from development to development cooperation: foreign aid, country ownership, and the developmental...

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From development todevelopment cooperation:foreign aid, country ownership,and the developmental state inSouth KoreaEun Mee Kim a , Pil Ho Kim a & Jinkyung Kim aa Development and Human Security , Ewha WomansUniversity , Koreab Development and Human Security , Ewha WomansUniversityc Ewha Womans UniversityPublished online: 19 Feb 2013.

To cite this article: Eun Mee Kim , Pil Ho Kim & Jinkyung Kim (2013) Fromdevelopment to development cooperation: foreign aid, country ownership, andthe developmental state in South Korea, The Pacific Review, 26:3, 313-336, DOI:10.1080/09512748.2012.759263

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The Pacific Review, 2013Vol. 26, No. 3, 313–336, http://dx.doi.org/10.1080/09512748.2012.759263

From development to developmentcooperation: foreign aid, countryownership, and the developmental statein South Korea

Eun Mee Kim, Pil Ho Kimand Jinkyung Kim

Abstract As an emerging donor of Official Development Assistance (ODA), theSouth Korean government has announced that it will provide a ‘South KoreanModel of Development Cooperation’. This paper explores how the South Koreandevelopment experience from the twentieth century can be transformed into analternative for development cooperation in the twenty-first century. The earlyaid management system in South Korea contributed to the bureaucratic capacity-building that was necessary for the installation of the developmental state. In itsquest for industrialization, the authoritarian developmental state in South Koreamaintained autonomy vis-a-vis foreign donors, foretelling the ‘country ownership’principle in today’s global norms of ODA. However instructive the South Koreanexperience may be, it will not work as a ‘one size fits all’ model for the twenty-first century development due to such fundamental changes in the global politicaleconomy as the WTO regime and democracy promotion. In this regard, South Ko-rea’s own double transition of economic liberalization and democratization offersanother important lesson. Therefore, we suggest a South Korean ‘alternative’ that

Eun Mee Kim is Dean and Professor at the Graduate School of International Studies and Di-rector of the Institute for Development and Human Security at Ewha Womans University,Korea. She served as a civilian member on the Committee for International Development Co-operation under the Prime Minister’s Office. She received her Ph.D. in sociology from BrownUniversity, U.S.A. This research was supported by the WCU (World Class University) pro-gram through the National Research Foundation of Korea funded by the Ministry of Educa-tion, Science and Technology of the Republic of Korea entitled, “Cross-National ComparativeAnalysis of the Effectiveness of Development Assistance” (Grant No.: R32-20077).

Pil Ho Kim is a Visiting Assistant Professor at the Institute for Development and HumanSecurity, Ewha Womans University. He received his Ph.D. in sociology from the University ofWisconsin-Madison.

Jinkyung Kim is a Ph.D. Candidate at the Graduate School of International Studies, EwhaWomans University.

Address. Ewha Womans University, Graduate School of International Studies, Daehyun-dong11-1, Seodaemun-gu, Seoul 120-750, Republic of Korea. E-mail: [email protected]

C© 2013 Taylor & Francis

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http://dx.doi.org/10.1080/09512748.2012.759263

314 The Pacific Review

respects both the global norms for development cooperation and the national demo-cratic aspirations. It would be a democratic developmental state whose autonomy ismore deeply embedded in civil society and whose capacity further expands humancapabilities.

Keywords Democratic developmental state; foreign aid; country ownership; de-velopment cooperation.

Introduction

South Korea’s phenomenal economic development in the second half ofthe twentieth century from one of the poorest ‘basket case’ countries to aneconomy boasting 13th in the world has led to new global roles for SouthKorea. In January 2010, South Korea ascended to membership of the De-velopment Assistance Committee (DAC) of the OECD as its 24th mem-ber, signaling its growing role as a major donor of foreign aid. In November2010, South Korea successfully hosted the first G20 Summit Meeting in Asiaand introduced the development agenda. In November 2011, the fourth andfinal High-level Forum on Aid Effectiveness (HLF-4), hosted by the OECDand the World Bank, took place in Busan, South Korea.

In search of a new, responsible global role in the twenty-first century, theSouth Korean government has announced that it will provide foreign aidwith a ‘South Korean Model of Development Cooperation’ based upon its‘development experience’ in the latter half of the twentieth century. Outof this ambitious announcement come two questions: first, what are thedistinct, if not unique, characteristics of South Korean development in thetwentieth century? Second, if there are such characteristics, how do theyfit in with the global norms for development cooperation in the twenty-firstcentury? The goal of this paper is to answer these two questions by revisit-ing the South Korean development experience in light of the global normsfor development cooperation. At the risk of retroactive rationalization, wewould like to focus on the ‘country ownership’ of foreign aid – or ODA(Official Development Assistance) in today’s terminology – that the SouthKorean ‘developmental state’ effectively took on in order to guide itsphenomenal economic development.

There is a wide consensus in the academic literature in internationalpolitical economy that South Korean development in the twentieth centurywas based on a market-guiding developmental state, to which we would liketo add that it also exercised strong ownership in its negotiations with majordonors of ODA. The South Korean developmental state was not only astrong state in the domestic context, but it was also a tough negotiatorwith foreign governments when it came to major decisions regarding itseconomic development. Thus, we focus on how the developmental statenegotiated its space vis-a-vis the major donors of ODA when it was a majorrecipient, preempting the ownership principle in practice a few decades

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E. M. Kim et al.: From development to development cooperation 315

earlier than its formulation in theory. Then, we critically examine howconditions of the global political economy as well as domestic politicalsituations are different in the twenty-first century, which may well limit therelevance of the South Korean experience to other developing countries.

