Editor’s Note:

Today, South Korea is home to such world-famous brands as Samsung, Hyundai, KIA and LG. But barely 40 years ago, the country was among the world’s poorest and most underdeveloped.

Under the government of president Park Chung-hee, South Korea experienced spectacular economic growth starting from the 1960s, and became known as one of the “Four Asian Tigers.”

Professor Jin Park of the KDI School of Public Policy and Management of Seoul, spoke to Shanghai Daily reporter Ni Tao about the secret of the South Korean economic miracle and what challenges and opportunities lie ahead.

Q: Please summarize the South Korean recipe for economic take-off in the 1960s.

A: In a word, it is the focus strategy. South Korea is a small country, and we cannot develop all the industries at the same time. So we have to focus on one industry where we can pool our resources and build our capacity.

And the criterion in setting the priority is something called the linkage effect. Linkage effect is a positive effect on the other industries.

For instance, if the steel industry grows, it will support the automobile industry, and it also consumes other inputs, such as electricity generated by the energy industry.

So when the South Korean government chose to select focus industries, it selected several with the highest linkage effects, namely, the biggest potential to grow and catch up with Western or Japanese frontrunners.The government came up with five industries: ship-building, automobiles, chemicals, heavy industry, electronics. Today South Korea has established global strengths in these areas.

In some way, it is like the focus strategy of a Korean father. There are five children in the family and it is impossible to send them all to university. So he will have to decide which one is the smartest and the most likely to succeed, and ask others to make the sacrifices to support the favorite child. As ex-president Park Chung-hee said, “We will win nothing when we try to win everything.” So basically South Korea’s growth strategy is the same as the family education choice.

Q: Did US aid and ODA (official development assistance) also contribute to the economic take-off?

A: I think it was very useful, but not that decisive, because other countries that also swore political allegiance to the US, for instance, India and the Philippines, didn’t do so well.

There were other countries which also joined the US camp but didn’t capitalize on such network. But it was truly a very effective tool, especially during the 60s. The US aid was very important for the South Korean government. Fifty percent of our budget was coming from aid.

But after the 70s, the foreign aid became less important. More important was the US market. The opening of that market is a crucial factor for South Korea. The US was cooperative because of our alliance. They opened the door. But the US is not always a friendly trading partner, there are many trade disputes as well.

Q: The five industries that worked for South Korea’s economy may no longer work in the future. Are there substitutes?

A: You are right, the choice of the five industries was made in 1973.

It’s time for us to think about the next 40 years and the industries that will feed future generations 40 years later. Shipbuilding and steel industries are in decline. We know that. China will replace us soon.

So we’ll have to scale down and focus more on added value, rather than increasing the volume.

On the other side, electronics and automobiles have more years to go.

For the auto industry, Hyundai’s biggest competitor is not Toyota, not BMW, it is Samsung, because Samsung may make electric cars. The two companies may converge in the future.

But what may help them to survive is that Samsung and Hyundai will compete against each other head-to-head. Since they have a good competition inside and outside South Korea, I think the automobile industry will go on. The chemical industry is something in between.

So we have to think of something new. Koreans’ option is energy and biotechnology.

South Korea has actually started the search for our strategic position in the global market since the previous Lee Myung-bak administration.

Q: A successful industrial policy is at the heart of the economic miracle. But heavy-handed government intervention increasingly proves to be a problem. Will the government scrape the industrial policy?

A: The South Korean government played an important role in supporting the companies, until the 1980s. But regarding the big companies, now the government is not so heavily involved in their business.

The Japanese model of MITI (Ministry of International Trade and Industry), featuring close connection between government and industry, had been a very effective tool until the end of the 1980s. But after globalization, the link with the ministry really slowed down corporate decision-making. There were a lot of inefficiencies. So the link between the ministry and industry is less important today.

Government efforts to intervene will aggravate the problem, because the government doesn’t have much power, especially in terms of big companies. It can still support small- and medium-sized firms but for Hyundai and Samsung, there isn’t anything the South Korean government can support them in any way.

Regarding big companies, it is the other way around. The big companies are too powerful in [South] Korea. Now the government is trying to reduce the power of conglomerates, or chaebol.

Q: Park Chung-hee silenced dissent and pushed forward necessary reforms that paved the way for economic take-off. Due to curbs on her power, can current president Park Geun-hye push through similarly bold reforms?

A: Dictatorship is useful at the beginning of economic development. But when an economy gets mature, dictatorship cannot be effective.

The current government understands that there is too much involvement and regulation by the state. And the incumbent president Park Geun-hye, daughter of Park Chung-hee, is trying to push through the reform agenda about deregulation and reform of state-owned companies.

Those are the two pillars of the current President Park’s political agenda. It is very difficult, and she is trying to gain the support of the public. She has around 60 percent approval rate right now. But I fear the driving force is inadequate. Although the president’s willingness is strong, her strong drive is not fully conveyed at the ministry level. That’s the problem.