The ROK as an aid recipient country

1. The Republic of Korea as an Aid Recipient Country
 
On November 25, 2009, the Republic of Korea (hereafter “Korea”) became a member of the Organization for Economic Cooperation and Development’s Development Assistance Committee (hereafter “OECD/DAC”). DAC membership has special significance for Korea, offering official international recognition of Korea’s place within the ranks of developed nations. Indeed, though Korea became a member of the OECD in 1996, it took thirteen years of progress before the country earned its membership in the DAC.

“Unless there is a miracle, it will take 100 years for South Korea to recover from the Korean War.”

The above comment was made by U.S. General Douglas MacArthur, who had led the UN forces during 1950 in their defense of Korea, upon his survey of the devastation inflicted upon the country during the course of the Korean War (1950-1953).

However, contrary to General MacArthur’s prediction, a miracle did occur; the“ Miracle on the Han River.”Within 50 years of the signing of the armistice that ended hostilities on the peninsula, Korea became a fully-fledged member of the OECD and within 60 years, a member of the DAC, which represents the 24 most advanced countries in the world.

Korea now has the capability to host important global events such as the G20 Summit and the Busan High-level Forum on Aid Effectiveness (HLF-4). Throughout the process of its miraculous social and economic development, Korea received generous and substantial support from the wider international community.
 
[Figure 1-1] Koreans waiting for blankets distributed by the UNKRA

※ Source: The National Audio Visual Information Service

By the end of the Korean War, Korea’s annual per capita national income was just 67 USD. Beginning in 1961 and continuing through the First Five-Year Economic Development Plan (1962-1966), Korea’s annual per capita GNP remained at similar levels, barely rising to around 89 USD. During this period, Korea was ranked among 125 countries as the 24th poorest. This was the period during which Korea was labeled by the UN as one of the world’s Least Developed Countries (hereafter “LDCs”), thereby belonging to a group which then included Ethiopia, Bangladesh, Uganda, Pakistan, and Togo. Within the span of only 50 years, Korea has managed to transform itself from the 24th poorest country to an OECD/DAC member country. During the period of its miraculous transformation, Korea received aid totaling more than 12 billion USD. In 1999, Korea was able to officially withdraw from the list of aid recipient countries.

Source: Korea International Cooperation Agency. 2011. 20 years of KOICA 1991-2010, Translated by Institute for Development and Human Security, Ewha Womans University. Seoul.

 [Figure 1-2] Grain Aid from the United States Arriving in Busan
 
 ※ Source: The National Audio Visual Information Service
 
Korea’s acceptance to the OECD/DAC is significant for the message of grateful acknowledgement it sends from the international community for the way in which Korea has come to provide such a large quantity of high-quality aid to international development efforts and embody a spirit of ‘noblesse oblige.’ Korea is now a role model for underdeveloped countries in their own development efforts. Aid from the international community has provided a solid foundation and steady support for Korea in its own economic development. Now, Korea has risen to a position from which it can reciprocate this generosity and give back the same type of aid it had once received, and share its development experience and expertise.

The OECD/DAC has been criticized for consisting of countries that do not have firsthand experience in economic development. Indeed, Korea is the sole OECD/DAC member to have experienced the development they are trying to achieve in LDCs. The 24 OECD/DAC members are known as global leaders and the wealthiest countries in the world and are dedicated to their mission of furthering global development. In 2010, they provided 128.7 billion USD (approximately 138.3 trillion Korean won) in Official Development Assistance (hereafter “ODA”). Despite such assistance, only three countries have escaped their statuses as LDCs since 1971: Maldives, Botswana, and Cape Verde. Critics claim that, due to a lack of firsthand experience, OECD/DAC member states have been attempting to further social and economic development in LDCs simply by delivering ODA.

