Syndicate content

Korea, Republic of

Learning from Korea: The Story of Korea’s Credit Guarantee Agency

Simon Bell's picture
Image: CC Pixabay

South Korea today has the fourth largest economy in Asia, is a member of the OECD’s “Rich Club,” and is part of the G20.  Despite sharp economic shocks emanating from the Asian financial crisis in the late 1990s, the global financial crisis in 2008, and the more recent slowdown in the Chinese economy – Korea has bounced back and continues to grow.

So it’s hard to imagine that some 70 years ago, Korea’s future looked very bleak – and akin to many of the excruciatingly difficult post-conflict environments that we face today.

To briefly summarize Korea’s post-World War II history: a 1947 report on Korea commissioned by U.S. President Truman concluded, “South Korea, [as] basically an agricultural area, does not have the overall economic resources to sustain its economy without external assistance …. Prospects for developing sizeable exports are slight ….. The establishment of a self-sustaining economy in South Korea is not feasible.” Then the Korean War compounded these problems – resulting in massive damage to both the north and the south – with destroyed infrastructure, a loss of skilled workers, a million South Koreans killed, and as much as one-quarter of the country’s population refugees. 

We have many lessons to learn from Korea – particularly as our institution, the World Bank, increasingly focuses on post-conflict and fragile environments.

Although South Korea is known for its large scale “Chaebols,” which have dominated much of its political and economic life – less well known is the considerable support that the government has provided to small and medium scale enterprises (SMEs).  As in most countries, Korean SMEs play a pivotal role in the national economy, accounting for 99% of all enterprises (3 million SMEs), over 80% of all employees (10.8 million employees), and almost 48% of total national production.

The essentials of a manufacturing ecosystem

Aref Adamali's picture

Value addition through manufacturing has been a major focus of economic policymakers across the world, and at times with remarkable success, most famously in East Asia. Initial ‘Asian miracles’ in places like South Korea have since been eclipsed by the meteoric rise of manufacturing in China, which has grown its exports in manufactures by 18 percent a year over the past 10 years, compared to a global average of 7 percent (ITC Trade Map data).

'Flying geese'
 
Most countries generally seemed to follow a basic pattern, initially establishing manufacturing credentials in light manufacturing, such as in textile and apparel, but then in time moving on from such products to higher-value-added and more complex products. As they moved on and up, they opened space for other countries to move into the initial entry products, following the so-called ‘flying geese’ model of division of labor.





There have been noticeable absences though, with not all regions having moved into manufacturing. This is partially the case with Central and South America, but most strikingly with Sub-Saharan Africa.  
 
What can be done to support countries in their quest to deepen their manufacturing sectors, and extract the jobs and technological development that this can offer? How can they develop the kinds of deep and comprehensive manufacturing ecosystems that have enabled China to maintain investment despite fast-rising labor costs?

The reforms behind the Doing Business rankings

Cecile Fruman's picture



In Mozambique in 2003, it took an entrepreneur 168 days to start a business. Today, it takes only 19 days. That kind of transformation has major implications for ambitious men and women who are seeking to make a mark in business, or, as is often the case in Africa, seeking to move beyond a life in agriculture. In economies with sensible, streamlined regulations, all it takes is a good idea, and a couple of weeks, and an entrepreneur is in business.

This week, the World Bank Group launched its annual Doing Business 2016 report, which benchmarks countries based on their progress undertaking business reforms that make it easier for local businesses to start up and operate.

For the second straight year, Singapore topped the list, with New Zealand, Denmark, the Republic of Korea, and Hong Kong SAR, China, coming in closely behind.

In the developing world, standouts included Kenya and Costa Rica, both of which rose 21 positions; Mauritius, Sub-Saharan Africa’s top-ranked economy; Kazakhstan, which moved up 12 places to rank 41st among all countries; and Bhutan, which topped South Asia’s list of reformers. In the Middle East and North Africa, 11 of the region’s 20 economies achieved 21 reforms despite the challenges caused by a number of civil and interstate conflicts.
 
The reforms tracked by Doing Business are implemented by governments, but the results show up most in the private sector, which is critical to driving a country’s competitiveness and to creating jobs. Ensuring an enabling environment in which the private sector can operate effectively is an important marker of how well an economy is positioned to compete globally. 
 
For those of us working with governments to help improve their investment climates – and to create a policy environment in which business regulatory costs are reasonable, access to finance is open, technology is shared, and trade flows within and across borders – the real work begins long before the Doing Business rankings are published.

In the World Bank Group’s Trade and Competitiveness Global Practice (T&C), our mandate is to work with developing countries to unleash the power of their private sector for growth. Much of this work involves reforms in the very areas measured in the Doing Business report: starting a business, dealing with construction formalities, or trading across borders, among other factors.

Our experience working with clients confirms one of this year’s key findings: Regulatory efficiency and quality go hand-in-hand. A good investment climate requires well-designed regulations that protect property rights and facilitate business operations while safeguarding other people’s rights as well as their health, their safety and the environment.