GEO 460: Geography of Development U n i t e d N a t i o n s O f f i c i a l D e v e l o p m e n t A s s i s t a n c e P r o p o s a l : S o u t h K o r e a V E R S U S S o u t h A f r i c a , a C o m p a r a t i v e A n a l y s i s

Written by: David C. Harary

     

           

     

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TABLE OF CONTENTS CHAPTER I: SOUTH KOREA….. 3 – 9

INTRODUCTION………………………………………………………… 2

ECONOMIC STRUCTURE………………………………………… 3

GENERAL FACTS………………………………………………………. 4

ECONOMIC DEVELOPMENT ISSUES……………………. 4 – 7

SOLUTIONS……………………………………………………………….. 7 – 9

CHAPTER 2: SOUTH AFRICA.. 10 – 16

INTRODUCTION……………………………………………………….. 10 – 11

ECONOMIC STRUCTURE……………………………………….. 11 – 12

GENERAL FACTS……………………………………………………… 12 – 13

ECONOMIC DEVELOPMENT ISSUES……………………. 13 – 14

SOLUTIONS……………………………………………………………….. 14 – 16

CHAPTER 3: ODA ANALYSIS.. 17 -- 19

INTRODUCTION………………………………………………………… 17

SOUTH KOREAN ODA……………………………………………… 17 – 18

SOUTH AFRICAN ODA……………………………………………... 18 – 19

CHAPTER 4: CONCLUSION….. 19

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CHAPTER I: SOUTH KOREA INTRODUCTION:

The Republic of Korea (South Korea) is a country in East Asia that has a

population of over 50.21 million citizens. With a unitary presidential constitutional

republic government type, the government is divided into three branches: executive,

judicial, and legislative. Local governments within South Korea operate similar

executive and legislative branches as well. South Korea is a member of the United

Nations, World Trade Organization (WTO), the Organization for Economic Co-Operation

and Development (OECD), Asia-Pacific Economic Cooperation (APEC), and the East Asia

Summit. The capital of South Korea is Seoul.

ECONOMIC STRUCTURE:

Ranked 15th in the world by nominal GDP and 12th by purchasing power parity

(PPP), South Korea has a market economy.1 According to the International Monetary

Fund (IMF), South Korea’s GDP in 2012 was valued at 1,129,536 million (USD). As

such, South Korea is identified as one of the major G20 economies.

South Korea’s economy is heavily dependent on international trade. In 2010,

South Korea was the 6th largest exporter and 10th largest importer in the world.

Transportation and energy in South Korea are arguably the most advanced sectors

within East Asia. High-speed railways have become a major infrastructural

development in South Korea’s economy. In addition, South Korea is the 5th largest

nuclear power producer in the world.2

                                                                                                               1 “Report for Selected Countries and Subjects”. World Economic Outlook Database, 2 “Another Korean Nuclear Issue”. The Diplomat. July 19, 2010.

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GENERAL FACTS:

Population: 26th ranked – 50,219,669 (as of July 1st 2013)3

Gross Domestic Product (PPP): 12th ranked – 1,662 billion (USD billion, 2012, IMF)4

Gross Domestic Product (PPP) per capita: 26th ranked - 31,950 (USD, 2012, IMF)5

Literacy rate: 97.9% (total), 99.2% (male), 96.6% (female, 2002)67

Unemployment rate: 2.8% (October 2013), 7.8% for those aged between 15 – 298

Foreign Direct Investment: 16.3 (2012, USD, billion), 11.5 (2009, USD, billion)9

Happiness: 41st ranked -- 6.26710

ECONOMIC DEVELOPMENT ISSUES Due to both diplomatic tensions and close proximity to North Korea, South

