South Korea faces crisis after leaving developing world

UNITED NATIONS, Dec 8-- South Korea, one of the most active members of the Group of 77, has formally ceased to be part of the developing world since its entry into the Paris-based Organisation for Economic Cooperation and Development (OECD).

But coincidentally, its departure has been accompanied by a major financial crisis which has forced Seoul to seek about $56 billion from the International Monetary Fund (IMF).

With its huge reserves running low, the country's currency and its stock markets took a severe beating in December.

South Korea is the second country to leave the Group of 77 since it was set up in 1964. The only other country to leave the 33-year-old Group was Mexico in 1994.

But Mexico was also embroiled in a major financial crises after joining the OECD and had to seek a financial bailout of more than $40 billion. At the time of its departure from the G-77, there were many who have challenged Mexico's wisdom in abandoning the Group for the OECD.

A country with a per capita income of more than 10,000 dollars annually, South Korea dropped out of the Group of 77 in late 1997.

''We are not planning to sever all our links with the Group of 77,'' Euy Taek Kim, Counsellor at the Korean Mission to the United Nations, told the JOURNAL OF THE GROUP OF 77 long before the financial crisis. ''We will play a bridging role between the developed and developing countries,'' he said.

The only country which has transformed itself from an aid recipient to an aid donor, South Korea joined the OECD in late 1996.

But only at its annual ministerial meeting in late September that the Group of 77 formally announced that South Korea is now a member of the OECD.

According to the ground rules of the OECD, Kim said, Korea cannot maintain its fullfledged membership with the Group of 77 while being an OECD member. ''But we plan to attend meetings on an adhoc basis,'' he said.

The Group of 77 consists of 132 developing nations fighting to protect its own economic interests. With the departure of Korea, membership dropped to 131. But with the admission of Eritrea last week, the Group is back to its normal strength.
A relatively significant contributor to Third World causes, South Korea doled out 30,000 dollars last year to the Office of the Chairman of the Group of 77 in New York, another 50,000 dollars to the South Centre in Geneva and 200,000 dollars to a U.N. Development Programme (UNDP) Trust Fund for South-South Cooperation.

South Korean Foreign Minister Yoo Chong-Ha told the General Assembly in September that although his country is now a member of the OECD, ''we will participate more vigorously in South-South cooperation projects.''

In an effort to expand assistance to least developed countries (LDCs), he said, South Korea has participated in bilateral cooperation projects with the Economic Commission for Africa (ECA) since 1965. He said Korea also plans to undertake a Programme for the Development of Africa for the period 1998 to 2000.

As the world's 11th largest economy, South Korea has made a quantum leap forward in joining the ranks of the industrial world. Korea's per capita income has soared from 82 dollars in 1962 to 8,550 dollars in 1995 and more than 10,000 dollars in 1996.

The U.S. State Department has said that over the past 30 years, South Korea's economic growth has been "spectacular.'' ''Despite the need to maintain a large military, South Korea, one of the world's poorest countries only a generation ago, is now the United States' eighth largest trading partner and has the 13th largest economy in the world,'' it said.

The United Nations has attributed Korea's economic successes to several factors, including a well-educated and disciplined work force, a high savings and investment rate, and a favourable trade environment.

In a report released in September, the Geneva-based U.N. Conference on Trade and Development (UNCTAD) said South Korea ''is perhaps the outstanding example of an 'emerging donor' with the potential for making a significant contribution to official development assistance (ODA), which could supplement the aid resources provided by the traditional donor countries.''
The study said that Korea already provides substantial amounts of non-ODA finance and private investment to other developing countries. Moreover, it has its own development experience of much interest to least developed countries (LDCs) and other developing countries, and lessons to share with them.''

UNCTAD said that Korea itself was a major aid recipient, with foreign assistance contributing significantly to its development. Since its independence from Japan in 1945, Korea has received grants totaling 4.8 billion dollars, mostly in bilateral assistance. From 1953 to 1962, such aid financed 71 percent of total imports and 80 percent of total fixed investment.

During this period, UNCTAD said, South Korea established the basis for its industrialisation later in the 1960s and 1970s. ''It is a country that has successfully broken out of aid dependence,'' UNCTAD concluded.