Page last updated at 03:27 Asia/Manila, Friday, 09 May 2014 PH
South Korea should be the model of many emerging markets trying to escape the middle-income trap in the next ten to twenty years. As I have written in this column, this Northeast Asian country was one of the few large economies that graduated to First World status in the last century, leaving behind others who were more prosperous after the Second World war such as Argentina, the Philippines, Thailand, Burma, Indonesia, Brazil, South Africa and Mexico. Because it began its ascent to development with the same challenges faced by the developing countries of today (e.g. rampant corruption, a very backward agricultural sector, acute lack of infrastructures, low levels of literacy and high rates of poverty), South Korea can be a realistic model to emulate. As discussed before, the key factors for the so-called "Miracle on the River Han" were initial focus on agrarian reform and rural development, high investments in infrastructure, focus on quality education at all levels, State support to strategic industries on the basis of meritocracy, and the fostering of research and development. Only late in the last century did good governance become a major concern of the national leaders as democratization provided the necessary checks and balances to combat corruption. From a per capita income of less than $1,000 in the 1960s, South Korea now enjoys an income of $24,000 per capita, making it the latest member of the OECD nations.
Last February 25, I traveled to Seoul to attend a conference on ASEAN-Korea relations sponsored by the ASEAN Korea Center, a governmental body. I was very impressed that many government officials and private sector executives in Korea are much more knowledgeable about the opportunities and challenges the ASEAN Economic Community will bring starting 2015 when there will be free flow of goods, services, capital, labor and technology among the ten members countries of the ASEAN than their counterparts in the Philippines. The usually inward-looking and protectionist Filipinos are still trying to digest what will be the implications of the AEC on their respective businesses. The Koreans are already several steps ahead of us, identifying opportunities for ASEAN integration in such sectors as infrastructures, construction, real estate, car parts manufacturing, chemicals, food manufacturing, garments, tourism, education, media and entertainment. Many of the participants came to me, asking about how to look for their possible joint venture partners in many of these sunrise industries. I promised to go back later this year to give an economic briefing on these profitable industries in which they can invest, with the view to using the Philippines as staging point for the whole ASEAN. They were especially interested in the acronym VIP, which signifies Vietnam, Indonesia and the Philippines. As I diplomatically alerted the Japanese executives I briefed on the economy in a conference organized by the Philippine-Japan Economic Cooperation Committee, Korean companies like Hyundai, Samsung, LG, Korean Electric as well as numerous medium-sized companies will compete with the Japanese in locating their manufacturing plants in the ASEAN, looking for more competitive and productive manpower that they no longer find in China.
What impressed me to no end was to read in the Korea Joongang Daily (February 25, 2014) of the three-year plan of the Government of President Park Geun-hye (daughter of the founder of industrialization and modernization of South Korea, Park Chung Hee) to sustain a 4 percent annual GDP growth and a 70 percent employment rate in the next three years to bring Korea to a level of GDP per capita of $40,000 during her presidency (called the "474" plan). Although there are critics who question the realism of such ambitious goals, I know the Koreans enough to be confident that they will give their very best efforts to come close to their targets. That is why it is always exhilarating to visit their country and talk to their leaders to get inspiration in our own efforts to duplicate over the next twenty years of Philippine economic development what they accomplished in the last century.
Although some of their strategies are more applicable to an advanced economy already suffering from low fertility rates and a rapidly aging society, I still found it useful to study details of the 474 plan that could give us leads in our own efforts to attain inclusive growth. A major policy move is to stimulate the domestic market and to strongly support small businesses. They are making an extra effort no longer to be as dependent on exports as they have been in the past. Their government is also imposing stricter management of public institutions such as debt restructuring, realizing a more creative economy by offering stronger support for start-ups and encouraging employment of women and retired employees. The government has also lifted regulations on the real estate market, which has been in the deep freeze since 2008. Some of these concerns of the Korean policy makers may suggest some moves on our part to intensify Korean-Philippine economic relations. For one, we may significantly increase our exports of high-value agribusiness products, such as bananas, pineapple, and other fruits and vegetables as the Korean consumers cut down on their savings rate and spend more of their incomes on non-basic items. We can also continue selling more of our condominium units to the Koreans who are residing in the Philippines, considering that real estate is very expensive in their urban areas. We may pay special attention to attracting SMEs in manufacturing to locate in our industrial zones. We may offer to the major conglomerates from South Korea to employ our topnotch managers and professionals in their operations in other Southeast Asian countries like Indonesia, Vietnam, Myanmar, Thailand and Malaysia as other multinationals from other parts of the world have already been doing for years. I would like to see many more Filipino entrepreneurs exploring closer relations with their Korean counterparts in the coming years. The Korean Studies Program of the University of Asia and the Pacific will act as a catalyst for these closer relations. For comments, my email address is email@example.com.