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Development Overview

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Overview of Korea’s development experience

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Development Overview
Official Aid Economic Infrastructure

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Economic Infrastructure

Construction of the Gyeongbu national expressway

1 Background
 
Once the first Five-Year Economic Development Plan was securely on track and the first features of industrialization were created in Korea in the late 1960s, the amounts of industrial goods in transit multiplied explosively, raising the urgent need for expansion of transportation infrastructure.
Up until as late as the second Five-Year Economic Development Plan, policymakers had not considered construction of a national highway connecting Seoul to Busan. However, a survey performed by the Nedeko Investigation Group, commissioned as part of the human resources agreement that the Korean government signed with the International Bank of Reconstruction and Development (IBRD), revealed the pressing need for building and expanding the road network in Korea. The Nedeko group thus advised the Korean government to shift its focus from railways to vehicle roads, but without going into the specifics of building highways. The group merely addressed the need to build highways between Seoul and Incheon, and between Seoul and Suwon, before the implementation of the third five-year plan.[1]

The Korean government then began to consider the possibility of extending the nation’s highway network. The Ministry of Construction surveyed the possibility of constructing highways that would extend 1,138 kilometers in total and link Seoul and Busan, Seoul and Incheon, Seoul and Gangneung, and Daejeon, Gwangju and Yeosu, in hopes of securing the international loans necessary for the construction of the Seoul-Busan highway.[2] The idea of highways, however, was quite unpopular among policymakers and the general public alike at the time. This negative sentiment, coupled with the massive, almost prohibitive amount of funds required for such an undertaking, prevented the Ministry’s plan from developing further.

Nevertheless, the construction of the Gyeongbu National Expressway, linking Seoul and Busan, appeared as part of the campaign promises of President Park Chunghee in 1967, spurring serious debate. Proponents argued that highways were crucial for expediting the processes of modernization and industrialization, and also for the development of rural, farming communities by narrowing the distances between those communities and cities. In other words, it was charismatic political leadership that transformed the image of national highways in popular opinion overnight.

 
[1] Kim Jeong-ryeom, Three Decades of Economic Policymaking in Korea, Seoul: The Joong-ang Ilbo Publications, Oct. 1990, pp. 231-232.
[2] In Support of Building a National Expressway Linking Seoul and Busan, Ministry of Construction and Korea Expressway Corporation, July 1974, p. 43.


Source: Korea International Cooperation Agency. 2004. Study on Development Aid and Cooperation for South Korea: Size, Scope and Exemplary Effects. Seoul.

 

##PAGE##

2 Process
 
In April 1967, as part of his campaign platform, President Park announced his plan for building highways that would link Seoul and other major urban centers in Korea, such as Incheon, Gangneung, Busan, and Mokpo. The government began to prepare for the construction of these highways immediately following the presidential election.

In December 1967, the Driving Committee on the Construction of National Expressways, chaired by the President and membered by leading figures of various sectors of Korean society, launched the National Expressway Construction Planning and Investigation Group to handle all investigative and planning tasks pertaining to highways.

In the meantime, policymakers had made the decision to build the highways based solely on domestic capital and technology, since decision-makers in the IBRD, Washington, and other development organizations and donor countries believed it too early for Korea to initiate a highway project. Korean policymakers therefore concluded that they likely could not proceed with their highway projects reliant on international development aid alone. This conclusion culminated in a policy decision when the International Development Association (IDA), believed the likeliest source of funding, rejected the Korean government’s application for financial support.

 The Korean government funded the import of certain construction equipment and materials from overseas through the Japanese Reparation Fund for Korea. It also quickly commissioned a group of domestic technical experts to conduct a feasibility study and devise a plan for the building of the highway. Construction on the Seoul-Suwon part of the Gyeongbu National Expressway Project finally began in February 1968.

The project, which claimed more than one-tenth of the total government budget (KRW 300 billion at the time), was a major national commitment on an unprecedented scale. The Driving Committee, which was installed under presidential decree, included as its members not only Cabinet ministers, but also leaders of the Korean economy and society, while its Planning and Investigation Group enlisted the participation of hundreds of civil servants, local government officials, scholars, and businesspeople.

Although the project was, in principle, to be completed reliant on domestic resources only, it inevitably required the import of certain construction materials and equipment from overseas, and some investment of foreign capital. Concluding that construction alone would require KRW 36 billion, the government drew up a budget matching that amount, seeking partial funding in the international grain fund provided as PL480, as well as in the Japanese Reparation Fund.[1] In essence, the Korean government utilized the foreign capital it had already been given to fill in the project’s financial and technical shortcomings.

In the end the project cost KRW 42.9 billion for construction alone, mainly due to unexpected increases in land compensation costs and inflation.
 
< Construction Costs for the Gyeongbu National Expressway Project>
(Unit: KRW 1,000,000)
 

Item Budget (1968) Actual (1970) Margin of Difference
Land compensation 1,224 1,963 719
Construction 28,294 37,390 9,096
Testing equipment 55 44 -11
Imported equipment - 492 492
Imported materials 2,194 1,892 -302
Foreign services 110 86 -24
Ancillary costs 1,123 1,106 -17
Total 33,000 42,973 9,973
 

Source: Seoul-Busan National Expressway Construction Logs, Ministry of Construction and Korea Expressway Corporation, July 1947.
 
