When it secured independence in 1948, South Korea was wracked by poverty, political chaos and popular discontent. It was widely regarded as a sinkhole of US aid. Now this small, ruggedly anti-communist country enjoys relative political stability; making impressive economic progress. It has become one of the success stories of the US assistance program.
Experts familiar with South Korea’s history since its war with the communist North insist that the ingredients for success had been there for a long time. However, they are convinced that the apparent miracle is genuine and most likely to continue.
Economic growth was at the rate of 7.6 per cent annually over the 1962-67 period, with an 8.4 per cent rise in 1967 and a surprising 13.1 per cent in 1968, but it started from a very low base. South Korea’s mixed economy is ranked 11th nominally and 13th largest GDP worldwide in purchasing power parity (PPP) terms; identifying it as one of the G-20 major economies. It is a developed country with a high-income economy and the most industrialised member country of the OECD. South Korean brands such as LG Electronics and Samsung are internationally famous and have garnered a reputation for the country’s quality electronics and other manufactured goods. Although considerable progress has been made toward democracy, the overriding need for stability and order and the government’s vigilant anti-communist policy lays a heavy hand across certain sectors of the society. However, the key element is a new feeling of self-reliance and self-assurance that has begun to pervade the country. “We can do it ourselves,” has become the motto for a people who were inclined to ask for long: “How can we ever succeed?”
From 1961 to 1996, South Korea underwent a period of rapid economic development, during which it transformed into a prosperous, industrial society. During these years, its economic growth rates were among the highest in the world. The state gave priority to economic development; focusing on a combination of state planning and private entrepreneurship. With few natural resources, it depended on a low wage, educated, and disciplined labour force to produce goods for exports. As wages rose, economic development shifted from labour to capital-intensive industries. Focusing initially on textiles and footwear, South Korean manufacturing moved to steel, heavy equipment, ships, and petrochemicals in the 1970s, and electronics and automobiles in the 1980s. Two major reforms under the administration of Syngman Rhee helped prepare the way for land reforms and educational development. However, it was the commitment to rapid industrialization that set the country off.
Industrialisation was characterised by a close pattern of cooperation between the state and large family-owned conglomerates known as chaeb?ls. But after 1987, labour emerged as a major political force. Rising wages gave further impetus to the development of a more capital-intensive industry. Although living standards still lagged behind those of North America, Western Europe, and Japan, the gap was significantly narrowed. After 1996, its economic development slowed but was still high enough to achieve a per capita income comparable to the countries of Western Europe and to shift from a borrower of technology to an innovator in technology.
South Koreans attribute much of their success to traditional values. By this, they mean hard work; discipline; respect for learning; frugality; the importance of family; emphasis on education; high esteem in which civil servants were held that attracted talented technocrats to serve the state and be willing to delay gratification. All this has resulted in a high savings rate; characterised the period of rapid economic growth. Many scholars found it necessary to look at specific developmental policies and historical contingencies to explain the economic transformation of South Korea, including the roles played by land reform; educational development and the ways by which the country achieved technical transfers.
On the other side, almost all financial indicators in Pakistan have seen a downward trend. The growth rate fell by almost 50 per cent from 6.2 per cent to 3.3 per cent.
South Koreans attribute much of their success to traditional values
It is expected to go down even further to 2.4 per cent next year, the country’s lowest in the past 10 years. The Pakistani rupee has lost a fifth of its value against the dollar since the beginning of this fiscal year. Inflation is expected to hover around 13 per cent over the next 12 months; reaching a 10-year-high as well.
Then, there is the issue of the ever-increasing debt, which eats up some 30 per cent of the budget every year. Pakistan continues to take out loans to be able to cover repayments of past borrowing. It recently signed yet another deal with the International Monetary Fund (IMF) for a bailout package worth $6 billion.
The country has low sources of revenue and high non-development expenditures, a recipe for a financial disaster.
For decades, Pakistani authorities have been unable to establish effective tax collection practices. Currently, only one per cent of Pakistanis pay taxes and the country has one of the lowest tax-to-GDP ratios in the world.
Successive governments have avoided imposing stricter controls because of widespread corruption. In fact, it is cheaper for them to bribe than to pay their dues.
Thus, the tax burden in Pakistan falls overwhelmingly on the poor who pay it in various indirect ways despite already struggling to make ends meet. Currently, a third of the nation is living below the poverty line. Pakistan may follow the footsteps of South Korea in technology and industrialisation.
Now, those in power and those who enjoy economic privileges must realise that this status quo is unsustainable. The only way out is to implement a just easy tax system along with cancellation of large currency notes like thousand and five thousand.
If Pakistan is to avoid the looming economic disaster, it must revise current spending and prioritise expenditures that will actually generate social and economic development and uplift the poor, not just the civilian and military elites.
The writer is an author, analyst, educationist, human rights activist, blogger, certified trainer, life coach and poet. He is a motivational speaker and a cultural-cum-political analyst. He tweets @DrZeeshanKhanA1 and can be reached at [email protected]