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Lessons from Korea’s economic development: visionary leader and national unity with sacrifices

Published on 20th Apr, Edition 16, 2015


Message of Dr. Song Jong-hwan, Ambassador of the Republic of Korea to Pakistan and Interview with Dr. Baek Yeong-hoon, translator of President Park Chung-hee’s first commercial loan delegation to West Germany in 1961.

It has been 1 year and 8 months since I came to Pakistan as the Ambassador of the Republic of Korea. During this time the most frequently asked question of my Pakistani friends has been “How did Korea develop so amazingly in such a short time?”

In 1960 Korea’s per capita income was $79 which was lower than the average income of the Least Developed Countries and Korea had only $20 million foreign exchange reserves. By the end of 2013, Korea’s per capita income was $25,977 and its foreign exchange reserves are over $345.6 billion, the 8th largest reserves in the world.

There are many reasons for Korea’s speedy development. The two most important reasons were Korea’s visionary leader, President Park Chung-hee, who created a strong momentum and secondly, the Korean nation’s unity and efforts with their sacrifices.

A Korean newspaper, The Dong-A Ilbo, published an interview with Dr. Baek Yeong-hoon, translator of Korean Government’s loan delegation to West Germany, on 10th April, 2013 about how President Park got a $30 million commercial loan in 1961 from West Germany. This loan was required very urgently for implementing the first Economic Development 5 Year Plan (1962-66).

After Korean delegation’s visit to Germany in December 1961, Korean miners and nurses started working in Germany from 1963. Even though their working conditions were very difficult and intense, yet they provided parts of their income as security for a German commercial loan to the Korean government.

President Park visited Germany in December 1964. During his stay in Germany he visited the Ruhr mines along with Karl Heinrich Lübke, the president of Germany, and addressed the Korean miners and nurses. During his speech to these hard working Koreans, President Park cried while he promised “We must not pass this poverty to next generation”. This is a really good lesson for Pakistan too, if it wants to learn Korea’s Economic Development.

President Park learnt many lessons in his visit to Germany in 1964, which would change the history of Korea. Particularly, he understood that he should not rely only on foreign aid for the progress of his country. Secondly, he learnt how to make an economic development order for the economic stability in a country. His economic development order started with the construction of highways, followed by making of automobiles, steel mills and oil refineries.

I wish to see the Miracle of the Indus River here in Pakistan as I witnessed and experienced the Miracles of the Rhine River in Germany and the Han River in Korea. And with that desire and hope, I have always made efforts to strengthen the relations between our two countries as an Ambassador of the Republic of Korea to Pakistan. I am translating the interview with Dr. Baek Yeong-hoon into English, for the convenience of my Pakistani friends.

Park Chung-hee came to power through a military coup on 16th May, 1961. He believed that people could achieve what they wanted if they had a firm volition such as ‘Just Do it’.

However, economic problems are not something we can overcome only through desire. Park Chung-hee’s will to keep the pledge he made at the time of taking power was high. In addition to this he wanted to find solutions to the economic difficulties of the Korean people, who were desperate and starving, but unfortunately Korea had no ‘money’.

In Nov 1961, shortly after the military coup, he went to the American President John F. Kennedy with hopes of getting economic assistance but he had the door slammed in his face. The proposals he had prepared were considered absurd by the American side. More importantly the Kennedy government had an unwelcoming and critical opinion about the military coup itself.

America had the stance that giving a loan to Korea would give the impression they approved of Park’s coup and that militaries in other Asian countries may attempt to replicate such actions. At that time military coups seemed probable in Vietnam, Malaysia and Philippine.

The financial institutions of America also turned their backs on the Korean proposals mercilessly. They explicitly said it was nonsensical to give loans to the country that had already been given grants; it was obvious that at heart they didn’t believe in the future of Korea.

Apart from America, President Park briefly considered Japan as a possible source of loans but he couldn’t imagine how the Japan could give loans to Korea as Korea and Japan didn’t even have diplomatic relations.

He had been taking notice of a new country, West Germany, an emerging power known as the ‘Miracle of the Rhine River’. The economy of West Germany had been showing 8% annual growth rate on average since 1950. Observing the dramatic recovery of West Germany, a country which had overcome the wound of being defeated and shared the pain of being a divided nation, he made a resolution ‘Let us also achieve the Miracle of the Han River from the ache of the war.’

