external (USA) - SK

Question 1

SK government highly dependent on US aid and investments savings

Answer 1

[average 15.9% of GNP coming from US aid, peaking at 22.9% in 1957]

• 64% of investment savings were US-owned

Question 2

reason for USA’s help (Cold War)

Answer 2

1965 Normalisation Treaty between Japan and Korea encouraged by the USA in the Cold War struggle against Communism in East Asia

• Americans granted deeply anti-communist South Koreans with special access to huge US marketplace
• to make sure that the Seoul government could continue to defend itself against the Communist threat (NK)
• independent military and economic contribution to the “free world’s” fight against communism

Question 3

USA’s help during the Vietnam War

Answer 3

effect: benefited through massive compensation for Seoul’s involvement with contracts for Korean companies

reason: Park dispatched 2 combat divisions to fight alongside US troops during VW

• 50 million dollars in remittances
• Hyundai’s rise - SK firms to construct facilities and provide services to US military in Vietnam
• financed 10 million dollars for the establishment of the Korea Institute of Science and Technology
  -> contributed to acceleration of industrial development by channeling science and technology into industrial action and customizing technology to Korean needs
• 1.3 billion won financial assistance provided to Korea Development Institute to conduct studies on major public policy issues

Question 4

CA (#short-term)
USA decline

Answer 4

USA aid transfers primarily targets consumption goods to meet urgent economic demands and strategic concerns about military defense in the short run, rather than production goods to be invested for rapid economic construction

sharp decline in the 1960s:
- Vietnam Syndrome and South Korea’s anxiousness over the sustainability of USA’s financial assistance
- USA unilateralism in the 1980s and protectionism meant that dependence on US was unsustainable

[1957 Development Loan Fund]
replace concessional grants and emergency relief assistance with development loans.

-> US strategy shifted from the mixed bag of economic and military aid to economic loans
-> diminishing concessional transfers

Question 5

therefore.. government planning took over

Answer 5

• heavy industry provided basis for self-reliance in defense should the USA cease to provide military assistance
• industries selected for special emphasis in the Heavy and Chemical Industry Plan (HCIP) were largely defense-related
  eg. steel and petrochemicals, nonferrous metals, electronics and ship building