SEOUL – In mid-November, all eyes will shift to Seoul, when G-20 leaders convene for the first time in the South Korean capital. The choice is long overdue, as South Korea is a remarkable success story: in one generation, the South Koreans, formerly pummeled by civil war, under constant threat from their Northern communist brethren, long mired in poverty, and ruled by military dictators for 40 years, have built the world’s 13th largest economy and Asia’s most vibrant democracy.
Historically squeezed between its two giant neighbors, China and Japan, South Korea had long been perceived as an underdog with a fuzzy cultural identity. In Asia, however, Japan’s leaders are not waiting for the Seoul summit to take a closer look at South Korea. South Korea was formerly a Japanese colony (1910-1945), and the natives were treated like an inferior race. Today, South Korean’s economy has been growing annually by 5% on average for ten years, whereas Japan grew by 0.42% per year during the same period.
One could argue that South Korea is not yet a mature economy and is only catching up with a more advanced Japan. This was the case in the 1970’s, but no more. Whereas China’s growth is fueled by low-cost labor as millions of peasants enter the industrial economy, this is not the South Korean recipe for success, which has been driven by private entrepreneurship, innovation, and quality products: Samsung and Hyundai, not cheap wages, are South Korea’s growth engines.
Another key to South Korea’s success story is the well-balanced relationship between stable governments and the private sector. This was clearly demonstrated late last year when a South Korean consortium won a contract to build four nuclear reactors in the United Arab Emirates late last year, beating out the French.