dsa annual conference november 5, 2010 eun mee kim

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Lessons from the ‘Seoul Alternative’ of Lessons from the ‘Seoul Alternative’ of Development and Development Development and Development Cooperation: Cooperation: Republic of Korea’s Experience Republic of Korea’s Experience from Recipient to Donor of Aid from Recipient to Donor of Aid DSA Annual Conference November 5, 2010 Eun Mee Kim Professor, Graduate School of International Studies Director, Institute for Development and Human Security Ewha Womans University

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Lessons from the ‘Seoul Alternative’ of Development and Development Cooperation: Republic of Korea’s Experience from Recipient to Donor of Aid. DSA Annual Conference November 5, 2010 Eun Mee Kim Professor, Graduate School of International Studies - PowerPoint PPT Presentation

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Page 1: DSA Annual Conference November 5, 2010 Eun Mee Kim

Lessons from the ‘Seoul Alternative’ of Lessons from the ‘Seoul Alternative’ of Development and Development Development and Development

Cooperation: Cooperation: Republic of Korea’s Experience Republic of Korea’s Experience from Recipient to Donor of Aid from Recipient to Donor of Aid

DSA Annual Conference

November 5, 2010

Eun Mee KimProfessor, Graduate School of International Studies

Director, Institute for Development and Human SecurityEwha Womans University

Page 2: DSA Annual Conference November 5, 2010 Eun Mee Kim

I. Introduction

II. South Korean Development Experience

III. South Korea and Official Development Assistance

(ODA)

IV. South Korean Alternative for Development

Cooperation

V. Concluding Remarks

2010-11-5 2

Table of ContentsTable of Contents

Page 3: DSA Annual Conference November 5, 2010 Eun Mee Kim

• South Korea’s phenomenal economic development

• 2010 Ascension to OECD/DAC

• 2010 G20 Seoul Summit: November 11-12, 2010

• 2011 Busan HLF-4 (High-Level Forum on Aid Effectiveness): November 29-December 1, 2011

• New challenges for South Korea in the global arena“South Korean Model of Development Cooperation”

2010-11-5 3

I. IntroductionI. Introduction

Page 4: DSA Annual Conference November 5, 2010 Eun Mee Kim

• Three questions:

1. What are the key factors of South Korea’s

development experience (1960-1980)?

2. Challenge 1: What are the changes in the

global political economy in the 21st century?

3. Challenge 2: What are global guidelines for

development assistance (donor guidelines)?

2010-11-5 4

Page 5: DSA Annual Conference November 5, 2010 Eun Mee Kim

2010-11-5 5

II. South Korean Development II. South Korean Development ModelModel

Post-WWII key questions in development studies:1.Why are some nations underdeveloped? 2.How do nations attain development?

Modernization theory: 1950-60s

Dependency theory: 1970-80s

East Asian cases treated as anomalies in Modernization and Dependency theories:

Japan, S. Korea, Taiwan, Hong Kong, Singapore, and China

Page 6: DSA Annual Conference November 5, 2010 Eun Mee Kim

• 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 Tigers

Emphasis: Earlier phase of industrialization

2010-11-5 6

II. South Korean Development II. South Korean Development ModelModel

Page 7: DSA Annual Conference November 5, 2010 Eun Mee Kim

2010-11-5 7

• S. Korean scholarship on economic developmentHighlighted political and social problems

associated with developmentAuthoritarian and dictatorial rule of the military regime Suppression of democracyExploitation of labor Unequal development between urban and rural areas

and between large business groups and SMEsCapitalist development without democratization during

early phase of growth

Post AFC: Emphasis shifted to the changes/ transformation of the developmental state

II. South Korean Development II. South Korean Development ModelModel

Page 8: DSA Annual Conference November 5, 2010 Eun Mee Kim

Key Institutions Policies/Instruments Distinct Features

Developmental State: • Economic Planning Board (EPB)• Ministry of Finance (MOF)• Ministry of Commerce and Industry (MOCI)

• Long-term comprehensive planning and projection• Provider and intermediary for capital & technology• Provider of indirect assistance and subsidies• Export-oriented industrialization (EOI)

• Sustained economic development• Low income inequality• Low inflation• High employment

Authoritarian State •Military, police, tax, and intelligence used•Limited civil liberties •Labor oppression

• Collusion with chaebol for HCI

Local Capital: • Large Business Groups (Chaebol)

•Heavy and Chemical Industrialization (HCI)•Trading Company

• Large chaebol as the state’s partner for development vs. MNCs, SOEs or SMEs

Foreign Capital:• ODA grants• Concessional loans

•Grants and loans over FDI•State-guarantees for repayment for loans

• Foreign capital (grants/loans) behaving like domestic capital

2010-11-5 8

II. South Korean Development Model (1960s-II. South Korean Development Model (1960s-80s)80s)

Page 9: DSA Annual Conference November 5, 2010 Eun Mee Kim

• Received ODA from 1945-1995Began 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 (1950-1953) devastated over 80%

of the Korean peninsula.