In November 1961 the military regime of Park Chung-hee decided to send Jung Rai-hyuk, the minister of commerce and industry, as the chief delegate of the ‘Loan Negotiation Delegation’ sent to West Germany. However, there was no one who could speak German, either at the embassy of the Republic of Korea to West Germany or in the delegation. After asking around, a person called Baek Yeong-hoon (83, current chairman of Korea Industrial Development Institute) was found. He was the first Korean to earn a Doctorate in Economics from West Germany. He earned the degree during the presidency of Lee Seung-man, as a student studying abroad on government expense in West Germany (Nuremberg Erlangen University) and had come back to Korea. He was working as a professor at Joongang University.

Dr. Baek joined the delegation as an official translator. Even after the delegation arrived in West Germany no one wanted to meet them.

Dr. Baek said “at that time, we were like the least developed country of Africa today. Our delegation was from a country most Germans had never seen or heard about in their entire lives. When they came asking for a loan, who would want to meet them?”

The then Minister of Economic Affairs of West Germany was Ludwig Erhard who became the Prime Minister of the country 2 years later. After much deliberation, Dr. Baek called on his respected professor at university who had attended the same university as minister Erhard did.

Dr. Baek recounted “I’d been talking about the pitiable circumstance of Korea and implored him to help us meet the Minister of Economic Affairs but he repeatedly said he would not be able to help me. Later on, he didn’t even like me visiting his home. Finally, I went to the residence of my professor daily at 6:00 am, waited for his wife to come out and appealed for sympathy saying ‘Madam, please help me, let me meet with the minister.’ After one week of this routine, my professor contacted me saying “I have arranged the meeting with the vice minister for you.”

On 11th December, 1961, the delegation finally met Rutger, the vice minister, and met the minister the next day. At last, Korea succeeded in borrowing a commercial loan valued at 150 million Marks ($30 million). The delegation was moved to tears. This was the first commercial loan after the establishment of the Korean government.

The delegation went back and Dr. Baek was left in West Germany to complete the rest of the work. All of sudden, a problem arose. Korea needed payment guarantees of a bank. The Ministry of Finance of the Korean government looked all around but could not find a foreign bank, which would offer payment guarantees as Korea had no national credit rating. That was a critical situation and it seemed like all the efforts to finalize a successful loan agreement might go in vain.

Regarding this matter Dr. Baek said “Nobody can understand how hard and difficult it is unless one is the national of a poor country. I cried every day and went around meeting German friends. As no one was ready to offer payment guarantees, the money we borrowed couldn’t be taken to our country; I thought ‘if I can’t make it, I will just die in West Germany’.”

One day Schmidt, with whom Dr. Baek went to university with and who worked for the ministry of labor as a section chief, came to him and said “Aren’t there many unemployed people in your country?” Dr. Baek responded “Why so?” Next day, he came again with a pile of papers.

Schmidt told Dr. Baek “At this moment, West Germany has a shortage of miners who are willing to work in a coal mine. It needs to be dug 1000 meters below ground but everyone is exhausted with the hot temperature and laborers from other countries ran away. Could Korea send about 5,000 laborers by any chance? About 2,000 nurses also are needed. It also requires daunting tasks like cleaning dead bodies and no German want to do it. If Korea can send miners and nurses, it can get the commercial loan on security of their pay.”

Dr. Baek immediately called on the Korean Ambassador to West Germany. His Excellency, Mr. Shin Eung-kyun listened to what Dr. Baek was saying and said “It would be possible for us to send even 50,000 people, not just 5,000 people.” For Korea, in which dollars and jobs were short, it was not an offer to decline. Mr. Shin sent an urgent message to his headquarters in Seoul and the job opening was posted in Korea.

In those days the monthly wage of West German miners was 7-8 times more than that of Korean miners. Economically, it was a very difficult time in Korea so thousands of people flocked to the opportunity with the hope of working in a developed country like West Germany, with high pays.

The unemployment rate in Korea was almost 40% and the GNI per capita in Korea was 79 dollars, which fell far short of the GNI per capita in Philippine (170 dollars) and Thailand (260 dollars). In addition, the foreign exchange reserves of the Bank of Korea were less than $20 million.

