G20 host Seoul positions itself as rags-to-riches mediator

Seoul is hoping that the world’s richest nations will remember some of the poorest at this week’s Group of 20 Summit. The South Korean government has recommended an agenda that highlights economic growth in emerging countries, taking a page from its own rapid development with its policy suggestions.

The country’s aggressive industrialization policies of the 1960s and '70s that emphasized exports helped create what Koreans call the “Miracle on the Han River.” Between 1962 and 1989, the country experienced an average of 8 percent growth per year. Over the past 50 years, Korea’s GDP per capita has risen from around $100 to just under $20,000 today.

The country’s rather recent emergence from economic destitution has put it in an unusual position among today’s advanced economies.

“Korea can play an important role [at the G20 Summit] as a country that still has a living memory of poverty, but that is rich enough to know what economic prosperity means,” University of Cambridge economics professor Ha-joon Chang told a Seoul audience last month.

Using rags-to-riches narrative

South Korea has used its rags-to-riches success to launch a series of campaigns encouraging poor countries to adopt what is known as the Korean development model. Several countries in Africa, including Rwanda, have already consulted with Seoul about how they might follow in the country’s footsteps.

“After the Korean War, the country was devastated. Economic and social infrastructures were destroyed, and people felt inferior and desperate. It was more or less like some of the fragile states in Africa today,” says Joo-hyun Lee, a senior researcher at the Korea Institute for Development Strategy, which consulted with the government on the creation of the G20 development agenda.

“We believe Korea’s development path can be a good model for African countries. We have development experience, experts who were engaged in Korea’s rapid development process and the know-how to help,” she added.

South Korea's mediator role

As the first non-G8 country to host the G20 Summit, the Korean government has played up its role as a mediator between the world’s wealthy and developing economies.

President Lee Myung-bak instructed the Presidential Committee for the G20 Summit to come up with a list of policy initiatives to present at the summit. Using the slogan of “partnership focused on economic growth,” the committee suggested a range of policies including strengthening infrastructure, increasing private investment, and opening up developing markets to international trade. The committee says Seoul will focus on the idea of “aid for trade” at the summit, emphasizing the link between access to global markets and economic growth.

In a television address 10 days before the summit, Mr. Lee explained the reasoning behind Korea’s development proposals.

“Based on our own development experiences, Korea proposed that the assistance that has so far been centered on aid be replaced with policies aimed at strengthening the foundation for growth,” Lee said. “Through these efforts, it would become possible to establish a fair global community and economic order.”

Criticism of Seoul's 'Aid for Trade'

The government’s emphasis on free trade over aid in its G20 development agenda, however, has left some wondering whether Seoul has wandered from its own development model.

Korea received millions of dollars in aid from the United Nations Development Program and other international donors throughout its development process. Last year, Korea became the first major recipient of overseas development aid to become a major international aid donor.

Korea’s economy also benefited from relatively closed markets during the cold war. Professor Chang calls Seoul’s call for freer markets “fundamentally at odds with how Korea itself developed."

“In the early stages of economic development," he says, "Korea used a mixture of protectionism, regulation of foreign investment, lax international property rights, and occasional use of state-owned enterprises in order to nurture and develop high productive industries like steel, automobiles, electronics and ship building which are now the main pillars of the Korean economy.”