These are timely issues since many nations suffering from poverty havelooked to countries such as South Korea for an effective alternative modelfor poverty reduction and development. Broadly speaking, South Korea’sdevelopment can be relevant for countries faced with the triple challengeof extreme poverty, lack of democratic governance, and fragile security.Throughout this paper, we will try to develop a South Korean ‘alternative’rather than a ‘model’. The term ‘model’ is based on the very problematicidea of ‘one size fits all’ – a singular mode of development – which does notfit with the global norms on foreign aid and development cooperation thatrecognize diverse developmental contexts of recipient nations. Before get-ting there, however, first we need to establish a theoretical link between thedevelopmental state, the concept of which addresses ‘national’ economicdevelopment, and the ownership principle on ‘international’ developmentcooperation.

The developmental state and the ownership principle

The autonomy and capacity of the developmental state

Since Johnson (1982) coined the term ‘developmental state’ to explainJapanese economic development that spanned the pre- and post-WorldWar II period, it has not only become representative of such East Asiancases as the original ‘Four Tigers’ of South Korea, Taiwan, Hong Kongand Singapore, but has also spread as a theoretical framework to otherregions like Latin America, South and Southeast Asia, Africa and evenWestern Europe (Chibber 2003; Edigheji 2010; Evans 1995; Haggard 1990;Kohli 2004; Leftwich 2000; Mkandawire 2001; Robinson and White 1998;Woo-Cumings 1998). Undoubtedly, the popularity of the developmentalstate theory was mainly due to the phenomenal performance of the EastAsian states, which formed a ‘flying-geese pattern’ of economic devel-opment with Japan leading the way. Moreover, in its formative periodof the 1980s, research in developmental states found its natural ally inthe ‘state-centered’ approach aimed at ‘bringing the state back in’ socialsciences (Skocpol 1985; Stubbs 2009).

The state-centered approach enriched the developmental state literaturewith two key concepts: state autonomy and state capacity. In return, thedevelopmental state literature provided ample evidence of strong bureau-cratic states in East Asia ruling efficiently over relatively weak civil society,private interests and social classes, which reinforced the idea that the stateplays a central role in national political economy. Be it formally democratic

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Japan or authoritarian South Korea and Taiwan, one could easily identifythe locus of state autonomy as well as capacity in the well-trained civilianbureaucracy responsible for economic planning and industrial policy. Later,however, Evans (1995) revised the original formulation of the developmen-tal state’s autonomy into ‘embedded autonomy’ – the state bureaucracybecomes autonomous not by detaching itself from society at large, butby further embedding itself in a ‘dense network of social ties’ withprivate actors, and thereby enhancing its capacity to achieve industrialtransformation.

It is clear that state autonomy and capacity are closely knit together in thepredominantly domestic context of a developmental state. What if the ques-tion of development goes beyond the borders and involves internationalactors? Whereas Brazil’s industrialization was attributed to the ‘triple al-liance’ of multinational corporations, state elites, and local capitalists, SouthKorea managed to do without the significant presence of multinationalcapital in its dual development coalition between the state and domestic bigbusiness (Evans 1979; Kim 1997). But South Korean sovereign autonomyvis-a-vis international actors in terms of economic development was farfrom guaranteed; instead, it was a hard-earned prize by the South Koreanleadership determined to exercise its ‘ownership’ over a national economythat had been largely driven by foreign aid (Kharas et al. 2011; Kim 2011).

This story, as we shall see later on, is more complicated than a simpleassertion of sovereignty by nationalistic leadership. Without bureaucraticcapacity built up from the previous decade’s foreign aid administrationand the institutional structure that sustained it, the young military regimewould have had much more trouble turning the economy around than itactually did during the first few years after the 1961 coup. The point is thatfor a successful ‘installation of the developmental state’, autonomy andcapacity should go hand in hand (Chibber 2003). Four decades later, theequivalent of this argument in contemporary discourse on developmentcooperation would be the ownership principle in the Paris Declaration onAid Effectiveness (2005).

Global norms for development cooperation and the ownershipprinciple

The OECD/DAC provides policy guidelines for ODA, and considerscapacity building as a priority of national development. Capacity develop-ment has been regarded as a key factor to promote leadership and own-ership of a partner country in the process of development (OECD 2009c).In order to achieve capacity development, six priority areas were identi-fied: (1) country systems capacity; (2) enabling environment for capacitydevelopment; (3) capacity development in fragile situations; (4) integratingcapacity into sector/thematic strategies; (5) role of civil society and the

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private sector in capacity development; and (6) relevance, quality andchoice of capacity development support (OECD 2009b, d; Pearson 2010).

What distinguishes the OECD/DAC guidelines from developmentalstate practices in the twentieth century is the emphasis on political aswell as economic development. In terms of political development, theOECD/DAC highlights good governance and the participation of civilsociety organizations (OECD 1995, 2009b). The OECD/DAC encourageswomen’s empowerment and the involvement of the private sector in thenational development process since the active involvement of women iscritical for social, political and economic development (OECD 1999, 2009b,2010).

The Paris Declaration was a result of a major international effortto improve aid effectiveness, with more than one hundred donors andpartner countries signing to commit to major reforms in aid delivery. Asdepicted in Figure 1, they agreed on five principles: ownership, alignment,harmonization, managing aid for results, and mutual accountability. Theyalso came up with 12 indicators to measure aid effectiveness.

Quite tellingly, the ownership principle is located at the top of theaid effectiveness pyramid in Figure 1, suggesting that ownership is themost important of all five principles. This impression is reinforced bythe following Accra Agenda for Action (2008), in which ‘StrengtheningCountry Ownership over Development’ was again at the top of the list ofpriorities (OECD 2009a). In fact, the ownership issue was first brought upby the IMF/World Bank in the late 1990s, featuring in the ComprehensiveDevelopment Framework and the Poverty Reduction Strategy Papers(Cammack 2004; Pender 2001; Wolfensohn and Fischer 2000). By elevatingit to the top principle of ODA, the OECD/DAC opened up a floodgateof discussion about how to define and/or assess country ownership. TheParis Declaration contributed further to the discussion on ownership byspecifying its actual indicator: national development strategies.