Korea’s economy is hindered by unstable national security (figure 1). The country’s

credit rating has frequently fallen due to belligerence of North Korea in times of

military and political crises. As such, Korea’s financial markets are hit with large

adverse shocks. Increased terror attacks in the country create further instability in the

markets.11 “If an acknowledged nuclear weapons test in North Korea did take place,

one could reasonably expect that, at least in the short run, sovereign debt would be

downgraded and both foreign and domestic investors would liquidate won-denominated

assets.” (Eberstadt et. al., 2006). However, South Korea’s government could potentially

                                                                                                               3 http://en.wikipedia.org/wiki/List_of_countries_by_population 4 "Report for Selected Countries and Subjects”. October 9,2013", International Monetary Fund. 5 World Economic Outlook Database-October 2013, International Monetary Fund. 6 Literacy definition: age 15 and over can read and write 7 CIA World Factbook, 21 February 2013 8 S. Korea's jobless rate rises on youth unemployment, Global Times, 13 November 2013. http://www.globaltimes.cn/content/824512.shtml#.UqTBMGRDvWo 9 Foreign Direct Investment, Korea.net, http://www.korea.net/AboutKorea/Economy/Foreign-Direct-Investment 10 Ranking of Happiness 2010-2012, World Happiness Report 2013, http://unsdsn.org/files/2013/09/WorldHappinessReport2013_online.pdf 11 Economic Implications of a Fundamental Shift in North Korean Security Policy, Nicholas Eberstadt, et. al., Asia Policy Number 2 (July 2006), 25-29.  

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use its plentiful reserves (over $200 billion) to eliminate the possibility of a financial

crisis due to emergency shocks in North Korea.

Figure 1

Territorial conflicts between South Korea, China, and Japan also hinder major

economic development problems on the nation. In 2005, Korean President Roh Moo-

hyun accused Japan of "rationalizing its history of invasion and colonization."12

Specifically, territorial control over the Liancourt Rocks has been an ongoing

contention between South Korean and Japanese foreign relations. The rocks lie within

rich fishing grounds, which may contain large deposits of natural gas.13

Another major issue South Korea has had to face is the lack of natural

resources in the country. While the country produces coal, tungsten, graphite, lead,

and hydropower potential, exports have to rely on human capital. Because of this,

                                                                                                               12 “Korea-Japan dispute strains longstanding alliances”, Christian Science Monitor, Robert Marquand, 25 March 2005, http://www.csmonitor.com/2005/0325/p07s02-woap.html 13 "Island row hits Japanese condoms", BBC News, 2008-07-27

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South Korea has had to invest greatly in its education sector and regards education as

being crucial to its financial and social success. In the 2006 results of the OECD

Programme for International Student Assessment, South Korea came first in problem

solving, third in mathematics and seventh in science.14 The lack of natural resources

contributes greatly to its high importation value, which is 10th ranked in the world.

Happiness in South Korea is generally very low despite a high life expectancy

rate above 80 years. The country has been suffering from a high suicide rate among

youths, which has increased by 57 percent from 2001 to 2013 (figure 2).15 South

Korea ranks first among all 30 OECD countries in suicide.16 Furthermore, suicide is the

most common cause of death for persons aged 40 or younger.17

                                                                                                               14 "Organisation for Economic Co-operation and Development". Pisa.oecd.org. 15 “Youth suicides in S. Korea up 57 pct in a decade”. Global Post, Yonhap News Agency. http://www.globalpost.com/dispatch/news/yonhap-news-agency/130910/youth-suicides-s-korea-57-pct-decade. 16 Society at a Glance 2009: OECD Social Indicators, Organization for Economic Co-operation and Development 17 Suicide main cause of death for those under 40 in S. Korea, Yonhap News

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Figure 2

SOLUTIONS

In November 2010, Seoul hosted the fifth G20 Summit. The Institute for

International Trade under the Korea International Trade Association said in a report

that the summit would be able to create 31 trillion won ($27.9 billion) in economic

effects and over 160,000 jobs.18 The summit was expected to raise exports by $17.3

billion, which would reduce South Korea’s foreign debt by over $250 million.

