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Development Overview

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Overview of Korea’s development experience

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Development Overview
Official Aid Social Infrastructure

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Social Infrastructure

Investments in infrastructure

Investments in Infrastructure

Korea’s major infrastructure (road networks, railroads and irrigation facilities) before 1950 was reasonably good considering all else. The railroad system connected the major cities. However, the road network was poor, even for a developing country and its roads in the rural sector were never developed well. But the Korean War destroyed some of the infrastructure.
                 
US assistance under the ICA was comprised of two categories: project assistance for facilitating investment to increase production and non-project assistance for consumption goods and raw materials to provide relief and secure economic stabilization. During 1955- 1959, non-project assistance comprises 70% of total aid, the largest component of being fertilizer (19% of total aid), followed by wheat (13% of total aid) and energies (9% of total aid). Project assistance accounted for 30% of total aid, of which nearly 37% of the aid was used to construct railways for YoungAm railway, Choongbuk railway, and Hahmbaik railway. Some of the project assistance was used to investment in manufacturing including the construction of the Choongju Fertilizer Plant, Busan Arsenal, electric wire factory, pesticide factory, rubber recycle factory, tire factory, Busan Shipyard. In addition, the ICA project assistance use used to build 44 new small-sized plants for about 7.8 million US dollars including four starch factories, three flour mill, five pharmaceutical factories, three jelly factories, limestone factory, leather factory, plastic manufacturing factory, asbestos factory, paper mill, and printing factory (Lee, 2002, p330). Project assistance was also used to reconstruct the Hwachon hydro power plant which was damaged during the War as well as thermal power plants in Yongwol, Danginri, and Masan. Despite the low percentage of foreign assistance spent on facility investment relative to raw materials, the size of the total facility investment is still quite sizeable in absolute terms under the ICA.
                 
By the end of 1950s, much of the infrastructure including railways, roads, and harbors that were damaged during the war was rehabilitated back to nearly pre-war level, thanks to the foreign aid. The reconstruction efforts faced a major challenge in supplying adequate electric power to meet the social and economic demand. Much of the electricity was supplied from power factories in the North before the partition of Korea. The Korean government established three-year electric power construction plan starting 1954 that was based on hydro electricity. However, the US opposed these plans in favor of focusing on thermal power electricity which argued that thermal power was more cost efficient based on electricity demand. So, only one hydroelectric plant was constructed at Koisan in the late 1950s while the planning for other hydro-electric plants began in 1961.22


[Table 1-1]  Electric Power Output and Number of Power Plants
 

  Number of Plants Electric Power Output (KW)
  Hydro-Plants Steam-Plants
1935 1 1 82,602
1940 2 3 51,364
1945 5 3 711,327
1950 5 3 420,651
1955 5 3 879,272
1960 6 6 1,699,443
1965 7 10 3,249,938
1969 8 17 7,699,968
Source: AD/DLEI, Power Branch, USAID/K from “Land Reform in South Korea” June 1970 by Morrow and Sherper (1970)
 
22 According to Lee (2002), the tied nature of US assistance favored the construction of thermal plants since the power generators and equipment could be supplied by US firm, which would also supply the oil need to run the generators.


Source: Kim, Jun-Kyung and Kim, KS. 2012. Impact of foreign aid on Korea's development. Seoul: KDI School of Public Policy and Management.