Transcript Africa-Korea Economic Cooperation

KEEI and UNECA Conference: 30 June-1 July 2011
Africa-Korea Economic Cooperation
: Issues and Future Strategies
Professor Lee, Jin-sang
Graduate School of International Studies
Korea University, SEOUL, KOREA
[email protected]
Tel: +82-2-3290-2428
Mobile: +82-10-4722-3801
Copyright@Lee, Jinsang
Contents
I.
I. Overview of Africa
II. II. Problems of African Economies
III. III. Overview of the Korean Economy
IV. IV. Development Path of Korea
V. V. Key Success Factors of Korea
VI. VI. Strategies for African Development
VII.VII. Africa-Korea Economic Cooperation
Copyright@Lee, Jinsang
2
I. Overview of Africa - 1. Continent
 Africa is the world's second largest continent after Asia
 Area : 30,221,532 km2
 Population : More than 1 Billion (growing at twice the rate of other regions )
 Pop. Density : 30.51/km2 (about 80/sq mi)
 Countries : 53 countries, but will be 54 in July 2011
 Languages : 2000+ (UN estimation )
 Resources : Rich in Oil, gold, diamonds, alloys, arable land and several others
 Africa is one of the fastest urbanizing regions
- In 1900, 5% of Africa's lived in urban areas.
- In 1950 , 14.7% lived in urban, in 2000 it raised to 37.2% and is expected to rise to
54% by 2030.
Africa has a lot of potential to achieve economic development.
Copyright@Lee, Jinsang
3
I. Overview of Africa - 2. Economic Performance (1)
Growth distribution (annual percentage)
Real GDP growth and per capita GDP
During the five years prior to the global financial and economic crisis,
Africa’s real Gross Domestic Product (GDP) growth averaged more than 5.0 percent,
reaching 6 percent in 2007 and dropping down to 5.4 percent in 2008.
Copyright@Lee, Jinsang
4
I. Overview
of
Africa
2. Economic Performance(2)
Growth of African Countries
Growth in Africa, oil vs. non-oil economies,
2006-2008 (%)
Sub regional growth performance,
2006-2008 (%)
Distribution of growth performance in Africa,
2006-2008 (53 countries)
 Number of oil-importing African countries achieving a growth rate of
7% or more has consistently declined over the last 3 years.
 Gains in per capita income are modest.
 Recent estimates show that the poverty rate in Sub-Saharan African(SSA)
countries in 2005 was the same as the rate of 50 per cent in 1981.
 The number of poor people has actually doubled
Africa needs more effective strategies for
greater integration with the global economy.
Copyright @ Lee, Jinsang
5
I. Overview of Africa - 2. Economic Performance(3)
Africa’s share in world trade (%)
Africa’s share in world trade (%)
Africa’s share in world trade (%)
 Over the last few years, Africa has registered some progress in terms of trade performance but still the global trade remains
marginal.
 In 2007, African total merchandise trade (exports plus imports) amounted to over $782 billion, accounting for 2.7 per cent of
world trade.
 In terms of the trade growth rate, 30 African countries performed above the world average of 9.26 per cent in 1997-2007.
 Equatorial Guinea registered the highest average growth rate (36 per cent), followed by Chad (29 per cent), the Sudan and
Angola (22 per cent), and Mozambique (18 per cent). In contrast, Eritrea and Zimbabwe registered negative growth rates
(-0.85 per cent) and (-0.24 per cent), respectively.
Copyright @ Lee, Jin-sang
6
I. Overview of Africa
2. Economic Performance (4)
Top 10 countries in terms of foreign reserve
(% of GDP)
Capital Inflows in Sub-Saharan Africa
and capital inflows to decline
 Accumulated currency reserves should be used to finance counter cyclical measures.
 Foreign reserve losses were significant in many countries.
Copyright@Lee, Jinsang
7
Poverty
II. Problems
of African Economies
(1) Overall Issues
 Poverty is one of the Major problem that is creating obstacles to the economy of African nations
 Most Africans are on the far side of the Digital Divide and are cut off from communications technology
 Infant mortality is high, while life expectancy, literacy, and education are all low.
 Brain Drain : The best educated often choose to leave the continent for the West or the Persian Gulf
to seek a better life.
 Catastrophes cause deadly periods of great shortages.
- The most damaging are the famines that have regularly hit the continent, especially the Horn of Africa.
- These have been caused by disruptions due to warfare, years of drought, and plagues
 An average African faced annual inflation of over 60% from 1990 until 2002
 Large unemployment in most African nations
Copyright@Lee, Jinsang
8
II. Problems of African Economies
(2) Geopolitical Issues
 National boundaries in sub-Saharan Africa were established by Europeans using
latitude and longitude rather than natural borders.
- This separated population centers from their supplies of food and natural resources
- The artificial borders cut across cultural, tribal, linguistic and religious boundaries,
creating ethnic and religious cleavages which impede national unity and induce
internal violence
 Africa is a much divided continent with many small countries.
Successful economic growth requires regional cooperation, which political tensions make difficult.
 African countries suffer from communication difficulties caused by language diversity.
(i.e. Ghana has 47 ethnic languages)
 The primary language of government, political debate, academic discourse, and administration is
often the language of the former colonial powers—English, French, or Portuguese.
- Only an elite minority speak these European languages fluently enough to participate in
these institutions without intermediaries
Political instability in many countries inhibits economic development.
Copyright@Lee, Jinsang
9
III. Overview of the Korean Economy
(1) Economic Indicators
2006
2007
2008
2009
2010
GDP (100 million dollar)
9,518
10,492
9,314
8,325
10,124
GDP per capita (dollar)
19,530
21,420
18,930
16,860
20,450
Economic growth (%)
5.2
5.
2.3
0.2
5.9
Unemployment rate (%)





