South Korea & Taiwan

Aaron Kratzat

South Korea

Syngman Rhee Economy under Rhee based on import

substitution Heavy reliance on US aid Land reform Political concerns drive economy Growth in industrial private sector

Park Chung Hee Military rule beginning in 1961 Movement away from agriculture Consolidation of power & decision-making Normalization of trade with Japan

1970’s Heavy industrialization Dependency on external borrowing Balance of payment difficulties Incentive system

1980’s Return to democracy Trade liberalization Decentralization

Haggard’s summary of Korea Combined import substitution “deepening”

with upgrade of exports in “big push” (128) Financial systems and foreign borrowing,

protection Limited foreign direct investment

Shafer’s summary of Korea Centralization necessary to compete with

multinational corporations Focus on high/high sectors could have

inadvertently helped opposition to military rule

Big industry “supplemented, not supplanted” existing small manufacturing

Taiwan

Taiwan versus South Korea Taiwan had primarily small firms. Less interaction between government and

business in Taiwan Division of government and business

between mainland Chinese and local Taiwanese

Military threat of China for Taiwan

Chiang Kai-Shek KMT retreat to Taiwan in 1949 There face no significant opposition parties Land reform US uses aid as leverage, Taiwan more

receptive than Korea Focus on import substitution

The impetus of export-led growth In 1959, US AID gives $30mil loan to

Taiwan in exchange for small decreases in trade barriers and sale of state businesses to private sector

Haggard’s summary of Taiwan State-owned companies took lead due to

lack of private investment Six year plan of 1976 focused on

technology Government created non-profit

organizations to conduct R&D

Wang’s summary of Taiwan Small firm sizes favor hi-tech industry

rather than heavy industry Strong relationship between information

technology and pre-existing industries IT mitigates deficiencies of single-minded

export-led growth

Questions What are the similarities between South

Korea and Taiwan’s routes to development? How much can these traits be generalized?

What are the effects of the differences in firm sizes between the two countries?

How much did government action and the type of government affect growth?