent per year, from US$2.7 billion in 1962 to US$230 billion in 1989, breaking the trillion dollar mark in 2007. South Korea's growth rate of eight per cent per year then is almost what Zambia is currently seeking to expand its economy and create at least a million jobs for the many unemployed in the next few years.
During the same period, South Korea's nominal GDP per capita grew from $103.88 in 1962 to $5,438.24 in 1989, reaching the $20,000 milestone in 2007.
The manufacturing sector grew from 14.3 per cent of the GNP in 1962 to 30.3 per cent in 1987. Commodity trade volume rose from US$480 million in 1962 to a projected US$127.9 billion in 1990. The ratio of domestic savings to GNP grew from 3.3 per cent in 1962 to 35.8 per cent in 1989.
However, a downturn in the South Korean economy in 1989 spurred by a sharp decrease in exports and foreign orders caused deep concern in the industrial sector.
According to South Korea's Ministry of Trade and Industry, poor export performance resulted from structural problems embedded in the nation's economy, including an overly strong won (their currency), increased wages and high labour costs, frequent strikes, and high interest rates.
The result was an increase in inventories and severe cutbacks in production at a number of electronics, automobile, and textile manufacturers, as well as at the smaller firms that supplied the parts. Factory automation systems were introduced to reduce dependence on labour, to boost productivity with a much smaller workforce, and to improve competitiveness. It was estimated that over two-thirds of South Korea's manufacturers spent over half of the funds available for facility investments on automation.
Their rapid industrialisation was necessitated by an outward-looking strategy in the early 1960s. This strategy was particularly well suited to that time because of South Korea's poor natural resource endowment, low savings rate, and tiny domestic market.
The strategy promoted economic growth through labour-intensive manufactured exports, in which South Korea could develop a competitive advantage. And this has paid off considering the level at which South Korea's major companies have penetrated markets worldwide; for example, Samsung and Hyundai are now global names in the electronics and automobile industries, respectively.
Samsung, headquartered in South Korea's Suwon area, has a presence in 72 countries worldwide and is currently one of the Asian country's largest contributors to its economy with its 2011 operating profit hitting US$14.7 billion (about K77 trillion), three times more than Zambia's 2012 national budget.
This probably justifies President Sata's statement when he visited the company's headquarters over a week ago that "Samsung has more money than Korea", urging the electronics giant to set up base in Zambia.
By emphasising the industrial sector, Seoul's export-oriented development strategy left the rural sector relatively underdeveloped. Except for mining, most industries were located in the urban areas of the northwest and southeast.
Heavy industries generally were located in the south of the country. According to industry data, factories in Seoul contributed over 25 percent of all manufacturing value-added in 1978; taken together with factories in surrounding Gyeonggi Province, factories in the Seoul area produced 46 per cent of all manufacturing that year. Factories in Seoul and Gyeonggi Province employed 48 per cent of the nation's 2.1 million factory workers.
Increasing income disparity between the industrial and agricultural sectors became a serious problem by the 1970s and remained a problem, despite government efforts to raise farm income and improve rural living standards.
South Korea relies largely upon exports to fuel the growth of its economy, with finished products such as electronics, textiles, ships, automobiles, and steel being some of its most important exports.
Although the import market has liberalised in recent years, the agricultural market has remained largely protectionist due to serious disparities in the price of domestic agricultural products such as rice with the international market.
And during the 1970s and 1980s, South Korea became a leading producer of ships, including oil supertankers, and oil-drilling platforms. The country's major shipbuilder was Hyundai, which built a one-million-tonne capacity dry dock at Ulsan in the mid-1970s. Daewoo joined the shipbuilding industry in 1980 and finished a 1.2-million-tonne facility at Okpo on Geoje Island, south of Busan, in mid-1981. The industry declined in the mid-1980s because of the oil glut and because of a worldwide recession.
But there was a sharp decrease in new orders in the late 1980s; new orders for 1988 totalled 3 million gross tonnes valued at US$1.9 billion, decreases from the previous year of 17.8 per cent and 4.4 per cent respectively. These declines were caused by labour unrest, Seoul's unwillingness to provide financial assistance, and Tokyo's new low-interest export financing in support of Japanese shipbuilders, South Korea's Ministry of Trade and Industry states.
However, the South Korean shipping industry expanded in the early 1990s because older ships in world fleets needed replacing.
South Korea eventually became the world's dominant shipbuilder with a 50.6 per cent share of the global shipbuilding market as of 2008. Currently, notable Korean shipbuilders are Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding and Marine Engineering, and STX Offshore and Shipbuilding, the world's four largest shipbuilding companies. South Korea also owns STX Europe, which is Europe's largest shipbuilder.
The Korea Railroad Corporation (Korail), a parastatal, is another success story of the Korean government's drive to augment its economy.
Commerce minister Robert Sichinga met some executives of Korail to solicit investments for Zambia's railway industry which is almost non-existent.
"President Sata's emphasis is to build infrastructure. This is very key for us. Zambia is a very big country in terms of size, it is 754,000 square kilometres and each of its provinces has to be connected to the centre. So we need roads, rail, schools, hospitals. That is the reason why we are here, to get as many investors as possible who are interested in investing in Zambia," said Sichinga, who is currently seeking credible investors to help revamp the country's rail sector following the cancellation of Railway Systems' concession to run Zambia Railways.
Korail, currently rated A1 by ratings agency Moodys, is 100 per cent owned by the Korean government and generated an annual net profit of around US$409 million last year.
"This kind of rating for a government-owned company is very positive. It means the company is profitable and this is what we want to work at as Zambia. Zambia is landlocked but we want to be land-linked by developing our road and rail networks," said Sichinga who emphasised the need for the development of the railway sector in Zambia owing to its growing mining sector. "We need to haul copper via rail, and also fuel, not on roads. There is a lot of damage on our roads because heavy goods pass there.
"We want to connect the whole country. We also need to recondition the existing tracks on our rail lines. We need to connect to the Durban port, Beira in Mozambique, Walvis Bay in Namibia, Dar es Salaam in Tanzania, Lobito in Angola and also Nacala in Mozambique. We are also discussing with Botswana on possibilities of having a rail network between the two countries."
Korail director general Jong Won said they did not have immediate plans to invest in Zambia but promised to review the opportunities spelt out by Sichinga.
"Anyhow, if you don't come to Zambia, others will come, we will not force you. The government is in a hurry to get investors and we will get to those who are willing to move with us and develop," said Sichinga.
The visit to South Korea by President Sata and his ministers was mainly to learn from that country's achievements and attract investment for Zambia.
"We have learnt a lot from our colleagues and it doesn't have to end here. We need to come up with our own strategies, but obviously keeping in mind the Korean models that helped the country attain economic independence. I will come back here to focus on tourism to see what we can learn ahead of the UNWTO general assembly next year," said Masebo.
The economy of South Korea, like many others considered developed, has two major weaknesses. First is its heavy reliance on imported fossil fuels (oil and natural gas). South Korea is the second largest importer of liquefied natural gas (LNG), mostly from Malaysia and Indonesia.
Second, the South Korean economy depends heavily on imported capital goods and technology for its industries. Despite its emergence as a major exporter of light and heavy industrial products, its export industries require foreign machinery and equipment for production. While South Korea has surpassed Japan and the United States in selling memory chips, it still needs imported chip machinery to produce them. Another example is its automobile industry's reliance on imported parts and technology. Japan and the United States have been the major source of technology and capital goods for South Korea, constituting 40.5 per cent of its annual imports in 1999.
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