There were 2,894 people gathered for the miner work in the first recruitment; the competition rate was one out of six. Although it was posted in a notice that the applicant should have 2 years of work experience, even college graduates who lived in cities and had never worked in a coal mine applied for the jobs. ‘Fake miners’ who hadn’t even come close to a mine tunnel also manipulated the necessary documents and applied.

Another Korean newspaper, The Kyunghyang Shinmun, on 13th September, 1963, reported it as follows: “It is revealed that apart from 1,600 people who failed the medical test, half of the 1,300 applicants are unemployed people who have a college degree and don’t have work experience in the field of mining. According to the Ministry of Labor these ‘fake miners’ paid 300-500 Won for a fake certificate of work experience in the mining industry. It is found that there are 20 non-existent mines in these fake certificates. The Ministry of Labor plans to investigate the non-existent mines by assigning superintendents to every coal mine in Korea.”

In reality 30% of miners who entered West Germany from 1963 to 1966 were college graduates. Miners who went to the region of Ruhr were almost all college graduates. As everyone was interested in this job, the Ministry of Labor posted the list of successful applicants in newspapers just like announcements of national examinations.

Finally, first contingent of 123 miners arrived at the Düsseldorf airport of West Germany at 5:00 am, on 22nd December, 1963. They were assigned to mines in Eschweiler in Aachen area, west of Düsseldorf and Hamborn in the Duisburg district of Ruhr area, north of Düsseldorf.

The miners shed tears and sweat throughout the mine tunnels. In some cases they even lost their lives. They remitted all their salary to Korea except saving, cost of living and pension. 7,932 miners and 10,226 nurses went to West Germany till 1977. Their incomes played the role of seed money for the economic development of Korea. At one time the annual home remittances were $50 million, which amounted to 2% of GNP of Korea.

As per the contract terms, miners and nurses who went to West Germany were not able to go back to Korea for 3 years and had to remit a certain amount of money in their monthly salary to Korea no matter what. Their pay was remitted to Korea through Commerz bank. This Commerz bank was the bank that issued the payment guarantees for introduction of loan.

After much meandering, Dr. Baek successfully accomplished the mission of acquiring a loan and headed home, dragging his fatigued body, and was reinstated as a university professor in Joongang University.
After 3 years, at the end of 1964, Dr. Baek got an unexpected summon from President Park Chung-hee again. President Park ran for the Presidency in his capacity as a civilian after having finished military administration in October 1963 and became the president of the Third Republic winning over the candidate Yun Bo-seon by a small lead of 0.15 million votes.

President Park went to the front door and waited for Dr. Baek to ask him “Please help me one more time.” The fact was that the President of West Germany Karl Heinrich Lübke, had invited President Park as a national guest so they needed a translator.

Dr. Baek was waiting for the departure day to West Germany when he got a message that there was a meeting in the Blue House, the executive office and official residence of the President of the Republic of Korea. He went there and saw that everybody had a grave look. They didn’t have an aircraft to go to West Germany. “Initially, there was an arrangement of borrowing an aircraft from an American company, Northwest Airlines, for 20 days by paying $50,000. But the US congress decided to cancel it because they thought that it could provoke other countries if Korean soldiers who came in power through a military coup utilized an American plane. It was 10 days before the visit.

Dr. Baek was appointed as a presidential envoy at that very place. He was asked to fly to West Germany straight away and ask West German government for provision of an aircraft. After deliberation, Dr. Baek asked Choi Doo-sun, the former chairman of The Dong-A Ilbo, who had resigned from the post of Prime Minister of the Third Republic and studied in West Germany during the Japanese colonial era, to go to West Germany with him.

Mr. Choi, the former chairman had a lot of personal connections in Germany. The team of Dr. Baek met the chief presidential secretary and vice minister of labor department to consult on the schedules of the visit of President Park to West Germany.

Dr. Baek intended to talk about provision of plane but words were stuck in his throat. However, he opened his eyes wide, gathered all his courage and said “We don’t have an aircraft. As Germany is big and wealthy country, would it be possible to provide us an aircraft?” Everyone was dumbfounded. German officials gazed at us for some time and said “please go back for the time being”.