In this respect, Korea’s own experience utilizing ODA will allow it to serve as a bridgehead between ODA donors and developing countries. Using Korea’s development as a model, donor countries can tailor ODA to fit each recipient country’s own situation, thereby maximizing aid efficiency. With the help of ODA, Korea has leapt to the position of a donor country with a per capita income approaching 20,000 USD. Korea thus has become a symbol of successful ODA in the international community. Since 1991, the Korea International Cooperation Agency (hereafter “KOICA”) has been working to return the favor and share Korea’s success with the international community.

Korea was one of many countries to receive ODA after World War II. During the period of 1945-1953, ODA projects in Korea focused mainly on postwar rehabilitation and during 1953-1960, aid to Korea was focused on postwar reconstruction. Specific projects that supported rehabilitation efforts were the United Nations’Korean Reconstruction Agency’s (UNKRA) ODA, and food security ODA from USA Public Law-480 and the Food and Agriculture Organization’s (FAO) food aid. In 1961, the focus of ODA to Korea changed to supporting economic independence. The United States Agency for International Development’s (USAID) ODA projects, based on the Foreign Assistance Act (FAA), were initiated to support Korea in this effort.
 

Source: Korea International Cooperation Agency. 2011. 20 years of KOICA 1991-2010, Translated by Institute for Development and Human Security, Ewha Womans University. Seoul.

[Figure 1-3] The first graduation ceremony of the nursing school of the Seoul National Medical Center (1958)

■ The Center was established with grant aid from Sweden, Norway, and Denmark. Some of the nurses pictured here went on to work and continue their training in Germany.

※ Source: The National Audio Visual Information Service

As Korea still was a poor country in the 1950s, ODA grants became a driving force behind economic development and were an essential supplement to domestic financial resources. During the period from 1954 to 1960, even while Korea's annual economic growth rate was only 4.9%, annual investment rates reached 11.8% and foreign savings rates, mainly composed of grant ODA, amounted to 8.0% of all savings. This is evidence of the important role foreign ODA played in the formation of investment capital in Korea.

Korea received significant aid to its education sector. Aid from Germany established a Korean-German Girls’Vocational High School in Busan. The USA’s International Cooperation Administration (ICA), provided aid to tertiary education institutions, such as Seoul National University, through technical cooperation programs. These programs involved the direct exchange of knowledge in addition to monetary assistance. For example, 226 professors from Seoul National University were invited to training sessions ranging from three months to four years at the University of Minnesota. Meanwhile, 59 experts from the United States traveled to Korea to provide consultation on improving the education system. The American experts stayed in Korea for periods of between two weeks and seven years. From 1955 to 1961, the United States provided 10 million USD to three colleges in Seoul National University; the medical school, the engineering college, and the agricultural college. This ODA was mainly directed at improving university facilities, strengthening staff capability, and furnishing materials. These grant projects had a lasting effect in the development of Korea’s tertiary and upper secondary education.

By 1975 Korea’s economy had grown to such an extent that Korea no longer qualified for soft loans. Soft loans have the eligibility threshold of 520 USD per capita income and offer lower interest rates than IBRD development loans to poverty stricken developing countries. In recognition of this amazing growth, the International Development Association (IDA) removed Korea from its list of aid recipient countries. Korea became completely independent of ODA in 1995 when it stopped receiving loans from the World Bank. Because of this newly found financial independence, Korea was able to become an OECD member country in 1996. Since 2000, Korea has been classified as a Part II country in the transitional group of “More Advanced Developing Countries”by the OECD/DAC.

To keep pace with the international community and the OECD/DAC’s aid efforts for economic development and poverty reduction, KOICA has focused primarily on specializing in grant ODA: aid with no obligation of repayment. KOICA’s projects have been dedicated to the promotion of development policy ownership and capacity building in recipient countries. In order to encourage recipient countries to take ownership of development policies and aid activity, KOICA has striven to clarify responsibilities between partner and donor countries. To meet the international demand for aid effectiveness, KOICA tries to align projects in conjunction with its “Management for Results” strategy.

Source: Korea International Cooperation Agency. 2011. 20 years of KOICA 1991-2010, Translated by Institute for Development and Human Security, Ewha Womans University. Seoul.