                                                                                                               18 Koh Young-aah (October 11, 2010). "G20 to boost Korean economy by W31.3tr". Korea Herald (Seoul).

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South Korean President, Park Geun-hye, has been touring around the world

within the last few months to pitch “sales diplomacy”. The initiative is aimed at “forging

closer economic and financial partnerships, and securing support for her regional

peace and cooperation initiatives from major players in global diplomacy.” On

November 2nd, 2013, President Park arrived in Paris, France for a three-day European

tour, which also included trips to Brussels, Belgium and London, UK. Park has also

traveled to Vietnam and Indonesia on the same platform.

In 2009, South Korea and the United States announced the Joint Vision for the

Alliance of the Republic of Korea and the United States of America.19 The United States

government said, “The Alliance is adapting to changes in the 21st Century security

environment. We will maintain a robust defense posture, backed by allied capabilities

which support both nations' security interests....we will continue to deepen our strong

bilateral economic, trade and investment relations.... In the Asia-Pacific region we will

work jointly with regional institutions and partners to foster prosperity, keep the peace,

and improve the daily lives of the people of the region.... The United States of America

and the Republic of Korea will work to achieve our common Alliance goals through

strategic cooperation at every level.” Nearly 60 billion dollars of trade volume between

the two countries display the significant economic interdependence between the two

states.

To combat the country’s lack of natural resources, South Korea has been

developing its own petrochemical industry. In 2009, shipments by South Korea’s

chemical and petrochemical industries were valued at 99.4 and 63.7 trillion Korean

                                                                                                               19 Joint vision for the Alliance of the Republic of Korea and the United States of America, June 16, 2009. The White House.  

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won (W) (U.S. $87.7 billion and $56.2 billion), respectively.20 The Korean government

has recommended a plan to increase total R&D investment to increase from 3.23% of

GDP in 2006 to 5% in 2012. This R&D would go towards the development of key

technologies and composite materials that would insure South Korea’s

competitiveness in the petrochemical industry.21

                                                                                                               20 “The Chemical Industry of South Korea: Progress and Challenges”. Jae Hyun Cho et. al., Chemical Engineering Progress. 01 December 2011. http://www.aiche.org/sites/default/files/cep/20111240.pdf 21 Lee, H.S., et al., “International Comparison and Analysis of R&D Investment of South Korean Government,” Korea Institute of Science and Technology Evaluation and Planning, Issue Paper 2010-2012 (2010).

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CHAPTER 2: SOUTH AFRICA

“Overcoming poverty is not a task of charity, it is an act of justice. Like Slavery and Apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings. Sometimes it falls on a generation to be great. YOU can be that great generation. Let your greatness blossom.” — Nelson Mandela

INTRODUCTION: The Republic of South Africa is a country located on the southern tip of Africa

and gained its independence from the United Kingdom on the 31st of May in 1961.

With a population of over 52.9 million, South Africa is the largest and most developed

economy in Africa. South Africa has been identified as a middle power in international

affairs, and maintains significant regional influence.22

With 80% of the population having black ancestry divided among a variety of

ethnic groups, South Africa is a truly multiethnic society. South Africa’s constitution’s

recognition of 11 official languages is among the highest number of any country in the

world.

The government operates a constitutional parliamentary republic and is

recognized as a founding member of the United Nations, the African Union (AU), and

the New Partnership for Africa’s Development (NEPAD). South Africa is also a member

                                                                                                               22 Cooper, Andrew F.; Antkiewicz, Agata; Shaw, Timothy M. (10 December 2007). "Lessons from/for BRICSAM about South-North Relations at the Start of the 21st Century: Economic Size Trumps All Else?". International Studies Review 9 (4): 675, 687. doi:10.1111/j.1468-2486.2007.00730.x.

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of the Commonwealth of Nations, the Group of 77, the Southern Africa Development

Community, the South Atlantic Peace and Cooperation Zone, Southern African

Customs Union, the Antarctic Treaty System, World Trade Organization, International

Monetary Fund, G20 and G8+5. South Africa has no legally defined capital city.