“Considering there was no call until three days before the proposed departure, we thought they declined our request. Just before we left, we got the call from them, saying they would provide an airplane. Finally, Lufthansa airliner (Boeing 707), which was going back to West Germany via Hong Kong on 3rd Dec, 1964, changed its original route and landed in Seoul. President Park Chung-hee went to Germany by that airplane.”

In a hurry, the plane he took was a general plane, used by common people and not a presidential plane. He got to Germany after 28 hours, passing through Hong Kong, Bangkok, New Delhi, Karachi, Cairo, Rome, Frankfurt and Cologne airports.

Lee Ja-hun, accompanied Park Chung-hee in that airplane as a political department reporter of the Korean newspaper, The Chosun Ilbo, and wrote his memoirs in his book “45 Year History of Miners Dispatched to Germany”. That book excellently illustrates the poverty and inexperience of the Koreans who travelled abroad during that era. He wrote “The President and ministers took their seats in First class and others in Economy. When I went to the washroom some strange thing was placed in front of the mirror and there was confusion about what it was. At that moment, Ms. Chung Kwang-Mo, the only female reporter in our group from Hankook Ilbo, a Korean daily newspaper, explained that this was “liquid soap” and we couldn’t repress our laughter. Our reporters were international hillbillies and President’s companions were also shabby. President Park Chung-hee’s facial expressions were not bright either.”

There was a reason why President Park was invited by Western Germany. That reason was the miners who had started being dispatched from Korea since end of the previous year.

Dr. Baek said, “Every day newspapers and broadcasts would cover how Korean miners worked devotedly. When it was televised how Korean miners worked on the tunnel 1,000m underground, without claiming overtime, West Germans were amazed. Finally, members of the German National Assembly adopted a resolution, which said we should take interest in Korea and invite the Korean President to show our friendship.”

The West German President and Prime Minister gave a warm welcome to President Park Chung-hee when he got to Germany after his 28 hour long journey on December 5th, 1964. Dr. Baek said the President Park he witnessed at the banquet held for him by Prime Minister Erhard was unforgettable.
President Park, president of a poor country of the East and just 47 years old at that time, sobbingly said to Prime Minister Erhard of West Germany, “Half of the Korean people are dying of hunger”. He continued, “We Koreans never lie and we’ll pay back the borrowed money. Help us. All Koreans are yearning to work. We will also make the miracle of the Rhine River.” President Park was in tears and so was I as I translated his words.

Prime Minister Erhard asked “Why did you stage a coup?” and President Park answered, “Korea is threatened by Communist countries like your nation. To win against Communist countries, we must be wealthy first. The reason why I started a revolution is not that I am greedy for power but because of a crisis of conscience. Korea had no chance of revival because our political situation was uncertain and our economy was exhausted. However, we don’t have enough money, if you lend us money, I will surely use that to rebuild my country.”

That day, Prime Minister Erhard advised them on various things that would change the history of Korea. Dr. Baek noted the entire conversation between Prime Minister Erhard and President Park and gave those notes to the Ministry of Foreign Affairs. When President Park finished talking, Erhard held his hand firmly and said he was moved and influenced by Park’s passion and sense of duty. Based on his vast experience, he solemnly elaborated and made quite a few suggestions for Korea.

Erhard said, “I’ve visited Korea twice when I was Minister of Economy. Korea has many mountains and that’s an obstacle to economic development. You should construct highways. Germany’s Autobahn highway was initiated by Adolf Hitler. After you build the highways, you need vehicles to run on them. German’s national car, Volkswagen was also made when Adolf Hitler ruled.” He continued speaking, looking at President Park, bright-eyed, “To make automobiles, you need steel. You should build a steel mill. You need fuel as well so you require an oil refinery too. To focus on economic stabilization, the middle class must be made strong. For that, you should promote small and medium size business. We’ll help you and will send economic advisors.”

And indeed, West Germany sent 5 economic advisors to Korea after President Park returned to home.
Prime Minister Erhard, West Germany’s first Minister of Economy (1949-63) is a benefactor to Korea in this regard. When he met President Park, he was serving as the 2nd Prime Minister of West Germany (1963-66). He revived the West German economy after the country was ruined by war, under the slogan ‘Prosperity for all’.

