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From Aid Recipient To Donor: South Korea Brings New Model, Competition To Africa

From Aid Recipient To Donor: South Korea Brings New Model, Competition To Africa

South Korean President Park Geun-hye plans to visit the three largest economies of East Africa starting Wednesday, with a rags-to-riches message very different from U.S. and China’s been-there-done-that trade missions.

Park will be accompanied by 111 Korean companies hoping to do business with Africans, KoreaJoongangDaily reported.

Park plans to launch the newly-created Korea Aid in three countries — Ethiopia, Uganda and Kenya — during her visit, using South Korea’s experience transitioning from aid recipient to donor to serve as an economic model for other developing countries.

South Korea has evolved from a war-torn, aid-dependent republic to a high-income country and global exporter of tech and culture, Ozy reported. It officially switched to donor status in 2009 when it joined the OECD’s Development Assistance Committee.

An aid recipient from World War II until the late 1990s — South Korea received $12.7 billion in aid. When the Korean War ended in 1953, South Korea was one of the world’s poorest countries with a GDP per capita of $67 — about the same as Ghana at independence, Ozy reported. By 2014 its GDP per capita was $28,000, putting Korea on a par with Spain.

Now South Korea is counting on Africa’s so-called rising middle class to rise.

“With its improving political stability, high economic growth and expected increase of middle-class members of society to 500 million by 2030, many countries are pursuing Africa’s potentials,” said Kim Kyou-hyun, presidential senior secretary for foreign affairs, KoreaJoongangDaily reported.

While the U.S. pushes for democracy alongside development, South Korea takes a different approach, according to Ozy:

The tiny country, about the size of Indiana, doesn’t shy away from working with quasi-authoritarian regimes that prioritize growth over democracy. Take Rwanda or Ethiopia, two of South Korea’s primary aid recipients and countries where the leaders are known as much for their economic aspirations as their heavy-handed rule.

Despite the rising importance of African markets, South Korea’s exports to the region only accounted for 1.4 percent of its total exports as of 2015, government data showed, according to the KoreaHerald.

Bilateral trade between South Korea and African countries increased fourfold from $5.7 billion in 2000 to $22.2 billion in 2011 and exports to Africa jumped five times in the same period, Ozy reported:

That may seem small compared with $166 billion worth of trade for China in 2011, but as a percentage of Korea’s foreign aid budget — aid to Africa climbed from 12 percent in 2002 to 26 percent in 2012 — Africa’s importance to the country’s strategy is compelling. Because of the country’s role as a “middle power, Korea has a duty to contribute to Africa’s poverty reduction and economic development,” says Young Ho Park of the Africa team at the Korea Institute for International Economic Policy.

Korea believes it has something that China and the U.S. don’t: “been there, done that” experience and a rags-to-riches story that serve as an economic model for other developing countries.

Park’s visit for Africa is in line with the trends of major global powers such as the U.S., China and Japan, Kim said. Park is scheduled to give a speech at the African Union headquarters to announce Korea’s new policy vision for the continent.

Park’s trip and the projects to be launched in the three countries, are intended to create a favorable business environment for Korean companies, said senior presidential official on policy coordination, An Chong-bum. “Ethiopia, Uganda and Kenya are aggressively implementing policies to grow their industries with middle and long-term economic development plans,” he said. “We have high expectation of economic cooperation with Korea.”

Here are some Korean projects underway in Africa:

  • The Korea International Cooperation Agency, a Korean version of USAID, has agricultural projects in 21 African countries.
  • In 2014, the Rwandan government signed a deal with South Korea to install fiber optic cables and deliver 4G Internet to 95 percent of the country by 2017, up from from 8.3 percent in 2014.
  • In October, South Korea announced a rural community development plan for Rwanda worth $11 million.
  • Conglomerate SK Group has stakes in eight oil fields in six African countries.
  • Samsung operates in 32 African countries and is designing products such as phones and fridges specifically with African consumers in mind.

It’s not all rosy.

South Korea was identified as a “lead villain” in illegal fishing off the coast of West Africa, according to a 2014 Chatham House report, Ozy reported. And there was a controversial deal in Madagascar in 2009 when South Korea’s Daewoo Logistics tried to lease about half of the country’s arable land. Malagasy people cried neocolonialism, and the deal fell through:

It remains to be seen if South Korea’s long-term bets on Africa will pay off, but K-pop may soon be blasting from matatu speakers. “Many Korea populations believe Africa is richer than we think,” says Park. And they might just be right.