Eberlei (2001) defines ownership in terms of popular participation, inwhich the majority of the partner country’s population or its represen-tatives take part in the formation and/or implementation of a nationaldevelopment strategy. This marks a critical departure from the implicitassumption of the IMF/World Bank, that the partner country’s officials areto carry out development policies for their national interest (IMF 2001: 6).The potential conflict of interests between the state elite and the popularmass is a question at the heart of the aid effectiveness discourse, not tomention democratic legitimacy and ‘good governance’. Then again, theEast Asian experiences in the last century, as exemplified by the likesof South Korea, Taiwan and Singapore, attest to the compatibility ofauthoritarianism and developmental success.

A solution to this sort of conundrum may be found in the politicalaspect of ownership, rather than in the abstract definition of the term.Whether it is over an object or a process, ownership does not necessarily

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Figure 1 Five principles and 12 indicators of the Paris Declaration on Aid Effective-ness.Source: OECD (2009a).

mean complete authority even though it refers to the responsibility totake final decisions; ultimately, it is subject to social control in the broadsense (Cramer et al. 2006). In practice, ownership involves a wide range ofpolitical factors: (1) a sense of national purpose; (2) intellectual convictionof key policy-makers; (3) support from the top political leadership; and(4) visible efforts of consensus-building among various constituencies(Booth 2011; Brautigam 2000; Johnson and Watsy 1993; Nissanke 2010).

Whether or not the ownership principle is intended to bolster stateautonomy of the recipient country vis-a-vis international donors is ques-tionable from the donors’ perspective. This is not to even mention thosecritics who are extremely skeptical about the IMF/World Bank-defined

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‘ownership’ and its political–economic ramifications in the developingworld (Cammack 2004; Harrison 2001; Pender 2001). Fritz and Menocaladmit that the ‘goal of promoting country ownership is far from straight-forward,’ and yet the ‘expectation is that national development strategieswill provide a strategic policy framework oriented towards results thatdonors can support’ (2007: 545). Simply put, donors are likely to respectrecipients’ autonomy as long as they see desirable results coming out ofit. If the ownership principle boils down to the establishment of successfuldevelopment strategy in practical terms, then it looks like an importantendorsement of the South Korean development experience, especiallywhen it made a transition from an aid-dependent country in the 1950s toa developmental state with a clear-cut development strategy in the 1960s.In so doing, the South Korean developmental state managed to deliver‘results’ the donors could support even though they did not always agreeon the specifics of its development strategy and the way it was deployed.

This dovetails with the concept of ‘true ownership’ that refers to‘the capacity of a developing country to choose from alternative policyprescriptions – even if they are not granted by the international aidcommunity’ (Shimomura and Ohno, 2005: 8). In other words, a strong formof ownership would be the recipient country drawing up and executing itscreative plan the donor did not agree upon. We would like to expand onthe ‘true ownership’ discussion in two ways. First, it provides evidence, ifonly anecdotal, for strong ownership by pointing out actual cases whererecipient countries go against the wishes of donors and thereby claim theirautonomy. Crude as it may be, such an accumulation of anecdotal evidencecan serve as an indicator for the relative strength of ownership.

Second, it casts new light on the relationship between ownership andcapacity. From the donors’ perspective, the problem of ownership – orlack thereof – has been often considered in terms of political–economicincentives on the part of the recipient government (Helleiner 2002;Svensson 2006). That might be so if the question was simply a matterof compliance to donor-approved plans. Going against donors’ wishes,however, would require more than just incentives in the narrow sense; theleadership of the recipient country should possess not only strong politicalwill but also sufficient bargaining power to handle the discontent or evenire of the donors. And more importantly, as noted in the definition of trueownership above, it requires a certain level of capacity for the recipientcountry to draw up and execute a national development plan on its own.The South Korean development experience offers a classic example of theownership/capacity combination, as we will see next.

The role of foreign aid in South Korean development

South Korean development is a well-told tale in the developmental stateliterature. Thus we will only briefly recount the key institutions of the

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Table 1 South Korea’s development – key institutions: 1960—1980

Key institutions Policies/instruments Distinct features

Developmental state:Economic PlanningBoardMinistry of FinanceMinistry ofCommerce andIndustry

Long-term comprehensiveplanning and projection;Provider and intermediary forcapital and technology;Provider of indirect assistanceand subsidies;Export-oriented industrialization

Sustained economicdevelopment;Low incomeinequality;Low inflation;High employment

Authoritarian state: Military, police, tax, andintelligence used; limited civilliberties; labor oppression

Collusion withchaebol∗ for heavyand chemicalindustrialization

Local capital:Large businessgroups (chaebol)

Heavy and chemicalindustrialization; Tradingcompany (chonghap sangsa)

The state-chaebolpartnership fordevelopment

Foreign capital:ODA grants;concessional loans

Grants and loans over FDI; Stateguarantees for repaymet for loans

Foreign capital(grants/loans)behaving likedomestic capital

Source: Kim (1997: 27–94). Note: ∗Family-owned and -managed private business groups inSouth Korea.