That day, Prime Minister Erhard also gave an unconventional advice, “go hand in hand with Japan”. He continued “Germany fought 16 wars with France. West Germany had deep resentment for France even later. However, Konrad Adenauer, former Chancellor of West Germany, visited former French president De Gaulle and extended his hand for a handshake after World War . I hope Korea will act similarly. That’s also a way to prevent Communism.”

Dr. Baek reported “President Park looked angry when he heard that and said, “We have never fought with Japan, rather we have always beaten by them.” Erhard answered, “A leader should be futuristic.” His advice bore fruit as a Treaty between Korea and Japan was signed in 1965, the year after Park visited West Germany. Their communication on that day serves as an important momentum of Korean history.
Prime Minister Erhard and President Park stood hand in hand. After consultations between the two countries, Erhard announced an amazing 250 million Mark ($50 million) loan to Korea without any security.

Next day, President Park delivered a lecture at an engineering college of a university in Germany. However, an unexpected situation arose. “When teachers arrive for lectures, German people gently beat the desk several times, rather than clapping. Unfortunately, I couldn’t inform him that before. Sure enough, when President went up to the platform, students started to beat on the table. President Park thought they jeered him. I was in the translator seat, far from him so I couldn’t explain their culture to him…. He blushed. He was obviously flustered and even couldn’t read the prepared remarks properly. After a while, students again beat on the table and Park realized that they aren’t jeering, and are actually paying attention. He relaxed and started to read his remarks.

On the way back President Park casually told me off “Dr. Baek, Why didn’t you inform me about this kind of culture in advance? I was almost ashamed!”

Wherever he visited, President Park raised his voice “Help Korea!” Even the remarks he gave to student that day also contained the same message “Help us; we will make Miracle of the Han River like Miracle of the Rhine River, that you have accomplished.”

With the President of West Germany, Karl Heinrich Lübke, President Park visited the mines in Ruhr where most Korean miners worked. The miners, waiting for the President of Korea, had coal stained faces and muddy clothes. President Park Chung-hee and first lady Yuk Young-soo went up on the stage. The miners’ band played the national anthem but nobody sang along. The music was overwhelmed by the sound of crying. All 500 miners bowed their heads and their shoulders heaved as they sobbed.
After the band stopped playing, President Park wiped his eyes and nose, and then walked toward the podium. “Because of our reunion in this distant foreign country, I am overwhelmed with emotion…” He couldn’t continue to speak the prepared remarks as the sound of crying became louder and changed into wailing. President Park put the paper aside and said “What state are we in? My heart is crying bitter tears. My dear miners! I understand you are uncomfortable and missing your family and hometown. Let’s pass a wealthy country on to our next generation, even if we can’t witness it in our life time. Let’s do our best. You do your best and I will do mine…” He couldn’t complete his words and cried loudly. The President of West Germany had eyes full of tears as well. Later, the miners held the doors of President Park’s car and continued to cry bitterly.

During one week in West Germany, President Park drove on the motorway — Autobahn and visited a steel mill. He was most interested in the ‘Autobahn’. The construction of the Autobahn was started by the Nazi Reich and was planned to be 14,000 km long. 3,860 km were completed before the construction was stopped by World War. When President Park was in West Germany, Autobahn was famous as ‘the fastest motor way.’

At that time, Park enquired of the West German authorities about many things in profound detail regarding the construction of the Autobahn, the management methods, project costs, construction period and the equipment used. Finally, in a meeting at the Blue House on 7th November, 1967, he gave to the Minister of Construction the directions to build the Gyeongbu Expressway and supervised the project himself.

Dr. Baek said, “The experience gave a new direction to my life as I observed young President Park dedicate himself fully towards rebuilding Korea. I was deeply impressed by him. It seemed as if he was willing to risk his skin for Korea and for the people of Korea.”

When he was on the Autobahn, President Park suddenly stopped the car and got off. He bowed on his knees and kissed the road. Everyone looked at him and cried. First lady Yuk Young-soo cried many times in West Germany with her husband on seeing the situation of Korean miners and nurses. Dr. Baek’s eyes ached with tears as he remembered everything like yesterday.

Dr. Baek deliberates “Today’s Korea was not made by President Park alone. Without the dedication of the miners and nurses working in a distant and strange country, risking their lives, we couldn’t have obtained the loan and the consequent economic development. I am truly proud of the Koreans who made Korea what it is today!”


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