AFRICA MONEY-Africa studies 'made in Korea' model to push growth

Fri Oct 19, 2012 10:09am EDT

* South Korea once poorer than many African countries

* Its development could serve as model for continent

* Battling Asian rivals for African resources

By Tosin Sulaiman and Jon Herskovitz

JOHANNESBURG, Oct 19 (Reuters) - African leaders have been making pilgrimages to Beijing for years seeking Chinese wisdom on expanding their emerging economies -- but they may do better by dropping in on Seoul.

With a similar population size to a number of African states and tales of damaging wars and colonial exploitation, South Korea's growth as a democratic economic power is arguably better suited to the continent than that of China, a single country with more people than in all of Africa.

In its biggest meeting yet with African leaders this week, South Korea pledged $590 million in aid and loans, but also offered what it said no other advanced economy could provide: its experience of development.

The contrasting fortunes of South Korea and many African countries since the 1950s illustrate why leaders on the resource-rich continent are looking to emulate Asia's fourth largest economy whose heavy investment in education and infrastructure development helped kickstart growth.

But some parts of the South Korean model may be difficult to copy. Africa is reliant on exports of primary commodities, whereas South Korea built its economy on exporting manufactured goods. In Africa, manufacturing accounts for the same proportion of GDP as in the 1970s.

In the 1950s, after the end of the Korean War, South Korea had a weaker economy than many newly independent sub-Saharan African countries, such as Ghana.

Now, it is one of the world's 15 biggest economies and has an estimated GDP per capita of $23,000, nearly 15 times that of the west African cocoa, gold and oil producer.

"Korea has been where we are coming through," said Ugandan finance minister Maria Kiwanuka, who attended the Korea Africa Economic Cooperation Conference, which ended on Thursday.

"Korea is about the only country that has graduated from being a major aid recipient to being a major assistance giver over the last 50 or 60 years ... we feel that they can understand the problems that countries like ours face," she told Reuters.

After the war, South Korea rebuilt its economy starting with labour-intensive heavy industries, such as steel and ship building, and then used its human capital to expand into value-added manufacturing to become a global leader in electronics and computer memory chips.

It takes South Korea just six weeks to produce as many cars as Africa's biggest auto producer, South Africa, makes in a year. Both countries now have populations of about 50 million and up until 1982 South Africa had a larger GDP.

RESOURCE HUNGRY

South Korea has battled its larger Asian neighbours, China and Japan, for access to African resources to power its economic machine while trying to grow sales of its consumer goods among the continent's expanding middle class.

It has been winning some of those battles, with its flagship electronics firm, Samsung, aiming for sales of $3 billion in sub-Saharan Africa this year, from $1 billion last year.

South Korea's trade with Africa, which pales in comparison to China's, has grown by 60 percent in the past five years and direct investments by 80 percent, according to Finance Minister Bahk Jae-wan.

Like their Chinese counterparts, resource-hungry companies in South Korea, such as the Korean National Oil Corporation , are looking to increase their footprint on the continent, said Philippe de Pontet, Eurasia Group's director for Africa.

"To the extent that Chinese commercial engagement in Africa has opened a lot of eyes on the potential of Asian engagement I think Korea benefits from riding the coattails of China when it comes to Africa," he said.

At the conference, South Korea said it would invest in 37 projects in Africa worth $590 million in 2013-14, including the construction of roads and hospitals, and education programmes.

The aid package is large for South Korea but smaller than the sums supplied to the continent by China, which in July offered $20 billion in loans to African countries over the next three years.

Bahk said his country had realised the importance of investing in education and establishing social safety nets.

"If Africa is to promote inclusive growth while sustaining the momentum for economic development, it needs to take stock of the experience of Korea and other countries that have traveled along a similar path," he said in a speech to 34 African ministers.

But South Korea's heavy reliance on educating its workforce for a global economy will be hard to replicate in Africa, which has the world's least developed educational infrastructure.

In 2011, sub-Saharan Africa had a gross secondary enrolment rate of 35 percent, compared to 77 percent in east Asia and the Pacific, according to a paper presented at the conference.

South Korea's growth spurt also did not coincide with a lacklustre global economy, said Gabriel Jonsson, associate professor of Korean Studies at Stockholm University.

"At the time Korea expanded, the world economy was growing and there were fewer competitors," said Jonsson. "That's not the case now." (Additional reporting by David Chance; editing by Ron Askew)