Consumer price inflation (%)
2.2
2.5
4.7
2.8
3.1
Exchange rate (W/dollar)
945
929.3
1,102.0
1,276.9
1,129.6
Current account balance
(million dollar)
5,385
5,876
-5,778
42,668
35,253
Export (million dollar)
331,842
379,045
432,922
373,585
459,803
Import (million dollar)
303,938
350,877
427,254
317,457
415,024
Foreign reserve (million dollar)
238,882
262,150
201,145
269,933

27.5
36.2
41.0
42.3
36.1
Debt balance/GDP (%)
Copyright@Lee, Jinsang
10
III. Overview of the Korean Economy
(2) Export Growth and Trade Balance
< Korea’s Annual Export Growth in 2008(US$ billion)>
Year
Export
Import
Balance
2002
162.4
152.1
+10.3
2003
194.3
178.7
+15.6
2004
254.2
224.5
+29.7
2005
284.7
261.1
+23.6
2008
363.5
323.1
+22.0
In 2008, the following 5 commodities’ export exceeded US $184.23 billion(50% of the total export)
<Korea’s 5 Major Export Commodities in 2008 (US $ billion)>
Shipbuilding
Chemical
IT
Automobile
Semi-conductors
43.16
37.57
35.71
35.0
32.79
Copyright@Lee, Jinsang
11
IV. Korean Development Path
(1) Economic and Social Conditions in the early 1960s
Lack of
Investment Capital
Abundant
Labor with Skills
Low Level of
Technology
?
High Level of
Education
Limited
Private Sector Activities
Motivation on
Economic Development
Source: MOSF, 2009
Copyright@Lee, Jinsang
12
IV. Korean Development Path
(2) Flow of Export-Oriented industrialization Strategy
Economic Promotion
Foreign Capital Inducement
(External Debt)
S
S
Industrial Sector
Import of Capital Goods
Private
Enterprises
Imports of Raw Materials
Financial  Tax
Incentives
Borrow Technologies
from Abroad
Government
Technology
Development
Source: MOSF, 2009
Export
Promotion
Well-educated Labor Force
Copyright@Lee, Jinsang
13
IV. Korean Development Path
(3) 1970s : Development of Target Industries
• Mobilize financial resources
 Iron and steel
• Government selected target industries
• Many Chaebols were created
 Electronics
 Petro-chemical
 Automobile
• Accelerate competition in the int’l market
 Ship-building
 Machineries
Source: MOSF, 2009
Copyright@Lee, Jinsang
14
IV. Korean Development Path
(4) Changes in Development Strategy (1980-2000)
Financial Suppression
due to Prolonged
Government Intervention
Over-investment in
HCIs
High Inflation and
Large Fiscal Deficits
• Inefficient Resource Allocation
• Macroeconomic Instability
• Less Favorable Policies for SMEs
 1979 : Negative Export Growth for the first time since 1960
 1980-90 : Perpetual Economic Growth and Trade Union Movement (1980s)
 1990-2009 : More Integrated into the World Economy
Source: MOSF, 2009
Copyright@Lee, Jinsang
15
V. Key Success Factors in Korea
(1) Can be explained in many ways
 Endogenous and Exogenous Factors
 The Government:
- Good governance; authoritarian regime
- Top people as the society respects the civil servants
- Effective long-term vision and good management
- Induced crony capitalism
 The Private Sector
- Entrepreneurship: Risk-taking behavior
 Social Infrastructure
- Education & skills, motivation and self-esteem
- Confucianism value seniority
 External Factors : USA, Japan (geographical location)
Copyright@Lee, Jinsang
16
V. Key Success Factors in Korea
(2) The private sector has led economic development
 Government Orchestrated, the Private Sector Participated, the Society Accepted
 The Government: Long-term vision, national unity, some degree of protectionism,
holding key industries, mixed economy, created elite group in the government
 The Private Sector: Followed the government instruction, Completely resulted
oriented treatment, leader-follower model, protected and selected industries
 Social factors: Social values on scholars, civil servants, equal opportunity and
democratic progress
 External factors : Foreign aid, use of the war reparations from Japan
 All in all : Many entrepreneurs were encouraged to do business.
Copyright@Lee, Jinsang
17
VI. Strategies for African Development
< Factor Endowment >
 Africa is the ecological lung of the planet. Its forests, which cover about 22% continents.
 Africa is one of the engines of global growth .
 It is the richest continent in raw materials (oil, minerals, and agricultural products).
 It is also the youngest: 43% of sub-Saharan Africans are under 15 years.
< Issues to be Tackled >
 What can it does for better future; Have goods leaders, build-infrastructures,
promote agriculture, diversify production and exports, promote good macroeconomic policy,
mastery demography, invest in education, fighter against epidemics, promote regional
integration.
 Able to allow the displacement of goods, persons, and economic operators, facilitate the
installation of economic operators in all country, reducing investment cost, water, electricity,
social infrastructures, reduce the costs of commercialization.
Copyright@Lee, Jinsang
18
VI. Strategies for African Development
 Increase public savings and income. Duty, taxes, customs, export income etc.,
 Increase privates saving and investments.
 Promote and encourage FDI and entrepreneurship.
 Liberalize and encourage the banking sectors and the financial market.
 Fight against inflation, encourage competition and practice and market prices.
 Orient the economy in the driving sector growth
 Promote economic integration
 Free exchange and movement of persons and property
 African governments must invest in education Training, science, R&D
 Fight against epidemics such as AIDS and malarial that are the basis of the expenditure
of Health and retreats of GDP in many Africa countries.
Copyright@Lee, Jinsang
19
VI. Strategies for African Development
 Many African countries improves the living standards of their population.
 The Africa has a GDP above the average world.
 The demography is increasingly better control in a certain number of countries.
 The investments increase.
 The banking sector is getting better.
 The mineral resources would improve economic promotion
This shows that Africa has a great potential to develop.
Copyright@Lee, Jinsang
20
VII. Africa and Korea Economic Cooperation
(1) Government Role on Economic Activities