While much of the project proceeded based on domestic capital and technology, Korea was nonetheless forced to draw upon foreign capital for part of the project, particularly with respect to importing materials and equipment not able to be manufactured in Korea given its industrial capacity at that time. Even basic building materials like cement had to be imported in part from overseas. A number of devices and equipment were also brought into the country in order to ensure project efficiency. Foreign grants and aid mainly went to securing these items.
Because the Korean government was already negotiating a loan with the ADB regarding the construction of another highway, between Seoul and Incheon, the government necessarily turned to the Japanese Reparation Fund for the Gyeongbu project, even changing and converting some of the items already on the fund application for this new purpose. A total of USD 8.45 million originated from foreign sources for the Gyeongbu project, or approximately 10 percent of the total construction cost.
 
< Foreign Capital Used for the Gyeongbu National Expressway Project>
(Unit: USD 1,000)
 

Source   Amount Purpose
Japanese Reparation Fund (conditional grants) Project Year 3 326.9 For the purchase of maintenance equipment and radio devices
Project Year 3 2,671.6 For the purchase of guardrails and other construction materials
Subtotal 2,998.5  
Project Year 4 748.8 For the purchase of paving equipment
Project Year 4 3,148.6 For the purchase of reinforcing steel and other construction materials
Subtotal 3,897.4  
Total 6,859.91  
ADB loan2   872.7 For the purchase of paving equipment
KFX fund   681.5 For the purchase of construction equipment
Total 8,450.1  
 

Notes:
1. Korea apparently drew KRW 8 million in total (KRW 3 million and KRW 5 million in 1968 and 1969, respectively) from the Japanese Reparation Fund, but left no details more specific than those indicated here.
2. While there is a record showing that the loan from the ADB was spent on purchasing paving equipment, there was no ADB loan for the Gyeongbu project. One can infer, then, that the ADB loan provided for the Gyeongin (Seoul-Incheon) project was spent, in part, on the Gyeongbu project.
Source: Ministry of Construction and Korea Expressway Corporation, 1947.
 
In addition to Korean technical experts’ participation in the project, the Korean government also enlisted the services of well-established, US-based technical service agency De Leau Cather International during the early part of the construction phase (1968), to advise on, and assess, the technical status of the project overall. More specifically, Korean experts handled the feasibility study, routing, executive designs, and other components of investigation and planning, while the foreign agency provided technical support for the rest of the construction process.

Thanks to these efforts, the national expressway projects officially concluded in July 1970, significantly ahead of the original deadline of June 1971.
 

 
[1] The Economic Ministers’ Council finally approved the financial plan for the Gyeongbu project in February 1968.

Source: Korea International Cooperation Agency. 2004. Study on Development Aid and Cooperation for South Korea: Size, Scope and Exemplary Effects. Seoul.

  ##PAGE## 3. Assessment and Implications
 
The Gyeongbu National Expressway Project started out amid the criticisms and pessimistic forecasts of the international community at large, and ran into a number of financial and other difficulties from the outset. Nevertheless, the project was completed successfully, and its completion catalyzed Korea’s industrialization and contributed to the realization of more balanced national growth.
The technical expertise and capital that Korea had accumulated in the early part of the decades of development were crucial for the country’s advancement. Moreover, through such projects as highway construction, the Korean government came to realize the importance of achieving process efficiency and quality outcomes through the active and effective utilization of foreign technical and financial resources, provided as part of international development cooperation.

The economic and social benefits the highway project generated for the country are undeniable. Though Korea did not possess on its own all that was required to complete the project at the outset, it actively and decisively proceeded anyway, a move that had massive, positive ripple effects economically and socially. The addition of a highway linking Seoul and Busan significantly expanded and enhanced the overall state of infrastructure in Korea, and also endowed Koreans with a newfound confidence in their capacity to achieve national development.

The Seoul-Busan National Expressway Construction Logs, published four years after the project’s completion, describe the economic and other benefits of the project in great detail. Thanks to the new highway, transportation cost, time spent traveling, and accident rates all significantly dropped, while travelers’ convenience was greatly improved. Moreover, the project catalyzed the development of cities and towns outside Seoul, narrowed the development gap between rural communities and urban areas, expanded the domestic market, prompted the development of domestic resources, and produced other far-reaching benefits. The most important non-economic effect of this project was that it enhanced national defense capacity, as the highway allowed for the rapid mobilization and transportation of military troops in the event of a national emergency.
Another noteworthy effect of the project was that it provided an occasion for boosting national competence and gathering all wisdom available, the experience of which Koreans had been denied for so long. The Korean government learned to steer a major national project by creating a provisional expert organization which it operated with flexibility and professionalism so as to ensure the optimal allocation of limited resources and maximum project efficiency overall.
The total cost of the 428-kilometer-long Seoul-Busan highway was KRW 42.6 billion. In other words, only KRW 100 million or so was spent on building each kilometer of the highway. The unit cost is only one-fifth of the highway that was built in Japan around the same time, linking Tokyo, Nagoya, and Kobe. Although the Gyeongbu National Expressway was built first and the necessary repairs and reinforcements were undertaken only after it was opened to the public, it was the decisiveness and swiftness of Korean decision-makers that ensured the construction of such a major highway with minimum cost and in the shortest time possible.

The success of this project also greatly boosted Korea’s profile abroad and enabled the country to pursue other projects of international development cooperation with greater vigor. The construction of two other highways, linking Daejeon and Jeonju, and Shingal and Saemalgan, respectively, were also completed successfully based on domestic capital and technology. After witnessing such successes, the IBRD and other international development agencies began to provide active financial support for Korea’s national expressway projects. The IBRD, in particular, played an active part in supporting the construction of the Honam National Expressway, linking Jeonju and Suncheon; the Haenam National Expressway, linking Suncheon and Busan; the Yeongdong National Expressway, linking Saemal and Gangneung; and the Donghae and Guma national expressways.

Source: Korea International Cooperation Agency. 2004. Study on Development Aid and Cooperation for South Korea: Size, Scope and Exemplary Effects. Seoul.