Lessons of East Asia: Korea. A Case of Government-Led Development

摘要

Despite unfavorable initial conditions, the Republic of Korea's real GNP has tripled in every decade since 1962. The economy has undergone a rapid structural transformation and is now dominated by a dynamic and flexible manufacturing sector. Korea's industrial policy can be divided into three stages. In the period 1961-73, the state combined the aggressive promotion of exports with classic protection of the domestic market. In 1973, Korea launched an attempt at industrial diversification and upgrading, through the Heavy and Chemical Industry (HCI) drive. Six strategic industries were identified and supported through a combination of tax incentives, subsidized credit and import protection. Beginning in 1979, there was a sharp reversal in policy. As the economy stalled, deficits increased and excess capacity appeared in HCI, the government withdrew from selective intervention in strategic sectors. Assessments of the HCI drive are controversial. Importantly, the objective was to develop industries that could compete successfully on international markets. Nevertheless, there were significant costs associated with the policy. The excess capacity and low returns experienced in the 1980s indicate that the state over-invested in HCI. (Copyright (c) 1993 The International Bank for Reconstruction and Development/The World Bank.)