Pursue good governance
Provide long-term vision : Induce national unity

Determine target industries
- Based upon factor endowment
- Considered with human capital

Provide enabling business environment
- Human resource development
- Social infrastructure
Entrepreneurship Development
Provide economic infrastructure


Copyright@Lee, Jinsang
21
VII. Africa and Korea Economic Cooperation
(2) Private Sector should be in the driving seat

Promote entrepreneurship

Patriotism : obligation to promote the country

Risk taking behavior : Bold decision

Vision and Strategies: Forward looking, action plan

Self -esteem, confidence and motivation

Align with government policies : Take advantage of government incentives

Dissemination of best practices: Sharing

Formation of sustainability : Education and training programs of employees
Copyright@Lee, Jinsang
22
VII. Africa and Korea Economic Cooperation
(3) Societies accept incentive systems: Share Korean Experience

Give priorities to entrepreneurs

Provision of social infrastructure: Education, technical training, health care

Sacrificial attitude : Low level of income at the early stage of development

Trade Union Movement : Special bargaining programs

Business Ethics : Provide business culture

Education : Business related courses

Health care system : Improve health care system, safe water supply, better living
environment
Copyright@Lee, Jinsang
23
VII. Africa and Korea Economic Cooperation
<Africa can be benefited from Korean partnership
- Private Sector Development in particular>

Public-Public partnership between African countries and Korea

Build networks among African and Korea entrepreneurs
: Regular meetings, conferences, workshops etc.

African countries encourage joint ventures with Korean companies : Special incentives

Academic cooperation : Primary, secondary, tertiary – exchange programs

Research institutions : Research cooperation, exchange programs

The Energy sector is one of the first target areas to enhance economic cooperation
between Africa and Korea.
Copyright@Lee, Jinsang
24
Thanks!
Questions & Answers
Copyright @Lee, Jinsang