III. South Korea and ODA - III. South Korea and ODA - RecipientRecipient

2010-11-5 9

Page 10: DSA Annual Conference November 5, 2010 Eun Mee Kim

• 1995: S. Korea graduated from being a recipient by paying off the World Bank loan

• The S. Korean government was able to utilize ODA funds to support its industrial policies

• Significant in world history that a major aid recipient became an emerging donor of ODA in less than 5 decades

2010-11-5 10

III. South Korea and ODA - III. South Korea and ODA - RecipientRecipient

Page 11: DSA Annual Conference November 5, 2010 Eun Mee Kim

South Korea

Time Period 1945-1995

Volume USD 12.78 billion (Current USD)

Major Donors

US, UN , Japan(US : 44% of total grant aid in 1945-99,

63.6% of total ODA in 1961-75)

Summary of South Korea as a Recipient of Summary of South Korea as a Recipient of ODAODA

2010-11-5 11

Page 12: DSA Annual Conference November 5, 2010 Eun Mee Kim

• 1963: Participated in a training grant with USAID• 1987: Economic Development Cooperation Fund (EDCF)

Established in 1987 to handle concessional loans Housed in the Korea Export-Import Bank

• 1991: Korea International Cooperation Agency (KOICA) Established in 1991 to handle grant aid

• 2009: South Korea’s ODA Volume: $816 million ODA/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 Agenda• 2011: HLF-4 Meeting in Busan• 2015: South Korea’s Promise for ODA

Total volume: $ 3 billion ODA/GNI: 0.25%

III. South Korea and ODA - DonorIII. South Korea and ODA - Donor

2010-11-5 12

Page 13: DSA Annual Conference November 5, 2010 Eun Mee Kim

• 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

2010-11-5 13

III. South Korea and ODA - DonorIII. South Korea and ODA - Donor

Page 14: DSA Annual Conference November 5, 2010 Eun Mee Kim

1. South Korea’s own development experience from the 20th centuryCountry ownership in its development planning and usage of ODAState-intervention in the market

Industrial policies, effective use of carrots and sticks (performance-based incentive structure), prevention of moral hazard and corruption

Extensive use of authoritarian state apparatus for development

2. Global political economy & Global norms for ODAEnd of the Cold War WTO Regime OECD/DAC Guidelines for ODA

IV. South Korean Alternative for IV. South Korean Alternative for Development CooperationDevelopment Cooperation

2010-11-5 14

Page 15: DSA Annual Conference November 5, 2010 Eun Mee Kim

1. Changes in the Global Political 1. Changes in the Global Political EconomyEconomy

2010-11-5 15

Time period

Global Political Environment

Global Economic Environment

S. Korea 1960s-1980s

Cold War: Military aid; Economic aid to LDCs

Open Market (US); Relatively Few Players with Cheap Export Products;Trade Protectionism (high in NICs)

Developing nations

2010 -

Post Cold WarPost-Communist Reconstruction; Democracy; US: War against Terrorism;China: Non-interference (Communist)

WTO;Learning Effect re/ EOI;Cyclical and Global Financial/Economic Crisis

Page 16: DSA Annual Conference November 5, 2010 Eun Mee Kim

• Domestic Political System: 20th vs. 21st Centuries

2. Domestic Political System for 2. Domestic Political System for DevelopmentDevelopment

2010-11-5 16

Political System Government

South Korea • Developmental State• Authoritarian State (Military-

based Authoritarianism) • Severe restrictions on civil

liberties

• Bureaucracy

Developing Countries

• Less tolerance for non-democratic political systems

• Global and local demands for democracy is high

• Governance crisis• Corruption• Budget dependency on aid is

high

Page 17: DSA Annual Conference November 5, 2010 Eun Mee Kim

Global 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

2010-11-5 17

3. Global Norms for ODA3. Global Norms for ODA

Page 18: DSA Annual Conference November 5, 2010 Eun Mee Kim

1. The 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.

2. The DAC concentrates on two key areas:(1)How international development co-operation

contributes to the capacity of developing countries to participate in the global economy, and

(2) The capacity of people to overcome poverty and participate fully in their societies.

3. Members of the DAC are expected to have certain common objectives concerning their aid programs -> DAC provide Guidelines, Manuals and Reports for development practitioners.

2010-11-5 18

OECD/DACOECD/DAC

Page 19: DSA Annual Conference November 5, 2010 Eun Mee Kim

2010-11-5 19

OECD/DAC Guidelines on National DevelopmentOECD/DAC Guidelines on National Development

• OECD/DAC guidelines recommend capacity building for national development.

Economic Development Political Development

Page 20: DSA Annual Conference November 5, 2010 Eun Mee Kim

• Background The 2nd High Level Forum on Aid Effectiveness Conference to

efficiently manage increasing aid volumeParis, France, March 2005

• Endorsed by 107 countries, 26 development institutions, 14 civil society organizations (UN, WB, EU, etc.)