ECONOMIC STRUCTURE: South Africa’s mixed economy is the largest in Africa with a total nominal GDP

of 595.700 (2013) and GDP at purchasing power parity of 608.804 (2012) (USD,

billion).23 The World Bank ranks the economy as an “upper middle income” economy.24

Since 1996, the economy has nearly tripped in size while foreign exchange reserves

have increased from $3 billion to nearly $50 billion.25 Today the tertiary sector drives

the South African economy, representing roughly 65% of its GDP (figure 3). South

Africa is abundant in resources and is heavily diversified with key economic sectors

including mining, agriculture and fisheries, vehicle manufacturing and assembly, food

processing, clothing and textiles, telecommunication, energy, financial and business

services, real estate, tourism, transportation, and wholesale and retail trade.26

                                                                                                               23 "South Africa". International Monetary Fund. Retrieved 2013-10-27. 24 Editorial. "Africa's Largest Economies – Top 20 Economies in Africa". therichest.org. 25 http://www.cnn.com/2013/11/27/business/south-africa-since-apartheid/  26 South Africa's Economy. "Key Sectors". Media Club South Africa

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Figure 3

GENERAL FACTS: Population: 25th ranked – 52,981,991 (as of July 1st 2013)27

Gross Domestic Product (PPP): 25th ranked – 595.700 (USD, 2013, billions, IMF)28

Gross Domestic Product (PPP) per capita: 83rd ranked -- $6,847(USD, 2013, IMF)

Literacy rate: 93% (total), 93.9% (male), 92.2% (female)2930

Unemployment rate: 24.7% (as of 30 September 2013, SAUTERATE index)31

Foreign Direct Investment: $4.6 billion (1.2% of GDP, 2012)32

Happiness: 142nd ranked – HPI score: 28.233

                                                                                                               27 http://en.wikipedia.org/wiki/List_of_countries_by_population 28 "South Africa". International Monetary Fund. 29 Literacy rate definition: age 15 and over can read and write 30 The World Factbook, Central Intelligence Agency (CIA) 31 http://tradingeconomics.com/ 32 http://oecd.org/ 33 http://happyplanetindex.org/

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Figure 4

ECONOMIC DEVELOPMENT ISSUES: Despite a geographically relative high GDP per capita of $11,525, the country

still faces very high poverty and unemployment. According to the 2008 Human

Development Report (HDR) under the United Nations, 26.2% of South Africa’s

population earns less than $1.25 per day while 42.9% earn less than $2.00 per day

(2000-2006).34 Measured by the Gini coefficient, South Africa ranks among the top ten

countries in the world for income inequality (figure 5).3536

                                                                                                               34 Development and poverty indices: http://hdr.undp.org/ 35 "Inequality in income or expenditure / Gini index, Human Development Report 2007/08". Hdrstats.undp.org. 4 November 2010. Retrieved 26 June 2013. 36 "Distribution of family income – Gini index". Cia.gov. Retrieved 26 June 2013.  

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Although South Africa is the largest and most developed country in Africa, the

nation suffers in studies measuring overall happiness levels (figure 4). Ranked 142nd by

the Happy Planet Index, nearly 50% of South Africans are either outright poor or

vulnerable to become poor. Meanwhile, 7% of the population holds over 40% of the

nation’s wealth.

While South Africa is classified as a “medium human development” country, it

still ranks far below than expected on the gender-related development index (ranked

108th). Due to racial segregation and apartheid from 1948 to 1994, the country is still

heavily divided between colored persons, blacks, and whites. Remnants of the

apartheid are still seen in South African culture, society, and politics.

Figure 5

SOLUTIONS: The most comprehensive solution plan being devised is under the National

Planning Commission (NPC), administered by the Office of the President of South

Africa. The NPC was established in 2009 in order to strategically plan and accelerate

growth, reduce poverty, and ensure smooth economic development. Made up of 25

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commissioners, the NPC are taking consultations to better shape the key challenges

outlined above.

