Last week I went back to Seoul after 26 years. The city is transformed and so is the economy. In 1984, when I visited the export processing zones, Masan and Iri contributed at least 60% of total exports from South Korea. Posco had been established as a public sector company to take on established global giants and out-competed all of them despite having to import 100% of its raw materials by relying on latest technology, economies of scale and above all, sheer hard work and dedication. And at the same time, Korea was reaching full employment levels by furiously expanding labour intensive exports. The question arose in my mind that if Korea could successfully combine latest technology with large-scale employment generation, could we do it as well?
The most striking memory from 26 years ago is of having lunch with the president of the Federation of Korean Industries, the organization of the Korean chaebols, who like the Japanese zaibatsus, worked closely with their respective governments to create the two industrial juggernauts. I had asked the president, a wise old man, most gracious in his hospitality to a young researcher, what the main lessons were for India from the Korean experience in industrialization. He gave me three nuggets that have since remained with me.
First, he said, countries and/or their firms cannot succeed in a fiercely competitive global economy (this was in 1984) unless industry and government worked closely together to achieve national goals.
Second, developing countries should not be unduly concerned about national pride and national brands as long as they can generate the necessary employment for a young workforce by successfully attracting the necessary technology and foreign direct investment (FDI). But they should neither forget that both regaining national pride and building national brands are worthy goals to be achieved over time. The Koreans in their pragmatism had handed over Masan largely to firms from Japan, a country which had colonized Korea not so long ago and had broken down the gate of their emperor’s palace so that it did not face in the auspicious direction. Quite rightly, the Koreans are restoring it to its original location ahead of the Group of Twenty summit in November.
Third, that any country is as good as its human capital. He cited with approval the efforts of his friend Prof. Choi, founder of the Korea Advanced Institute of Science and Technology (now KAIST) to bring Korean researchers back from the US by paying them higher salaries than was being paid at that time either to senior bureaucrats or corporate managers. And as we know, Prof. Choi succeeded brilliantly. Korea has emerged as a leader in several frontline technologies and now competes through product innovation and not as a low-cost producer.
Have we learnt these simple lessons in India? I am afraid not. The government and industry, though not mutually suspicious any more, still do not seem to work together with a common national purpose. For example, maximizing employment generation can be a common goal for the government and industry. In this case, special economic zones, which have already generated large-scale employment, will hopefully not remain controversial. The criterion for making land available on a priority basis would then become a minimum number of jobs generated per unit of land. All restrictions, except on strategic grounds, would be removed on FDI when it is seen to generate employment.
There is, of course, give and take between the government and industry. But it is often non-transparent and perceived to be largely for private, not national, purpose. This can change if the industry decides to make the government accountable and not continue to act as a supplicant seeking favours. But for that, industry has to achieve even greater social legitimacy by paying its taxes honestly, not cutting regulatory corners,?and?generating employment and lowering prices when it can. It has to be seen by the people as working for national goals and not only in maximizing personal consumption and ostentation.
Unlike Korea, we have still not recognized the importance of attracting back our human capital. Instead, we celebrate whenever a person of Indian origin earns global recognition. This is a loser’s pride! Given that the Indian higher education system is hardly producing any globally comparable researchers, the only way forward is to attract talent back from abroad as seed capital. Indian industry can play a major role by letting charity begin at home rather than donating millions of dollars to foreign universities.
Moreover, it should be recognized by all those concerned that talent will not be attracted only because of its love for the motherland or for a possible entry into policymaking, increasingly difficult as it is. Researchers need living and working conditions comparable with ones they are giving up. It is time we paid attention to these issues. For once, we can learn from Pakistan, where in 2006, the government announced education pay scales that, in purchasing power parity terms, are better than those obtained in most advanced economies!
Rajiv Kumar is director and chief executive of the Indian Council for Research on International Economic Relations. These are his personal views. Comment at email@example.com