Is there a Korean Economic Model?

Is there a Korean Economic Model?

One generally agrees on South Korea’s success in terms of growth, technological innovation and level standards progresses. After Korean War, its GDP/capita was one of the poorest countries, Korea is now one of the most developed countries and its GDP/capita could overpass France’s within 2018. However, the Korean miracle, as many Koreans state, is everything but disputable. Many experts are pointing out economic dualism that creates efficiency as well as justice issues, but also many cheabols’ lack of competitiveness. If it understands such shortcomings, South Korea could continue to be one of the world’s economic leaders.

Pr. Yoo Junghwan insists on this dualism and cheabols’ lack of investment. He also worries about the insufficiency of domestic consumption because exports are not sufficient to raise Korean economy. This statement has a strong link with politics, especially the collusion between big business and the ruling class. Another source of concern is the new consumer’s individualism which invades the youth. We shall pay more attention to the psychological dimension of Korean fatigue. How could an exhausted society support a country which aims at becoming one of the very first countries in the world?

Pr. Bark Taeho, former Minister of Trade, expresses his concern about the present difficulties Worlds Trade Organization (WTO) is now facing and fears it could not succeed in overcoming them. He reminds that Korea has been very proactive by initiating free-trade agreements (FTA) with its area’s countries, as well as the rest of the world. It is of greatest importance to continue in this direction since Korea’s economy is fully dependent of external markets. As far the Trans-Pacific Partnership (TPP) is concerned, Korea should not expect major additional benefits since it is already involved in FTA with ten countries which are part of it. Nevertheless, in order not to join the negotiations in the last minute without being able to negotiate anything, it is crucial Korea moves on in order to be immediately associated to them. He also suggests, if negotiations with China –which could join the TPP‑ move forward, that the Regional Comprehensive Economic Partnership and TPP merge. Pr. Bark elaborates on the importance of Overseas Development Aid (ODA) for Korea since its recent experience of poverty could offer a better understanding of peculiar problems of developing countries. A major challenge for Korea is to attract more foreign investments. It could help creating new jobs, but too much barriers remain. Still, the broad network of FTA could help foreign companies to understand Korea as a hub for exports to neighboring countries.

Soogil Young, who held a top position in promoting green growth in Korea, doesn’t conceal his country’s difficulties: ageing population, increasing youth unemployment, dualism within the economy, dissatisfaction of the poorest regarding the quality of life, etc. He is less worrying about trade dependency provided that relationships with China remain good. Showing his concern about the relations with Japan, he although hopes that reason will prevail since everything speaks in favor of a strong partnership. He also thinks that within 2030 the North Korean regime will collapse and unification will have highly positive consequences for Korea that will become a continental country. The political sphere must become more mature and President Park Geun-hye has important challenges to address. It would be worrying if population people become more depoliticized and cynical. Among the challenges, superior education improvement is a top priority. It must be more stable. Last but not least, increasing tax on revenue in order to finance a true Welfare State and, when it happens, reunification is very much needed. Korea is in the forefront of green economy at international level but must promote it more at home as is it as part of “creative economy” launched by the President. The most important perspective is obviously reunification that may be a good opportunity upstream for an institutional reform.

Cho Yoon-je, who has been adviser to the Korean President and ambassador to United Kingdom, also insists on the brilliant progresses made by Korea. The country benefits a high education and public administration tradition. It shall now address inequalities issues, but also those of a too rigid labor market. Korean big companies must invest more at home. One of the difficulties stays in a kind of legacy: Korean economy rapid growth and democratization have conceded with globalization during a short period of time, and it didn’t offer time to think about structural issues. In order to define a new social contract, the political ruling class shall launch an open and free debate on those issues, especially on tax revenue that must increase. Korea cannot do without China. It must still be engaged in more FTA and be part of the negotiations on TPP. It has interest as well to strengthen its ties with Europe. As far as reunification is concerned, Korean people shall understand it as a true mission and be prepared emotionally and politically, not only economically. Korea will have to convince Japan and China, but it will take time. Reunification will offer Korea an opportunity to play a bigger international role provided that it succeeds in reforming its political institutions that don’t fit with such a major change.

Gene Yoon, chairman and CEO of Fila and Acushnet Company, tells us a success-story. It goes far beyond a purely Korean example and could be considered as a global entrepreneurship lesson. He is pointing out the difference between strategic and financial investors and underlines the necessity to comply with the competition law. We shall insist on the importance of quick decision which big companies often are unable to. Today, it could be quite impossible to create groups such as Samsung and Hyundai. We must expect much more from smaller societies, the only one capable to offer success to Korean economy. Entrepreneurship spirit must habit young Koreans who benefit the comfort offered by their parents. Big companies won’t be everlasting if they don’t remain at the top of innovation skills.

Chang-Hyun Lee, chairman of the Seoul Institute, which is in charge of framing agglomeration prospective, considers that Seoul must address a major challenge: improve his habitants’ quality of life and its competitiveness at world level. It shall adopt a clear view on the risks for the future and reconcile its development with Korean values that Korean people recognize. There could not be a unique urban development model. Happiness issue, which goes along with harmony, is at stake and it could only result from a development in accordance with family and community values. Consultation and participation are essential for the present Mayor who pays a great attention to micro-planning.

Kim Ji-hong, vice-dean of DKI School, considers that Korean economy is doing pretty well in spite of some obvious challenges (external dependency, revenue disparity). However, there is serious over-education problem which is combined with lack of unskilled labor force. According to him Korea must in the same time reengineer the high education system that comprehends too many universities offering a bad quality education. Korean economy shall also be more open. As far as North Korea is concerned, he states that we must for the time being focus on the nuclear threats and move forward on possible economic cooperation. Everything must be done for Korea to remain an innovating and creative country and professionals shall be well informed about that happens in the rest of the world. This innovation spirit must be spread out to students, but also to the ruling class whose horizon shall be now global. If it does so, Korea could become, in his opinion, a rule-setter.

Pr. Ahn Dukgeun, from Seoul National University, reminds us that Korean economy, like many others, includes also many poorly competitive companies. Considering Korea’s dependency vis-à-vis external demand, it would be certainly relevant to increase domestic demand, but it isn’t probably the right time to do so. China is facing the same issue. He points out that many construction companies cannot rely only on domestic market because of the price. The concept of “creative economy” seems to be interesting, but it must receive a concrete meaning. Korean economy should also continue to open to foreign companies, but it requires a major cultural and political change. In particular, a greater globalization in service sector is a priority.