Advantage Korea

Look east, find friend: The Economic times EDITORIAL THURSDAY, OCTOBER 07, 2004

Korea is important to India as a source of investment and jobs, as a growing market for iron ore, fine chemicals and software and as a potential ally in the region for India’s quest for a larger role in world affairs. But Korea’s appeal goes beyond the merely utilitarian. Korea is living testimony to the potential for development, enrichment and popular empowerment inherent in broadbased capitalist growth. It is the first country from among the ranks of poor, backward countries liberated from colonial rule by World War II to become a member of the rich countries’ club, OECD. The roots of Korea’s dazzling development go back to land reforms and expansion of primary education carried out under American guidance immediately after the War.

But the miraculous saga of industrial growth that made Korea the premier tiger economy started in the early ’60s, when that country’s per capita GDP was $60, comparable to the then Indian per capita GDP. India’s per capita GDP today is around $470, while Korea’s is close to $10,000. Korea’s growth was neither free market driven nor socialist. The state and planning, complete with cheap, directed credit, played a major role in transforming agrarian Korea into an industrial powerhouse. However, the state benchmarked corporate performance against the global best, by forcing all companies to compete in the global marketplace.

Korea has developed also in politics. From authoritarianism, Korea has progressed to a thriving democracy that tried its last military ruler and sent him into exile in a matter of 18 months. In India, Korean firms showed aggression while Japanese majors remained finicky. After overtaking established Japanese brands in market and mind share in consumer durables and electronics, Korean companies have commenced serious investment. Globally, they seem well set to move on to higher rungs of the value chain, making space for volume players from China and India and creating new and huge opportunities for India’s IT industry as well.