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Lessons from South Korea: Indian industry and government must unite

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In Brief

Last week I went back to Seoul after 26 years. The city is transformed and so is the economy. In 1984, when I visited the export processing zones, Masan and Iri contributed at least 60 per cent of total exports from South Korea. Posco had been established as a public sector company to take on established global giants and out-competed all of them despite having to import 100 per cent of its raw materials by relying on latest technology, economies of scale and above all, sheer hard work and dedication. And, at the same time, Korea was reaching full employment levels by furiously expanding labour intensive exports.

The question arose in my mind that if Korea could successfully combine the latest technology with large-scale employment generation, could India do it as well?


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My most striking memory from 26 years ago is of lunch with the president of the Federation of Korean Industries, the organization of the Korean chaebols. These chaebols, like the Japanese zaibatsus, worked closely with their respective governments to create the two industrial juggernauts. I asked the president what the main lessons were for India from the Korean experience in industrialisation. He gave me three nuggets of information that have remained with me since.

First, countries and/or their firms cannot succeed in a fiercely competitive global economy (this was in 1984) unless industry and government worked closely together to achieve national goals.

Second, developing countries should not be unduly concerned about national pride and national brands as long as they can generate the necessary employment for a young workforce by successfully attracting the necessary technology and foreign direct investment (FDI). But neither should they forget that regaining national pride and building national brands are both worthy goals that can be achieved over time. Pragmatically, at that time the Koreans had handed over Masan largely to firms from Japan, a country which colonised Korea not so long ago, breaking down the gate of their emperor’s palace.

Third, a country is only as good as its human capital. The president cited with approval the efforts of his friend Professor Choi, founder of the Korea Advanced Institute of Science and Technology, to bring Korean researchers back from the US by paying them salaries that compared favourably with salaries paid to senior bureaucrats and corporate managers. And, as we know, Professor Choi succeeded brilliantly. Korea has emerged as a leader in several frontline technologies and now competes through product innovation and not as a low-cost producer.

Have we learnt these simple lessons in India? I am afraid not. Government and industry, though not mutually suspicious any more, are still not working together for a common national purpose. For example, the maximization of employment generation is a common goal of both government and industry. Given this, special economic zones, which have already generated large-scale employment, should not be controversial. The criterion for making land available on a priority basis should become the number of jobs generated per unit of land. All restrictions, except on strategic grounds, should be removed on FDI when it can generate employment.

There is, of course, give and take between government and industry. But it is often non-transparent and so is perceived to be largely for private, not national, purposes. This can change if the industry decides to make the government accountable and ceases to act as a supplicant seeking favours. But, in order for that to happen, industry must achieve greater social legitimacy by paying honest taxes, not cutting regulatory corners, generating employment, and lowering prices when it can. In sum, Indian industry must be seen by the people as working for national goals rather than the maximization of personal consumption and ostentation.

Unlike Korea, India still fails to recognize the importance of attracting back our human capital. Instead, we celebrate whenever a person of Indian origin earns global recognition. This is a loser’s pride. Given that the Indian higher education system hardly produces any researchers with global status, the only way forward is to attract talent back from abroad as seed capital. Indian industry can play a major role by beginning its charity at home rather than donating millions of dollars to foreign universities.

Moreover, India should recognize that its talent will not be attracted back only because of a love for the motherland, or because of the possibility of participation in policy making. Researchers need living and working conditions comparable to those which they give up. Here, we must learn from Pakistan, where, in 2006, the government announced education pay scales that, in purchasing power parity terms, are better than those obtained in most advanced economies.

Rajiv Kumar is director and chief executive of the Indian Council for Research on International Economic Relations.

This essay is adapted from an opinion piece first published here in the Mint.

One response to “Lessons from South Korea: Indian industry and government must unite”

  1. You are very right when you cite Korea as a lesson for India. Yes in India we should learn all the good things from the world and Korea is a good example.Though we say we move like elephants time is ripping us. Industry Govt Nexus, Human Capital, Pride of Nation is diminishing with individualness.
    We have to sit and look at ourselves
    T.S.Chandrashekar MAM’PhiL/(PhD South Korea)
    North and South Korea Expert
    President: Korea Academy (R)
    Bangalore India

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