The NPC’s, “National Development Plan 2030”, has a goal to eliminate poverty

and reduce inequality by 2030.37 The nine challenges the commission is set to tackle

are:

1. Too few people work 2. The quality of school education for black people is poor 3. Infrastructure is poorly located, inadequate and under-maintained 4. Spatial divides hobble inclusive development 5. The economy is unsustainably resource intensive 6. The public health system cannot meet demand or sustain quality 7. Public services are uneven and often of poor quality 8. Corruption levels are high 9. South Africa remains a divided society

Two of the initiatives set forth within the Executive Summary of the NPC’s National

Development plan are:

Growth and jobs, education and skills, and a capable and developmental state

• Raising employment through faster economic growth.

• Improving the quality of education, skills development and innovation.

• Building the capability of the state to play a developmental, transformative

role.

Direct and immediate measures to attack poverty

                                                                                                               37  National  Development  Plan  2030,  Executive  Summary.  National  Planning  Commission,  Department  of  The  Presidency  of  the  Republic  of  South  Africa  

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• Introduce active labour market policies and incentives to grow employment,

particularly for young people and in sectors employing relatively low-skilled

people.

• Expand public employment programmes to 1 million participants by 2015

and 2 million by 2020. As the number of formal- and informal-sector jobs

expands, public work programmes can be scaled down

• Strengthen primary health-care services and broaden district-based health

programmes, such as the community health worker and midwife

programmes, and health education.

• Expand welfare services and public employment schemes, enabling the

state to service and support poor communities, particularly those with high

levels of crime and violence.

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CHAPTER 3: ODA ANALYSIS

INTRODUCTION: Official development assistance (ODA) is a term used by OECD to measure aide.

First used in 1969, it’s widely used as the primary indicator of international aide. The

full definition of ODA is:38

“Flows of official financing administered with the promotion of the economic

development and welfare of developing countries as the main objective, and

which are concessional in character with a grant element of at least 25

percent (using a fixed 10 percent rate of discount). By convention, ODA flows

comprise contributions of donor government agencies, at all levels, to

developing countries (“bilateral ODA”) and to multilateral institutions. ODA

receipts comprise disbursements by bilateral donors and multilateral institutions.”

— OECD, Glossary of Statistical Terms

SOUTH KOREAN AIDE: ODA was the only source of capital for Korea after the Korean War (1950-

1953).39 In 1995, Korea ended its dependence on the World Bank’s assistance and

was excluded from the list of ODA recipients in 2000. In 2010, Korea became the 24th

member of Development Assistance Committee (DAC), the international donor’s club.

South Korea now receives limited ODA capital.

                                                                                                               38 The Developmental Effectiveness of Untied Aid: Evaluation of the Implementation of the Paris Declaration and of The 2001 DAC Recommendation on Untying ODA to the LDCS, Ramkolowan, Yash et al., Development Network Africa, http://dnafrica.com/  39 History of Korea’s ODA, http://odakorea.go.kr/

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Figure 6

SOUTH AFRICAN AIDE: ODA was first used to support national policy development in South Africa in

1994-1995. Aide has since been progressively increasing and diversifying since then

(figure 7).

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Figure 7

CHAPTER 4: CONCLUSION

United Nation’s ODA should be given to South Africa based on a variety of economic

development challenges. However, with South Africa’s NPC being committed to ending

poverty and reducing economic inequality by 2030, there are hopeful changes being

made. The United Nations should back the NPC’s development plans because of the

following reasons:

• South African economic development can act as a catalyst for the growth of

greater Southern Africa and the continent at-large

• South Africa’s rank among the top 10 unequal countries fosters opportunity for

all 51 million citizens

• South African’s culture and society has seen a renaissance unlike any other

country within the last 20 years, and that trend will continue to grow

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