9 - ASEAN–Korea Co-operation in the Development of New ASEAN Members: Korea's ODA Policy

Summary

INTRODUCTION

Korea was one of the major beneficiaries of international aid activities from the 1960s to the 1980s. Korea quickly reconstructed itself after the Korean War of 1950–53 and soon emerged as one of the world's leading manufacturers of selected industrial products, such as home electronics, ships, and cars. Little wonder then that a number of international development organizations (including the World Bank) termed Korea's economic development over the last five decades a “miracle”. However, it should be noted that Korea had benefited substantially from assistance provided by the international community. The international aid nurtured Korea's industrial and developmental capacity in three ways. First, during the first decade of the post-Korean War period, the United States provided a total of US$2.5 billion as grant-type aid to Korea. This accounted for about 80 per cent of Korea's total fixed capital formation. The total amount of Official Development Assistance (ODA) received by Korea in the years 1945–80 is reported to be US$20.3 billion. This sum can be subdivided into grants of US$4.5 billion and loans of US$15.8 billion. Second, numerous developed countries had provided Korea with technical assistance, thereby aiding in the development of its industrial capacity and market economy system. Third, Korea is a long-time developing country, and due to its status as such, it was granted preferential access when it exported to its major trading partners. This was especially so under the generalized system of preferences (GSP) scheme, which lasted until the mid-1990s.

Since becoming a newly industrialized economy (NIE) in the mid-1980s, Korea has begun to provide ODA. The establishment of the Economic Development and Co-operation Fund (EDCF) in 1987 under the auspices of the Korea Eximbank marked the beginning of Korean activity in dispensing ODA. The EDCF provided developing countries with loans for the development of their industrial capacity, the stabilization of their economies, and to strengthen their economic ties with Korea.