• Five Key Principles

2010-11-5 20

Ownership Alignment Harmonization

Managing for Results Mutual Accountability

Paris Declaration for Aid Effectiveness (2005)Paris Declaration for Aid Effectiveness (2005)

Page 21: DSA Annual Conference November 5, 2010 Eun Mee Kim

1. Washington Consensus: Capitalist market, economic liberalization

2. Paris Model: Traditional donor’s model of foreign aid (national interest -> humanitarian needs of recipients); Colonial past

3. Beijing Model: National interest of donor (energy, resources) + Recipient sovereignty

4. South Korean Alternative?

2010-11-5 21

4. Other Alternatives for 4. Other Alternatives for Development CooperationDevelopment Cooperation

Page 22: DSA Annual Conference November 5, 2010 Eun Mee Kim

• South Korea’s success in attaining development has made it a Poster Child for ODA:

1.Many less developed countries look to South Korea for a model for economic development

2.OECD/DAC welcomes South Korea’s input in the donor discourse

“Seoul Alternative” for Development Cooperation1.Balance between global standards and South Korea’s

distinct experience of economic development2.Developmental State & Country Ownership

2010-11-5 22

V . Concluding RemarksV . Concluding Remarks

Page 23: DSA Annual Conference November 5, 2010 Eun Mee Kim

2010-11-5 23

South Korean AlternativeSouth Korean Alternative

Page 24: DSA Annual Conference November 5, 2010 Eun Mee Kim
Page 25: DSA Annual Conference November 5, 2010 Eun Mee Kim

2010-11-5 25

S. Korea’s ODA System• Economic Development

Cooperation Fund (EDCF) • Established in 1987 to handle

concessional loans• Housed in the Korea Export-

Import Bank • Korea International

Cooperation Agency (KOICA)

• Established in 1991 to handle grant aid

• Total volume of ODA• Total volume: $ 815.8 million• ODA/GNI: 0.1%

• South Korea’s Promise for ODA by 2015

• Total volume: $ 3 billion• ODA/GNI: 0.25%

System

                                                                                                                                                                                                                                   

Source: ODA Korea

III. Overview of South Korea and ODAIII. Overview of South Korea and ODAIII-2. South Korea as a Donor of ODAIII-2. South Korea as a Donor of ODA

Page 26: DSA Annual Conference November 5, 2010 Eun Mee Kim

Japan (2007-08 average)

South Korea (2008)

China

Allocation Region Asia 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%)

Country Iraq, China, Indonesia, India, Vietnam

Vietnam, Philippines, Angola, Indonesia, Mongolia

Sector Economic 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 Resources Extraction/ Production (43.89%)Infrastructure/Public Works (42.35%)Humanitarian (1.3%)Military (0.23%)Technical Assistance (0.02%)

Income Group

Lower 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%) (2002-2007)

2010-11-5 26

III-2. South Korea as a Donor of ODAIII-2. South Korea as a Donor of ODA

Page 27: DSA Annual Conference November 5, 2010 Eun Mee Kim

South Korea Japan China

OECD/DAC Membership

Member (2010--) Member (1961--) Not a member

ODA/GNI 0.1%

(2009, OECD data)

0.18%

(2009, OECD data)

Grant Aid vs. Concessional Loans

2008: 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% (2002-2007), Govt. Sponsored Investment (53%), Concessional Loans (42%)

Tied vs. Untied Aid Untied (48.3%),

Tied (51.7%)(2009, OECD data)

Untied (96.5%) Tied (3.5%)

(2008, OECD data)

Bilateral vs. Multilateral Aid

71.2%; 28.8% (2009) 63.3%; 36.7% (2009)

2010-11-5 27

III-2. South Korea as a Donor of ODAIII-2. South Korea as a Donor of ODA

Page 28: DSA Annual Conference November 5, 2010 Eun Mee Kim

2010-11-5 28

South Korea

Time Period

1945-1948 1949-1960 1961-1975 1976-1990 1945-1995

Volume (Current

USD) $434.3 million

$2,546.2 million

$3,941.4 million

$3,510.8 million

USD 12.78 billion

Major Donors

US Grant aid $409.4 million; US Concessional loans $24.9 million; UN Relief and Reconstruction Agency

US 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 1945-99, 63.6% of total ODA in 1961-75

Grants vs Loans

70% of all grant aid to S. Korea was concentrated between 1945 and 1960

Grant aid 50.7%; Concessional loans 49.3%

Grant aid 21.4%; Concessional loans 78.6%

III. Overview of South Korea and ODAIII. Overview of South Korea and ODAIII-1. South Korea as a Recipient of ODAIII-1. South Korea as a Recipient of ODA

Page 29: DSA Annual Conference November 5, 2010 Eun Mee Kim

2010-11-5 29

S. Korea’s ODA System• Economic Development

Cooperation Fund (EDCF) • Established in 1987 to handle

concessional loans• Housed in the Korea Export-

Import Bank • Korea International

Cooperation Agency (KOICA)

• Established in 1991 to handle grant aid

• Total volume of ODA• Total volume: $ 815.8 million• ODA/GNI: 0.1%

• South Korea’s Promise for ODA by 2015

• Total volume: $ 3 billion• ODA/GNI: 0.25%

System

                                                                                                                                                                                                                                   

Source: ODA Korea

III. Overview of South Korea and ODAIII. Overview of South Korea and ODAIII-2. South Korea as a Donor of ODAIII-2. South Korea as a Donor of ODA