A funny thing happened some time last year while Australia was busy congratulating itself on the end of the recession and looking forward to some economic sunshine. It slipped one place down the ladder of international economies, as measured by gross national product – its place usurped by a country called South Korea, a country that, a generation ago, most Australians would have thought of only as a third-world battleground.
In 1953, as the Korean War – in which more than 300 Australians, part of the United Nations forces, were killed – came to an end, the British Prime Minister, Winston Churchill, commented: “Korea does not really matter now. I’d never heard of the bloody place until I was 74.” Great wartime leader he might have been. Economic prophet he was not. Of all the Asian “postwar miracles”, Korea’s is the most remarkable: it started nearly a decade late; it was built on an economy that had been bombed to bits; it is still racked by the threat of invasion from its Marxist rump to the north and insurrection from its own students and unionists.
But when President Kim Young Sam shakes hands with Prime Minister Paul Keating next week, he can do so confident that he will be welcomed as the leader of a country that Australia now sees as a vital trading partner, rather than a major aid supplicant. Korea is even aiming, by 1996, to become only the second Asian member of that most exclusive of rich nations’ clubs, the OECD(Organisation for Economic Cooperation and Development).
In the two years since Kim was inaugurated as Korea’s first democratically elected leader, he has shaken the country up with a series of radical reforms which have enormous significance for Australia and its other trading partners
Corruption, bureaucratic control, closed markets and the power of Korea’s industrial giants, the chaebol, have all been attacked. Hundreds of crooked and incompetent politicians, generals, judges and other public officials have been hounded from office.
Although he is now 67, Kim seems to have lost little of the reformist zeal- and the flair for self-publicity – which saw him through nearly four decades in the political wilderness, expelled from parliament, hunger-striking against the outrages of the US-backed military dictators who preceded him.
He survived even the tragedy of his mother being assassinated by North Korean agents. Kim, or “YS” as he likes to be known by his intimates, has set a new style from the Blue House in Seoul – the President’s official residence- that contrasts with the crooked profligacy that preceded him.
He has vowed not to play golf (club membership can cost $500,000 or more)until his five-year, one-term presidency finishes at the end of 1997. He cancelled the French banquet caterers and ordered bowls of humble k’alguksu, a garlicky noodle soup, for his first Cabinet lunch.
Initially dismissed as something of a show pony, Kim has now firmly won over Seoul’s business establishment. A series of reforms – not least, a new law requiring people to register assets in their real names – has freed the stockmarket from its miasma of sleaze and sent it booming to all-time record heights in the past few weeks.
Following a relaxation of the foreign ownership rules, offshore capital has been pouring into Korea. In the first six months of the year, $675 million has been sunk into the stockmarket, more than double the total for all of 1993.
Trade and investment will obviously top the agenda during the three days of talks in Sydney and Canberra, although North Korea, as well as science and technology cooperation, educational exchanges, APEC and environmental issues will be discussed.
Curiously, since Australia is one of its main raw materials suppliers, Korea and Australia have little mutual investment.
Only $166 million of the $6.67 billion foreign investment in Australia is Korean: mainly a hotel chain and stakes in the Springvale coal deposits and the Klura zinc mine.
Australia’s investment in Korea is also negligible. In spite of the two nations now being linked by regular air services, just 18 Australian companies have offices in Seoul and 35 Korean companies (including all the major chaebol) are in Sydney.
In the four decades since the war, South Korea has become Australia’s third most important export destination – behind only Japan and the US. And we run a handy surplus: last year, bilateral trade boomed 20 per cent, exports $4.36 billion, imports $1.86 billion.
A study by the Australian National Korean Studies Centre – a Melbourne universities’ think-tank – predicts that if current trends continue, Korea will overtake the US by the turn of the century as Australia’s second-largest market. Australia, in turn, is Korea’s fifth largest trading partner.
The bulk of the two-way trade is still based on Australia’s traditional role as Asia’s largest off-shore mine. Iron ore and coal make up a third of our export revenues; in return, we import Korean ships, cars, clothing and shoes.
But in recent years, the relationship has been diversifying and strengthening, particularly in so-called service areas. The Australian embassy in Seoul, for instance, has just signed its 100,000th tourist visa for the year – tourism has nearly doubled and is predicted to hit 250,000 by 2000 as increasingly affluent Koreans follow the Japanese to Australia’s boondocks and beaches.
In the short and medium term – whatever agreements are announced between the two countries this week – Korea will be an increasingly important market for Australian goods of all sorts. After falling into a hole after the Seoul Olympics in 1988, the economy is now powering along.
Growth in the latest quarter was 8.8 per cent (double Australia’s much-acclaimed recovery rate), due largely to what Korean businessmen call the”three lows”: low oil prices, low interest rates and a low dollar (which means a relatively high yen, helping Korean exporters).
The economy is expected to continue at this pace at least until the end of 1995. Unemployment is under 3 per cent; the trade deficit is shrinking. In fact, the only real worry is a gradual edging up of inflation.
All the signs are that this will be a sustainable boom. It is underpinned by several massive infrastructure projects as Korea completes its breakneck transition from peasant rice farming economy to developed nation. An Asian hub airport of breathtaking scale is being built in the sea off Inchon, a 300 kp/h bullet-train is to link Seoul with the southern port of Pusan. As well, Posco- the giant semi-government steelworks – has just announced plans to turn itself into the world’s largest producer. Korea already makes 28 per cent of the world’s steel. The expansion will cost $25 billion and two of the new plants are to be built offshore near a natural gas source – Indonesia, Malaysia and Australia have been discussed.
Korean cars are this winter just making their first concerted attack on the European market where – if their reputation for solid value-for-money holds up- they will do well. Korea’s main manufacturers, Hyundai and Daewoo, plan to almost double production from three million to five million vehicles by the end of 1997.
And if, as seems likely, a lifting of the ban on trade and investment in North Korea is imminent, the sky will be the limit. Scores of Korean companies are already queueing up for a chance to invest in the North’s near-bankrupt, peasant-wage economy.
On its own, South Korea is formidable. Linked with its cousins in the North, it would be a global power. Its 66 million people would make a united Korea the world’s 14th most populous country; its combined economy would rank it 14th and it would be the 11th largest trading nation.
It would be a mistake to applaud Kim’s new Korea as an unmitigated success. Side by side with economic progress and political liberalisation, he has been unable to resist the authoritarian slap of leather on flesh that Confucian societies are said to appreciate.
Tear gas once again filled the campuses of Seoul as Kim’s riot police smashed up Buddhist altars and arrested students mourning the death of the North’s leader, Kim Il Sung. A hundred or so students are still in prison, along with others Amnesty International classifies as “political prisoners”. Industrial relations are still confrontational – something else Australia and Korea have in common – and just last August a particularly brutal strike at the Hyundai Heavy Industries shipyard was calculated to have cost $400 million in exports.
Korea has one of the worst industrial accident records in the world and the International Labour Organisation has condemned laws banning strikes in”essential industries”. But, once that is said, Korea’s extraordinary transition has delivered living standards that people of Kim’s generation could never have dreamed of.
A country which 20 years ago exported its menfolk to work as labourers in the Saudi Arabian deserts now has a bigger economy than Australia’s – and a major problem keeping out illegal immigrants from China, Thailand and the Philippines.
Pub: Sydney Morning Herald
Pub date: Saturday 12 November 1994
Section: News and Features
Sub section: News Review
Word count: 1672
Keywords: Foreign relations
Caption: Shoppers in Seoul ..
South Korea’s economy is growing but relations with its neighbour, North Korea, are still uncertain.
President Kim Young Sam … shaken the country with reforms.