Yongusil 80: The Developmental State and Politics of Industrial Complex Development in South Korea

By | October 14, 2015 | No Comments

A photo from Professor Park's presentation. | Image: Asian Institute, University of Toronto

A photo from Professor Park’s presentation. | Image: Asian Institute, University of Toronto

What explains the developmental success of industrial “late comers” in East Asia? According to the developmental state thesis, those late to the game need(ed) a plan-rational model of development whereby the state, most notably a corporeally coherent bureaucratic apparatus, takes on developmental functions. This thesis, first popularized in the political economy literature by the stalwart Asian scholar Chalmers Johnson in his book MITI and the Japanese Miracle, significantly changed the way many people conceptualized the state and its role in development. Violating many bedrock principles of economic liberalism (willingly), scholars and collaborators of the “bringing the state back in” research program propagated the developmental state thesis widely, using it to explain the rapid rise of Japan, South Korea, Taiwan, and to a lesser extent, Hong Kong and Singapore. But just how accurate is the thesis?

In “Relations between the State and the Local in the Construction of Masan Export Processing Zone” [마산수출자유지역의 형성을 둘러싼 국가-지방 관계에 대한 연구], Professor Bae-Gyoon Park, a geographer from Seoul National University, reassesses the validity of the developmental state thesis by scrutinizing the developmental politics surrounding the Masan Free Export Zone (MAFEZ), located on the southwest coast of South Korea, during the 1960s. On September 24, 2015, Professor Park presented his findings at an event hosted by the Centre for the Study of Korea at the University of Toronto, entitled “Developmental State and Politics of Industrial Complex Development in South Korea: A Multi-Scalar Analysis of the Development of Masan Free Export Zone in the 1960s.”

The objective of the paper, according to Professor Park, was to assess whether the developmental state thesis is consistent with the Korean developmental state model by looking at the case of the Korean government’s decision to construct the Masan Free Export Zone in 1969. Contrary to the commonly-accepted idea of industrialization in East Asian countries as a state-led and planned process, the case of MAFEZ points to the idea that Korean industrialization involved multi-scalar forces and actors in and outside Korea. This includes Japanese colonial economic legacies in Korea and local and transnational actors.

The Korean government’s planning and approval of the development of a Free Export Zone in Masan initially started in 1967 when the Federation of Korean Industries (전국경제인연합회) sent a team to Hong Kong, Singapore, and Taiwan to conduct research on FEZs. Upon return, the Federation submitted several proposals to the Blue House to construct FEZs in the coasts of Korea. The Blue House approved them all, and established the Export Free Zone Promotion Committee that made the final decision to locate the FEZ in Masan in late 1969.

On the surface, the account behind the development of MAFEZ is highly consistent with Development State Theory. However, Professor Park points out that before the decision to locate the FEZ in Masan in 1969, the City of Masan already had started the construction of a “Coastal Industrial Complex” (임해 공업단지), or CIC, in 1967.

This begs the question: Why and how did the City of Masan attempt to construct an industrial complex without government-led assistance? At the time, Korea had serious lack of resources and capital, and its government was highly centralized as well. Considering these factors, the attempt would have been extremely difficult.

Park explains that the attempt was possible due to: (a) path-dependencies of colonial industrialization; (b) strong local entrepreneurialism; and (c) trans-national connectivity. Masan had been a major industrial centre during the Japanese colonial period. As early as 1899, Masan was already designated as an open port area, featuring a Japanese Consulate and a special settlement area for foreigners as well. Masan experienced high industrial and urban growth from a diversity of Japanese industries locating and constructing their manufacturing plants in the city.

Having been spared major destruction during the Korean War, prior to 1969, Masan was already one of the most industrialized and urbanized coastal cities in Korea. Local dependence on industrial development remained strong; for these reasons, Masan also tended to attract more entrepreneurial spirits from within its local communities. Transnational networks between Masan and Japan that existed prior to 1969 (i.e., those primarily due to Masan’s colonial industrialization) led businessmen who ventured in both Korea and Japan to be more inclined to provide their material support for the construction of a CIC in Masan.

Collectively, these factors led to the city of Masan’s approval of a Coastal Industrial Complex in the city. However, the construction of the CIC failed due to financial shortages, technical difficulties in reclaiming land, and most importantly, withdrawal of the city of Masan’s support from the project; this led construction to be suspended indefinitely. The failure of the CIC financially burdened the city of Masan.

Because the failure occurred in 1967, the same year the Federation of Korean Industries sought approval for the construction of a FEZ in Korea, the local actors of Masan mobilized to convince the Federation and the Blue House to locate the proposed FEZ in their city. Critically, the Korean government took over the unfinished construction of a Coastal Industrial Complex and rolled the project into the development of a FEZ. The Masan Free Export Zone was the first of its kind in Korea.

Upon examination of the case of Masan, Professor Park concludes that the development of MAFEZ was neither a response to the national capitalists of Korea or an outcome of the plan rationality of national bureaucrats — which are all points contended by those who subscribe to development state theory. Professor Park instead concludes that the development of MAFEZ was due to the city of Masan’s local industrial complex initiative and the strong path-dependent influences of colonial industrialization. Critically, Professor Park’s arguments denounce development state theory as a satisfactory model for explaining why and how industrialization took place in Korea.

* A variation of this piece first appeared at website for Synergy: The Journal of Contemporary Asian StudiesDaniel Park is the associate editor-in-chief for Synergy. It is republished here with full permission.