South Korea is a good friend of Brunei. Since our formal diplomatic ties were established in 1984, both countries have enjoyed prosperity and peace. To our people, South Korea is known for their amazing high-quality products, K-pop culture, etc. The South Korean has also provided scholarships and exchange programmes for our students to study at their universities. This is something that that, I as a Bruneian, respect.

But did you know that South Korea was poorer than Ghana in the 1960s. That its notorious neighbour North Korea was actually more developed than the country? How did it manage to turn itself from a war-torn country into becoming the most developed economy on earth today? This piece attempts to answer the question in hopes that government policy-makers and the youth leaders to study in hopes that we can learn and incorporate best practices into our economic system, as we rise in the changing global economic order.

After the war, South Korea was in the midst of a depression. Its industries were practically non-existent. The people, in general, were poor, homeless, and lack the basic necessity to secure a good education. While the turning point of a country in its history may be something that is extremely complex to pinpoint, it ccan be argued that South Korea changed under the leadership of General Park Cung-Hee.

General Park Cung-Hee became the President and ruled the country from 1960 to 1980. Under his leadership, he introduced an active form of industrial policy. Industrial policy, according to LSEs Robert Wade, is a government programme which is aimed at the structural transformation of an economy. Being an agricultural-centred economy, Park Cung-Hee mobilised his government to find ways to achieve modernisation through this policy.

The industrial policy in South Korea could be assessed in three parts. First, Park Cung-Hee introduced a national bank. That national bank then became a tool to control the capitalist class of the country. Basic economics has it that the public sector should aim to correct market failures. These market failures could be the result of monopoly imposed by the private sector. By controlling the big bank that provides the financing for big companies, Park Cung-Hee was able to leverage control so that they do not cause any harm to the general interest of society.

Setting up the national bank has another advantage namely that it can produce quick and large-scale financing to the private sectors. From the biggest Chaebols (Conglomerate) to the SMEs, financing was readily made available to most of the businesses in the economy. Of course, the Chaebols have the largest share of financing. Utilising this finance they can, in turn, acquire technology from abroad, such as car-making machines from Japan and USA, and pay consultant fees to improve the overall management structure of the business that they could not have otherwise afford had they used their own money.

The next step of the industrial policy is to focus on building the few powerful companies or Chaebols. The success of these big companies would, in turn, contribute to the economic prosperity for SMEs, which supplies intra- and inter-industry demand. For instance, Samsung which produces smartphone may acquire some of its materials from South Korean mining companies and these mining companies, in turn, acquire its skilled labour from private universities. We can see there is a “linkage” that is established out of what could have otherwise been seen as a chaotic marketplace.

Building these big companies during that period was indeed a risky move. What if they band together to create a monopoly, which then may affect the government and the people negatively. Enter the bank equation. Should these companies fail to meet their public responsibility, the national bank can either raise interest rates or completely dry up their financial supply. This ensures big companies or the Chaebols are disciplined. After all, they are given many privileges, they should meet their public responsibility which is to contribute towards job creation and economic development.

Finally, the board that manages the industrial policy is called the Economic Planning Board. Inside the board are people who, as the Bruneian catchphrase would have it, “bukan calang calang”. They are highly educated in the West in the subject of economics, technology, industry, statistics, and banking. Compiling the people within a department with the responsibility to drive up economic growth and development to match the West was their dominant and overriding purpose. They are not content or complacent with small success. They are driven to succeed and to compete against global companies out there.

It is through the combination of these highly educated people that they are able to adjust industrial needs or focus to maximise economic returns through the policies that affect the Chaebols and SMEs. For instance, the department heads would send recommendations to the President on which industries these Chaebols should focus on next. Some of the industries that were chosen during those times were shipbuilding, electronics, car-manufacturing, telephone industry and much more. It is no surprise that South Korea dominates these areas today. Their successes were not the result of an accident, they were engineered by people who have the foresight on where the future is heading next.

When it comes to the development of South Korea today, some argue that the country is not perfect and that it has its disadvantages. Pollution and traffic problems are just some of ideas they may argue against. I am not saying South Korea is perfect. But we must realise that the aim of learning from other countries is so that we can learn best practices and leave what is not good. There is no harm in this context, therefore, to learn what works or what has worked for South Korea. Indeed, there are also weaknesses of industrial policy that should be continually assessed and debated. There is no fixed formula for any policy, after all.

In this regard, Brunei can consider introducing a more robust industrial policy. It should focus on strengthening the national SME bank so that it can provide loans to the big companies and SMEs of Brunei. Next, as the big companies and SMEs secure these financial resources, it is their primary duty to contribute toward economic development and job creation. Otherwise, they should be stripped of their support immediately. Finally, the Brunei government must continually invest in the education of the people and provide these individuals with the right jobs where they can make full use of their education towards economic development.

The combination of these three factors in enhancing industrial policy of Brunei would contribute well towards the effective diversification of the country. I dare say that with the right policy, the right financial provisions, the right businesses, and the right team, Brunei can make full use of its resources to build a bigger, better and more diversified economy. This is crucial as we work towards preserving our national survival in the 21st century and beyond.