"Why didn't it meet the target?" The room fell silent as the South Korean president Park Chung-Hee put forth his question.
A sense of nervousness overtook the faces of the prime minister, the vice prime minister, ministers and entrepreneurs as a tense silence filled the room. At this monthly meeting, export performances by sector and future strategies were thoroughly examined and analysed by Mr Park, who was president from 1963 until his assassination in 1979. Answers and explanations to every question he asked were expected to be prepared.
This was the regular "export promotion meeting", which began in 1965 and continued for 15 years. For a country with no natural resources, infrastructure, foreign investment, political stability and nothing but widespread poverty, it was a natural result that the trade balance always signalled negative. Yet Mr Park believed export promotion was crucial for economic development and this belief was reflected directly into his governance.
Although some describe Korea under Mr Park as authoritarian or dictatorial, in terms of the economy, the public and the private dialogue, it was very active. The government was always aware of the difficulties the private sector was facing. Government intervention was mainly directed towards promoting the private sector rather than direct intervention in the market..
One major period in the modern history of Korea was its drive for the development of the heavy-chemicals industry (HCI) in the early 1970s. At this time, the United States proclaimed its plan to diminish military presence in Asia through the Nixon Doctrine. As a result, nearly one third of the US forces in Korea were withdrawn. The necessity of a strong heavy-chemicals industry that could be converted into a defence industry was emphasised as the threat of North Korea became ever more prevalent. Also, as the GDP per capita of Korea increased, there was a need to transform its industrial structure into a higher value-added one.
On December 17, 1971, Mr Park was proudly examining armaments that were products of a national plan to develop domestic weapon production capacity. He referred to the artillery as "the best Christmas gift this year" and opened a cabinet meeting in the Blue House where such weapons were on display, inviting members who were uncertain about pursuing the HCI drive. He explained it was the best policy for the sake of Korea's security and future. Focusing mainly on sectors such as electronics, steel, shipbuilding, petrochemicals and machinery (including cars), the government successfully transitioned and advanced Korea's industrial structure.
In the 1980s, the government continued to maintain a channel of influence over the national development process. Yet the difference was the loosening of trade borders with a turn toward liberalisation.
With the seventh five-year economic plan coming to an end in 1996, there was no longer official economic planning carried out by the government. Korea has significantly narrowed the technological gap with advanced countries and in some cases is leading the industry. Its role now lies in eliminating obstacles to entrepreneurship, encouraging innovation through regulatory reform and external liberalisation, correcting market failures and supplying high-quality manpower. The promotion of exports as a strategic choice in the 1960s, the focus on developing heavy-chemicals industries in the 1970s and emphasising liberalisation and stabilisation based on the market economy principle since the 1980s all took place under governmental guidance in a timely manner, transforming the poor and war-torn country into a modern industrial economy.
Oh-Seok Hyun is the president of the Korea Development Institute. This is the second of a six-part series on the Korean economic miracle