South Korean developmental state before turning our attention to theway South Korea utilized foreign assistance it had received for povertyreduction and economic development. Since we are primarily interested ininstitutions critical for the attainment of economic development, we willfocus on the earlier phase of development. Table 1 summarizes the keyinstitutions and actors from the early phase of South Korean developmentin the 1960–1970s. At the core of the developmental state was the economicbureaucracy. The Economic Planning Board (EPB) was at the helm of thisbureaucracy, working closely with the Ministry of Finance and the Ministryof Commerce and Industry. The EPB had two critical functions: planningand budgeting. The Chair of the EPB had the rank of Deputy Prime Min-ister, with strong coordination capacity among the government ministries.

The large family-owned and -managed business conglomerates (chaebol)built a close partnership with the developmental state in the process ofindustrialization. Foreign capital in the form of grant aid and concessionalloans was very important in the earlier phase, and was utilized morelike domestic capital compared to foreign direct investment. The SouthKorean government directed aid and concessional loans to its developmentprojects, and in particular to the strategic heavy and chemical industrialprojects in the 1970s (Kim 1997). The experience of South Korean de-velopment can be summarized as the strong developmental state that led

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economic development, and its adept usage of foreign aid for its own devel-opment. With a focus on the aid institutions, we will observe how these in-stitutional and strategic features came together to achieve ‘true ownership’.

Ownership and capacity-building in the early aid managementsystem, 1945–1960

South Korea as a recipient of ODA began in 1945 after it was liberatedfrom Japanese Colonial Rule (1910–1945). Until 1948, the southern partof the Korean peninsula was occupied and governed by the US, whoprovided aid through the Government Appropriations for Relief in Oc-cupied Area (GARIOA) and Economic Rehabilitation in Occupied Area(EROA). GARIOA was an emergency relief aid program to assist withUS-occupied areas in need of basic subsistence including food, medicine,and fuel, while EROA was for infrastructure in US-occupied areas. Aidthrough GARIOA and EROA totaled US 409.4 million USD. The US alsoprovided concessional loans from the Office of the Foreign LiquidationCommissioner (OFLC) with a total of 24.9 million USD, thus bringing thetotal ODA provided by the US to 434.3 million USD. The United NationsRelief and Reconstruction Agency provided emergency relief aid andinfrastructure (Lee 2004: 35–37).

The Republic of Korea was officially established in August 1948, but itcontinued to receive grant aid as military and economic assistance. TheKorean War (1950–1953) devastated over eighty percent of the Koreanpeninsula, and South Korea became an important recipient of military andeconomic aid during the war as well in the post-war reconstruction period.About seventy percent of all grant aid South Korea received from theworld was concentrated between 1945 and 1960, and the US was the largestdonor of grant aid to South Korea totaling 3.1 billion USD, which is worthabout 19 billion USD in current prices.

There is little doubt that the South Korean economy had been heavilydependent on foreign aid until 1960, when US aid policy began to shift.But what is less well known about this period was the South Korean gov-ernment’s attempt to control the aid management process, including aidrequirements, procurement, and allocation based on the agreement withdonors (Macdonald 1992). When the Republic of Korea started receivingUS aid from the Economic Cooperation Administration (ECA) in 1949,the Office of Planning and the Office of Procurement were establishedunder the Prime Minister’s Office in order to manage aid, and later theywere placed under the President’s Office. By putting aid-related officesunder the highest authority, the South Korean government showed itsresolve for better management and effective use of foreign aid.

The outbreak of the Korean War led to the termination of ECA aid,and the United Nations Korean Reconstruction Agency (UNKRA)took over long-term reconstruction projects while the Korean Civilian

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Assistance Command (KCAC) operated short-term reconstructionprojects. In 1952, the South Korean government and the UN Commandjointly organized the Combined Economic Board (CEB) to ensure effectiveaid coordination in accordance with the recommendations from the SpecialRepresentative of the US President for Korean Economic Affairs, HenryJ. Tasca. The CEB consisted of a senior Korean economic minister and aUS aid official, representing the South Korean government and the UNCommand, respectively. The two representatives held regular meetings toprepare and oversee economic and financial policies (Lee 2009). Underthe CEB, there were five committees: the Overall Requirements Commit-tee, the Finance Committee, the Relief and Aid Goods Committee, theEngineering Committee, and the Community Development Committee.Working groups as well as special committees were also created to run theCEB effectively. All committees were composed of an equal number ofofficers from both South Korea and the UN, appointed by their respectiverepresentatives. The CEB was involved in overall economic policies andplans as well as aid management.

In 1953, the US created the Foreign Operation Administration (FOA) asa government agency in Washington D.C. to maximize the effectiveness ofthe overseas aid programs (National Institute of Korean History 2007). Italso established the Office of the Economic Coordinator (OEC) under theUN Command in South Korea to design, implement, and supervise eco-nomic assistance including counterpart funds and to coordinate betweenthe US and Korean governments and aid agencies (Mason et al. 1980).The OEC focused on South Korea’s economic development and financialstabilization, working in close consultation with the US Ambassador ona range of political issues. Since 1956, the OEC had overseen all SouthKorean aid programs with the KCAC and the UNKRA functioning asits implementation agencies. The OEC managed policies on price, wage,resource allocation and labor in cooperation with the Prime Minister’sOffice, the Ministry of Finance and the Office of Planning.

The Economic Coordinator in the OEC, appointed by the US govern-ment, played the role of UN representative in the CEB as well as economicadvisor of the UN command. The OEC worked closely with the SouthKorean government and the UN aid agencies to manage aid programs ina harmonized way. The US State Department supported the OEC andcarried out its recommendations (Macdonald 1992). The CEB designedpolicies and monitored their implementation by the OEC and the SouthKorean ministries, functioning as a bridge between the domestic and theinternational aid-related organizations. Figure 2 shows how the US andUN agencies divided their role in terms of economic assistance in 1954.

