Panel 14: What Can We Learn from Korean Economic Development Experience?Friday, April 21st (9:00-10:00pm)

13th Symposium onDevelopment and Social Transformation

Korea Chaebol Reform Policy in 1998-1999

Jung-Ran Suh

Panel 14: What Can We Learn from Korean Economic Development Experience?

13th Symposium onDevelopment and Social Transformation

Korean Chaebol Reform Policy (1998-1999) Jung-Ran Suh

April 21, 2006

From Growth Engine to Culprit of CrisisChaebol : Too Big To Fail() (* Chaebol : Family Owned Conglomerates)State-led Development and Symbiotic Ties between Government and Business(60-80) Excessive Debt Financing, Overinvestment, Concentration of Control Korea Economic Crisis in 1997Excessive Foreign Debt under Shaky Finance SystemIMF Bailout Program and Structural Reform

Chaebol Reform Policy in 1998-1999 (1)Blame Chaebol, Dismantle Chaebol against State-controlled Economy, State-controlled Finance No Economic recovery without Chaebol Reform

Five plus Three PrinciplesFive Principles (1998.1.13) - Enhance Transparency - Control Intra-Group Transaction

Chaebol Reform Policy in 1998-1999 (2) - Improve Financial Structure - Streamline Business Activities - Strengthen Accountabilities

Three Principles(1999.8.15) - Limits on Chaebol equity investment - Improve management structure of secondary financial institute - Prevention of irregular inheritance and gift- giving

Limits and ImplicationsLimited Success : Corporate GovernanceCombined Financial Statement, External AuditDebt Payment Guarantee RestrictedDebt-Equity Ratio Reduced

Revival of Interventionist State PowerIndirect, Informal Administrative GuidancePolitical Reason for Tangible Results

Balancing the State and Market

Thank you !!!

Leadership in Development Program:Korean Case 1964-1979

Kang Seo

Panel 14: What Can We Learn from Korean Economic Development Experience?

13th Symposium onDevelopment and Social Transformation

Beyond the Myth:Leadership in Korean Development Policy,1962~1979Kang Seo

IntroductionPurpose of research

Historical background

Park, Jung-Hee: personal background

Five Year Plan(cont.)First Five Year Plan(1962~1966) -expanded exports for maximum growth-high inflation rate

Second Five Year Plan(1967~1971)-sound economic growth-reforming financial system, exchange rate, fiscal reform-resulted in rapid growth of exports and GNP, stable prices, and higher domestic savings

Five Year Plan(cont.)Third Five Year Plan(1972~1976)-promoted heavy and chemical industries(HCI)-New Village Movement(NVM): imporve the income and living standards of rural area

Fourth Five Year Plan(1977~1981) -1973 The first oil crisis-stabilization prioritized

Economic growth(Source: The Bank of Korea, Economic Statistics Yearbook)

Leadership AssessmentLeadership Typology(Tsurutani,1973) -commitment, intelligence and skill, dominance

Parks case -Effective modernizing vs. Crude modernizing

Beyond the mythShowed people the full commitment of leader to peoples needs for better life brought support from citizens

Failed to transform as his people did - oppressed people to continue authoritarian leadership

ConclusionControversies over the evaluation: committed leader vs. overvalued myth

Overall evaluation

Aid and Development in Korea

Phil-ho Kang

Panel 14: What Can We Learn from Korean Economic Development Experience?

13th Symposium onDevelopment and Social Transformation

Aid and Economic Development in Korea

Pil-ho Kang

April 21, 2006

Major facts about KoreaPoverty-stricken country in 1945 when she gained independence from Japans colonial rule Korean War in 1950Five year Development Plan in 1960Fast economic growth with export driven economic development strategy in the 1960-1970Joined OECD & the 11th largest economy

Aid in the 1945-1953 periodPolitical Motivation by the U.S - establish a free and independent Korea - make the country a showcase of democracyBasic Human Needs - provide sustenance and enable the restoration of basic economic functionThe Commodity Import Program - Import of fertilizer, petroleum, agricultural supplies, leading to increase in agricultural output

Aid in the 1953-1960Aid financed major part of commodity imports - 87% of imports and 14% of GNP - imports provide items unavailable and extremely scarce in Korea(100% fertilizer availability, textile, clothing)Counterpart Fund -Receipt from sale of aid financed-imported goods -53% of Government Revenue -Financing investment projects

Aid in the 1960-1975 period Five year Development Plan - Strong commitment to national development - Eager to induce foreign capital and assistance to fill the gap between domestic saving and investment Grants to Loans (Project Assistance) - Development Loan Fund (Commercial and Concessional) - Social Overhead activities - Transfer of new technology

Emerging as a Donor in the early 1990Joined OECD in 1996 and 11th largest economy with properly designed development strategy and the effective use of foreign aidIncreasing demand from international community for sharing her development experience through economic and technical cooperationProviding Grants and Economic Development Cooperation Fund to LDCs with her small amount of ODA

How to SucceedFilling the saving and investment gap - Foreign savings, in the form of aid, were the main source of resources for capital formation and investment at early stage of economic development

Absorptive Capacity & Economic Leadership - Korea largely initiated, directed, and organized development by setting goals, establishing priorities, and backing them up with resources

How to SucceedEffective allocation of Aid ResourcesFocus on Education after Korean War - Investment in Education enabled Korea to succeed in export-oriented development strategy

Shift focus to Infrastructure with changes from grants to loans in 1960 - Korea could be a exporter with debt free status - Investment in Infrastructure enabled Korea to further develop into a major exporter

Panel 14: What Can We Learn from Korean Economic Development Experience? Friday, April 21st (9:00-10:00pm)13th Symposium onDevelopment and Social Transformation

Jung-Ran SuhKorea Chaebol Reform Policy in 1998-1999

Kang SeoLeadership in Development Program: Korean Case 1964-1979

Phil-ho KangAid and Development in Korea