Why is Korea not afraid to enter geo-economy?

In the 21st century globalization became the objective reality that determines social and economic processes in the world and in all national economies. Today the world economy is forming a new economic system, which in the nearest future, will function as a single and unified organism. At the moment the global geo-economy is only being formed as the result of globalization, and it is only attempting to function as one single organism as the Single Economic Complex was being formed and started to function in the former USSR in the 1980s.

Iryna Novikava
Professor of Belarus Academy
of Public Administration

By Iryna Novikava

In the 21st century globalization became the objective reality that determines social and economic processes in the world and in all national economies. Today the world economy is forming a new economic system, which in the nearest future, will function as a single and unified organism. At the moment the global geo-economy is only being formed as the result of globalization, and it is only attempting to function as one single organism as the Single Economic Complex was being formed and started to function in the former USSR in the 1980s.

Globalization is a process of “inhaling” the world economy into the market and market relations (the world economy has been recently understood as a totality of national economies connected by the system of the world labor division, economic and political relations). As the result of this ‘inhaling’ some parts of national, “internal” economies are transformed into “external” ones via transnational corporations (TNC), regional groupings, special economic and frontier zones, and bilateral agreements on free trade). Then the process of separation of these “external” parts of economies from national ones and their close interweaving into the geo-economics as its components of take place. As the result of these processes a single world market economy and its infrastructure are being created though at the same time the national sovereignty of the states that were the most important actors on the world arena for so many centuries, now is being destructed. And only on this basis geo-economics, the system of the single and united economy and its new structure emerge. The elements of this geo-economics will be not national states but all those parts of the national economies that have become “external” ones ― TNCies, regional groupings, special economic and frontier zones, etc., which will serve the world reproduction process irrelevant to the countries they came from.

It is necessary to notice that each country nowadays tries to take part in the globalization process. Nevertheless, not all economies can enter into this global geo-economy as equals both economically and politically. And there is a simple reason for that. The emerging geo-economy assumes a free competition among economic subjects, but only few of them can really compete. Moreover, the economic environment of the majority of national economies, as a rule, is not ready to open to free competition and to the free admission of foreign companies in their market. Obviously, it is not possible for many countries to take part in the formation of geo-economy. Therefore new approaches to economic strategy development are necessary for all the countries wishing to participate in these processes.

Globalization demands openness of national economies. In its turn, the openness of economic systems assumes adaptation of their structure to environment. In other words, the national economy structure should be adequate to the processes and tendencies taking place in the world economic system, and, first of all, globalization processes. Without structural changes in the national economies not only the economic growth but even the preservation of the achieved living standards will be absolutely impossible. It is an imperative for any economy integrated into the system of world division of labor and participating in the processes of globalization.
Taking into account these circumstances an important task for any national economy is creation of the really favorable economic climate in order to attract foreign investments. Moreover, it is an unconditional priority. In the world today there is a fierce struggle between the national states to involve foreign investments but the involving of investments may be possible only under the following preconditions:

· interstate agreements on protection of investments;
· developed infrastructure that is understood also as presence of the industrial infrastructure (including industrial, transport and logistical structures), a market infrastructure (including financial, legislative structures, etc.), housing, municipal and social infrastructures.

Labor cost is not the most important factor anymore for attraction of investments today.

Taking into account all these circumstances of geo-economics emergence, the experience of Korea is of great interest.
The Republic of Korea is the country, which was one of the first to realize the necessity of entering the geo-economy and they managed in 40 years to create the economic system that helped them without shocks and losses to take part in the processes of geo-economy creation. A tribute should be paid to the competent economic policy of the country leaders, and, first of all, the President Park Chung-hee who laid the foundation for modern prosperity in South Korea. He was one of the first who realized the necessity for the creation of the civilized and developed infrastructure to involve the foreign capital into the economy, and then on this basis to provide the economic growth of the country and prosperity of the Korean people.

The rapid development of the Republic of Korea within approximately 30 years (1960s-90s) allowed it in the mid-1990s (1993-1997) to reach $10, 000 in gross national product per capita, as well as to receive membership in ОCDE.

At the same time Korea was of one of the first countries to realize the necessity of another economic step to get the advantage of her new status among the developed countries in the conditions of globalization and to save it, Korea started carrying out the transition to deregulation, decontrol, and decentralization.

This strategy has caused transition from state regulation to the public-private partnership (PPP). And already on this basis they began to involve not only the budgetary funds but also the means of private businesses and foreign investors.

New infrastructure meeting the requirements of globalization was created in a short time (creation and modernization of airports, seaports, highways and highly high-speed railways) to attract new investors from all the countries of the world. The share of expenses on the creation of the infrastructure ― adequate to the processes of globalization and allowing the country’s integration into the world economy ― has made up 3. 2 percent of gross national product but it really made economy open.

And again, this development was carried out on the basis of public-private partnership (РРР). Public-private investment is considered as an alternative method of creation of infrastructural services in following areas: management of industrial property, electric power services, telecommunications, services of charter warehouses, services of entertainments, road gathering.

Maintenance of such services as land acquisition through public agencies, pairing of public projects with profitable private projects, long-term financing ordering, tax exemption, etc. all these spheres of rendering services were done through public-private partnership.

The experience of the Republic of Korea can be of great use to Belarus. First of all, it is necessary to realize that though the Belarus has taken up the course to the liberalization of the economy, the streams of investments into the country will not pour down all by themselves. The Republic of Belarus is surrounded by the countries which also are looking forward for investments, and it is necessary to struggle for the investments.

Then, the interests of the investors should be long-termed; otherwise they may come here, remove the “cream,” and then go somewhere else. We should make the investors interested in staying here for longer periods. And for this purpose the developed infrastructure is a great necessity, and nowadays the Republic needs a good national program on the development of the country’s economy infrastructure.

Today there is already a project of the law on public-private partnership which is being discussed now. Recommendations for the use of this law in the field of an innovative policy and creation of modern innovative system are also being worked out. And the experience of the Republic of Korea is a good example for us showing a possible way of the country’s development via participation in the globalization processes and geo-economics formation.