The aid system overseen by the CEB and the OEC indicates that seriousefforts were made by both the US and South Korea to coordinate aid andavoid overlapping programs during the 1950s. However, the actual perfor-mance of the system was not quite up to the task. The CEB, supposedly themain vehicle of ‘country ownership’ exercised by the aid recipient in this

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Figure 2 The South Korean foreign aid system in the 1950s. Source: National Insti-tute of Korean History (2007); Lee (2009). Note: Red box is the Board managed byboth the UN and South Korea. Blue boxes indicate US and UN agencies in chargeof economic assistance, and grey boxes are the South Korean government orga-nizations working with the aid agencies. ∗CINCUNC: Commander in Chief, UnitedNations Command. ∗∗CINCREP: Commander in Chief, Pacific, Representative (thehead of Far Eastern Operations).

case, was hobbled from the beginning because the US and South Koreawere unable to reach an agreement on its specific role. As a matter of fact,the CEB and the OEC played only a limited role in aid management. Thisexplains in part the continuing problems with coordination and harmoniza-tion between the two major aid agencies, the KCAC and the UNKRA, notto mention their misalignment with the South Korean government system.It certainly did not help with coordination and communication that theUN agencies were all located in Seoul, while some of the South Koreanministries and offices were still in Busan after the Korean War (NationalInstitute of Korean History 2007).

These problems notwithstanding, it is remarkable to find such a co-ordinated system of aid management in the early stage of aid reception.The increasing number of South Korean officials participating in the CEBshowed their eagerness to take ownership of aid management and delivery.Meanwhile, at some point the OEC had as many as nine hundred Koreanemployees, who were building their capacity for South Korea’s economictake-off in the next decade. It was probably no coincidence that the ideaof the economic development plan was first hatched in the OEC and thenactually drawn up by the Korean Ministry of Reconstruction, which hadsent its officials to the US and the World Bank for that purpose.1 In otherwords, the capacity to devise the Five-year Economic Development Plansin the developmental state of the 1960s did not come out of the blue; it hadbeen built up since the mid 1950s (Macdonald 1992: 271; Lee 1999).

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Consolidation of ownership and the rise of the developmentalstate, 1961–1975

Between 1961 and 1975, South Korea experienced rapid economic devel-opment, and foreign capital was provided more in the form of concessionalloans, graduating from grant aid. The new aid policy of President Kennedyin 1961 switched its goal from economic stabilization to developmentand growth (Macdonald 1992: 290). This policy shift replaced grant aidwith concessional loans requiring more responsibility and ownershipfrom the recipients. This policy shift coincided with South Korea’s pushfor economic development in the early 1960s, and South Korea utilizedconcessional loans for its development plans. In 1961–1975, 50.7% of ODAto South Korea was in grant aid and 49.3% in concessional loans.

More importantly, while the US provided 63.6% of ODA to South Koreain 1961–1975, it became a much less important provider during 1976–1990with only 14.6%. Japan provided 57.4%, and other nations provided 28%of ODA to South Korea during this period. In total, ODA to South Koreareached 3.9 billion USD in 1961–1975, and then decreased to 3.5 billionUSD in 1976–1990 (Bank of Korea 1975; Lee 2004: 57–59). In 1975, havingachieved per capita GNP of 574 USD, South Korea became ineligible forthe low-income economy classification by the International DevelopmentAssociation, and thus could no longer receive soft loans. Two decades laterin 1995, South Korea finally graduated from being a recipient by paying offthe structural adjustment loan from the World Bank.

As we have noted in Table 1, grant aid and concessional loans to SouthKorea acted almost like domestic capital, allowing the South Koreangovernment to utilize these funds to support its industrial policies. Thus, itwould be difficult to understand South Korea’s remarkable economic devel-opment from the 1960s without examining the role of ODA. It is also signif-icant in world history that this major aid recipient has become an emergingdonor of ODA in less than sixty years. What enabled this transformationwas, we believe, a fortuitous combination of ‘country ownership’ – auton-omy vis-a-vis international actors – and capacity building that the South Ko-rean developmental state managed to hold together while receiving ODA.

It was not uncommon that the South Korean economic developmentplans went against the wishes of major donors, especially during the HCIperiod. The IMF and the World Bank openly questioned the wisdom ofHCI, suggesting that South Korea stick with labor-intensive light manufac-turing industries. Due to this negative outlook, the Pohang Iron and SteelMill project failed to secure funding from the US. Undaunted, the SouthKorean government persuaded Japan to divert its reparation fund fromagriculture and fishery to the steel mill project. There were similar storiesabout the Korean Cable Company (1964–1966), the Seoul–Busan Express-way project (1968–1970), and the Petrochemical Industry DevelopmentLaw (1970).2

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The establishment of a comprehensive developmental state clearly differ-entiated the Park regime from its predecessors. The founding of the EPBand other government offices geared toward economic development, thecreation of comprehensive Five-year Economic Development Plans, andthe nationalization of banks are evidence of the increased capacity of thestate under Park (Kim 1997). To be sure, the early period of the EPB dur-ing the First Five-year Plan (1962–1966) saw ‘American tutelage’ continu-ing from the previous decade that helped enhance the capacity of the SouthKorean economic planners, but by the end of the period it became clear that‘the more autonomous the [South Korean] government became, the morecapable it was of rejecting American guidance and implementing its own vi-sions of economic development and modernization’ (Brazinsky 2005: 114).

It was not just ‘state’ capacity that surged in the same period; ODA cameincreasingly with such capacity-building opportunities as foreign trainingand technical assistance in the private sectors as well:

Between 1962 and 1971 more than 7000 Koreans received trainingabroad, and additionally over 1500 experts were sent to Korea bydonor nations. A high proportion of the senior personnel in govern-ment, business, and academia received foreign training . . . When es-tablishing the Korea Institute of Science and Technology with USassistance, Korean project managers decided the orientation of theinstitute and picked the most qualified advisers, instead of waiting forexperts to be sent. Investment of significant local resources and timein project implementation signaled strong Korean project ownershipand was in line with local efforts to learn ‘how to fish’. (Kharas et al.2011: 6)

The consolidation of country ownership and continued capacity buildingin ODA gave a great boost to the South Korean developmental state, andvice versa. However, picturing South Korea in the 1960–1970s as a ‘model’ODA recipient faces two critical questions. First, how relevant is it inthe current context of the post-Cold War globalized capitalist economy?Second, should its glaring lack of democracy and ‘good governance’ give uspause, considering the global norms of development cooperation today?

Limits of the authoritarian developmental state and a South Koreanalternative for development cooperation

Changing conditions of development in the global politicaleconomy

The search for a South Korean alternative for development cooperationshould begin with an examination about how the global political economyhas changed since South Korea attained its economic development in

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Table 2 Changes in the global political economy

Time periodGlobal political

environmentGlobal economic

environment

South Korea:twentiethcentury

1960s–1980s • Cold War: military aid• Economic aid toLDCs

• Open market(USA)• Relatively fewplayers with cheapexport products• Tradeprotectionism (highin the NICs)

Developingcountries:twenty-firstcentury

2001– • Post-Cold War• Post-communistreconstruction• Democracypromotion• US war againstterrorism• China:Non-interference

• WTO• Learning effectregardingexport-orientedindustrialization• Cyclical andglobalfinancial/economiccrisis

the second half of the twentieth century. This exercise, as summarized inTable 2, will help us arrive at a more feasible alternative of developmentthat twenty-first century developing countries, and more importantly,countries suffering from extreme poverty can utilize for their development.The East Asian developmental states in the twentieth century were madepossible by the Cold War conditions, in which the United States toleratedneomercantilist development strategies adopted by its allies to competeagainst the communist rivals.3 The question is, to what extent their devel-opment experiences are still relevant to the developing countries in thepost-Cold War world.

In the global economic environment, not only is aid less readily availablesince the end of the Cold War and in the middle of global financial crisis,the world economy has had many developing nations wanting to break intothe world market with cheap manufactured goods, and thus there is lessroom to tolerate more nations with low-cost manufactured products. WhenSouth Korea employed an export-oriented industrialization (EOI) strategyin the mid-1960s, there were relatively few players in the world export mar-ket. However, that is no longer the case. The WTO regulations and normshave made it extremely difficult to pursue protectionist policies. SouthKorea’s early years of development were marked by a heavily protecteddomestic market in spite of its aggressive export promotion. It is unlikelythat such a protectionist policy would be tolerated in the WTO regime.

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Furthermore, global and regional economic crises appear to be happen-ing with greater frequency since the end of the twentieth century. Andthese crises affect aid-dependent developing countries with a triple tragedy:(1) donor nations can cut back on development assistance; (2) opportu-nities for exports have decreased; and (3) new foreign direct investmentsare harder to come by and existing ones may also decrease. Thus, aid-dependent developing countries can become extremely vulnerable duringglobal and regional economic crisis.

The global political context has also changed significantly since the endof the Cold War. As the rivalry between the US-led capitalist democraticcountries and the USSR-led socialist countries ended, the global politicalmood has changed toward democracy. The former Soviet-bloc countrieshave been going through double transitions to capitalist market economyand liberal democracy. Also, studies on poverty that went beyond economicanalysis emphasized that democracy was key to poverty reduction. In hisseminal study on poverty, Sen (1999) highlights that poverty is sometimescaused by, or at least exacerbated by, authoritarian governments that donot listen to the people’s cry for an improvement in their lives. Thus,democratic government is seen as a key to eliminating poverty.

As a matter of fact, the domestic political context in which developingcountries find themselves is quite different from that of South Korea in thetwentieth century. In the post-Cold War world, where authoritarianism isnot seen as an alternative, but an utterly immoral system of government,it would be extremely difficult for governments to openly pursue suchhard authoritarian policies as South Korea did during the Cold War era.Even if overt authoritarianism were a viable political option for somecountries, it would not guarantee them a successful installation of thetwentieth century-style developmental state in the twenty-first century.This is not merely because of the changing global political economicconditions as stated above, but also inherent limits of the authoritariandevelopmental state. Here again, the South Korean experience, and itsdemocratic transition in particular, offers a telling example.

Limits of authoritarianism: South Korea’s double transition

The relationship between capitalist economic development and politicaldemocracy is one of the perennial debating points in the social sciences. Onthe one hand, there is a long tradition from the 1950s’ modernization theoryon down affirming a positive correlation between development and democ-racy (Almond 1991; Lipset 1959; Przeworski and Limongi 1997). Someconclude, on the other hand, that development does not necessarily lead todemocracy as contemporary authoritarian regimes like China and Russia‘are showing that they can reap the benefits of economic developmentwhile evading any pressure to relax their political control’ (Mesquita and

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Downs 2005: 78). According to their warning, we should not understate theability of authoritarian regimes to prevent the demands of democratization.

Even though the experiences of South Korea and the rest of the EastAsian Tigers seem to suggest that the developmental state and authoritar-ianism are two sides of the same coin, and/or the combination is crucialfor successful economic development, we need to separate these twoconcepts analytically.4 For one thing, authoritarianism more often thannot has begotten ‘predatory states’ as opposed to developmental ones(Evans 1995). For another, at least one East Asian developmental state, thearchetypal one in postwar Japan, is not exactly authoritarian; there couldbe many more examples of non-authoritarian developmental states if weinclude western countries in the category (Woo-Cumings 1998). Some evenfind successful democratic developmental states in Sub-Saharan Africa,such as Botswana, Mauritius and, potentially, South Africa (Edigheji 2010;Mkandawire 2001; Sandbrook 2005).

A more nuanced theoretical approach to the relationship betweendevelopment and democracy stresses class structure and class politics as anintervening factor:

. . . capitalist development is associated with democracy because ittransforms the class structure, strengthening the working and middleclasses and weakening the landed upper class. It was neither the cap-italist market nor capitalists as the new dominant force, but ratherthe contradiction of capitalism that advanced the cause of democracy.(Rueschmeyer et al. 1992: 7)

In the South Korean case, where class dynamics were subsumed under theauthoritarian developmental state and continued to color the democratictransition, the contradiction of capitalism expressed itself as contradictionsof the developmental state – more specifically, the erosion of its autonomyvis-a-vis private capital and the democratic challenges from the newly risingurban middle and working classes (Kim 1997: 45–47).

Formerly junior partners of the economic bureaucracy in the SouthKorean developmental coalition, chaebol clamored for the relaxation ofstate control over finance and other sectors related to their wide-rangingbusiness interests, and largely got their wish thanks to their expandedpolitical clout. In the meantime, the military regime was forced to makedemocratic concessions to the popular voices of dissent coming fromthe newly empowered civil society and working class organizations. Andfinally, the gradual decline of the South Korean developmental state took aprecipitous fall when the Asian Financial Crisis (1997–1999) forced SouthKoreans to swallow their pride in economic nationalism and to ask the In-ternational Monetary Fund (IMF) for a rescue package. In a bit of an irony,the ‘IMF’s man in Seoul’ to carry out its structural adjustment programin return for the emergency rescue was none other than Kim Dae Jung,

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the long-time opposition party leader whose election as president – onlya few months after the breakout of the financial crisis – can be seen as alandmark in South Korean democratization (Cumings 1999: 36–41).

The retreat of the developmental state in South Korea, therefore, tookthe form of double transition of economic liberalization and democrati-zation, which lasted two decades from 1982 to 2002. It was followed by afive-year interlude of a rather unstable quasi-welfare state before returningto the ‘growth-oriented policies’ under the last and current conservative ad-ministrations. Here it would suffice to present a stylized summary of eventsin Table 3 since this historical process was discussed in detail elsewhere(Kim 1997, 2010: 100–12). Although the fate of the South Korean develop-mental state is not at all clear at this juncture, we can say with some degreeof confidence that it will not revert back to an authoritarian state whoselegitimacy can only be sustained by near double-digit annual GDP growth.

The twenty-first century democratic developmental state anddevelopment cooperation

If the South Korean example shows the limits of the twentieth centuryauthoritarian developmental state, can other developing countries learn thelesson and build new developmental states sans authoritarian politics? Ad-vocates for the democratic developmental state seem to think so, as they see‘consensual autonomy’ or ‘political capacity’ necessary for a long-term, sta-ble and equitable development (Edigheji 2010; Leftwich 2005; White 1998).Peter Evans goes a step further by arguing that fundamental changes in thecharacter of development, such as the ‘bit-driven growth’ of informationtechnology-oriented economy and the expansion of ‘human capabilities,’are transforming the developmental state, whose capacity to draw up andexecute a national development strategy is increasingly dependent upon its‘embeddedness’ with not just private capital elite but also civil society:

The centrality of dense connections to civil society and the construc-tion of democratically deliberative institutions would at first seem tomake the twenty-first century developmental state and the politicalantithesis of the twentieth century version. A closer look suggests thatthe classic twentieth century developmental states have already begunto change the character of their embeddedness. For example . . . theexpansion of health care over the course of the 1980s and 1990s showsTaiwan and Korea managing to shed enough of their authoritariantraditions to allow public deliberation to move policy priorities in thedirection of capability-centered development. (Evans 2008: 17)

Admittedly, rethinking ‘development’ in any other way than the twen-tieth century notion of industrialization and GDP growth has yet to reachany sort of consensus. Besides, we still need to wait and see if South Korea

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Table 3 South Korea’s developmental state, 1961 to present

Aspect

Authoritariandevelopmental

state (1961–1981)

Doubletransition

(1982–2002)

Quasi welfarestate

(2003–2007)

Newdevelopmentalstate (2008–)

State EconomicPlanning Board

Economicliberalization(1982onwards)

Welfareexpansion

New form ofgrowth-orientedpolicy

Korean CentralIntelligenceAgency

Democratictransition(1987onwards)

Participatorydemocracy anddecentralization

Capital Growth ofchaebol

Increasedpower ofchaebol

Chaebol reform Deregulationand pro-market,pro-chaebolpolicies

State control offinance

Regulatorydevelopmentalstate

Labor Acceptance oflow wages andlong workinghours duringeconomicexpansion

MilitantunionismKoreaTripartiteCommission(1998)

TripartiteCommissionrenamedEconomic andSocialDevelopmentCommission(2007)

Changes not yetclear

Economicgrowth

Rapid growth:7.2% (1971–1981)

Before Asianfinancial crisis:8.5%(1982–96)

Slow growth:4.4%(2003–2007)

Slow growth:2.3%(2008–2010)

After crisis:4.4%(1997–2002)

Source: Adapted from Kim (2010: 101).

is definitely headed in a new direction, whether it is capability-centered de-velopment or ‘green, inclusive growth’ as the economic bureaucracy wouldhave us believe. Nevertheless, the South Korean government appearsundeterred from promoting the twentieth century developmental statemodel to other, less-developed countries. We have already mentioned itseagerness to showcase the past, state-led ‘development experience’ throughODA policy. The Korea International Cooperation Agency (KOICA) hasprovided numerous programs on South Korea’s development experience

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through training, education, and technical cooperation, and the KoreaDevelopment Institute (KDI) – established as the research arm of theformidable Economic Planning Board under the Park Chung Hee regime– has offered lessons of South Korea’s economic development programthrough the Knowledge Sharing Program (KSP).5 Thus, even beforescholars are ready to agree on a model of South Korean developmentcooperation, practitioners in ODA agencies have already begun to ‘export’the South Korean development model as they see fit.

In the introduction, we made clear our objection to the term ‘model’because of its ‘one size fits all’ connotation that goes against the globalnorms on ODA. In particular, the term ‘model’ invokes a problematicdiscourse in the aid community regarding conditionality and the failedWashington Consensus, which attempted to implant a US and WesternEuropean economic system to many developing nations. It might be astretch to think that the South Korean ‘model’ is intended to operate inthe same manner, but as long as it is based on the twentieth century devel-opmental state, we need to take a critical look at the very experience wewould like to share with other developing countries. Can the success of theauthoritarian developmental states of the twentieth century be replicatedin the current global political economic context? How compatible is it withthe global standards and norms of development cooperation that prioritizegood governance and civic participation?

Instead of ‘model’, we suggest the term ‘South Korean alternative’ in thedouble sense – both as a ‘South Korean’ alternative to the ‘Western’ modeland as an ‘alternative’ to the South Korean developmental state of thepast century. The South Korean ‘alternative’ for development cooperationshould be a combination of three broad elements: (1) the global standardsand norms for development cooperation as exemplified in the OECD/DACguidelines, which South Korea cannot ignore given its recent ascension tothe OECD/DAC; (2) South Korea’s own development experience fromthe twentieth century; and (3) the current global political economy contextin which developing countries operate.

We have argued that ‘true’ country ownership can be a link between(1) and (2), as South Korea was able to successfully exercise its ownershipover foreign aid to spur national economic development. On the otherhand, the double transition of the South Korean developmental state tookplace right at the turn of the century, which makes it a poignant cautionarytale for many countries looking at the crossroads between (2) and (3).In the end, the synthesis we envision in Figure 3 is a South Koreanalternative of a democratic developmental state, whose autonomy em-bedded in a larger civil society enables it to exercise strong ownershipover ODA, and whose capacity ensures a sound development strat-egy for expanding human capabilities in the twenty-first century globaleconomy.

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South Korean Alternative for DC:

Democratic Developmental

State

OECD/DAC Guidelines for Donors

(Global Standards)

South Korea's Development

Experience (20c)

Global Political Economy Context for Developing Countries

(21c)

Figure 3 Synthesis for a ‘South Korean alternative’ for development cooperation

Concluding remarks

South Korea’s economic development from the 1960s has been regardedas one of the most phenomenal in world history. Considering SouthKorea’s success in attaining development, in part thanks to ODA, it isnot surprising that many less developed countries look to South Koreaas a model for economic development. To these nations US or WesternEuropean models of development are too distant to be realized. The LatinAmerican style development of import substitution industrialization basedon abundant natural resources also may be seen as irrelevant for lessdeveloped, resource-poor countries.

The challenge, however, is to find the lessons of the South Koreandevelopmental experience that can be still relevant to the developingcountries in the twenty-first century, where the context of global politicaleconomy for development is markedly different. WTO regulations aboutunequal treatment of domestic and foreign firms make South Korean styleprotectionism of the domestic market difficult; a saturated world exportmarket makes it difficult for developing nations to take advantage of EOIfor their own development; and the world’s greater attention on the en-vironment has put constraints to pursue pollution-prone industrialization.In addition, the challenge is to adopt the South Korean model withoutsome of the costs or problems of its development such as the curtailment of

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democracy, suppression of labor, and excessive reliance on large businessesversus small- and medium-sized enterprises.

In this paper, we argue that the South Korean developmental experienceneeds to be transformed into a South Korean alternative for developmentcooperation. South Korea should not commit the mistake of insistingthat its mode of development is ‘the model’ for development, but insteadsuggest an ‘alternative’ for development cooperation paying attentionto both global standards and changing global political economy. This iseasier said than done. Nonetheless, South Korea needs to strike a balancebetween the global norms for development cooperation and its ratherdistinct experience of its own development. Furthermore, we need to se-riously consider implications of the double transition of the South Koreandevelopmental state since the 1980s, without which it would be difficult totalk about the relevance of its twentieth century development experience.All of these pose a challenge that South Korea must rise to since it has animportant story to tell about its development as well as a different mode ofaid delivery based on its experience as an aid recipient.

Notes

1 Kim Hyon-ch’ol, known to US authorities as Henry Kim, personifies the link be-tween the aid management system and the economic development plan. At thetime, Kim was both the Minister of Reconstruction and the Korean representa-tive in the CEB (National Archives of Korea 2006: 341). He resurfaced as thechair of the EPB in 1962, when the Park regime launched the First Five YearEconomic Development Plan.

2 Eugene Black, the president of the World Bank at the time, is said to havemade the following remarks with respect to South Korean HCI: ‘There are threemyths in a developing country. The first is construction of express ways, the sec-ond is construction of an integrated steel mill, and the third is construction of amonument for the head of state’ (Kim 2011: 159–60). See also Brazinsky (2005:111–12).

3 This is one of the main arguments for those who see the developmental statemodel limited primarily to the Northeast Asian capitalist economies under theCold War US hegemony (Woo-Cumings 1998; Zhu 2002). On the other hand,there are others who think that the model can be detached from the historicalcontext and applied more broadly (Hayashi 2010; Vu 2010).

4 A more thoroughgoing discussion, involving the ‘good governance’ agenda, canbe found in Fritz and Menocal (2006, 2007).

5 See Jung (2010) for KOICA and Lim et al. (2010) for the KSP.

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