The Korean government’s public health responses to the COVID-19 epidemic through the lens of industrial policy

ABSTRACT

The paper explores the idea that the success of the Korean government’s non-pharmaceutical interventions in response to the COVID-19 epidemic can be better understood through the lens of industrial policy framework than many descriptive public policy literatures that have merely focused on administrative efficiency. It is emphasized in this paper that the Korean government has maintained sustained R&D support, tax subsidy, and various forms of public–private partnerships to help nurture and grow domestic infant industry in such strategic industrial areas as information-communication technology, biotechnology and health care, and pharmaceutical industry for a long time, and this soft industrial policy has enabled the public health authority to implement a series of successful non-pharmaceutical public health measures to suppress and mitigate the spread of the novel coronavirus.

KEYWORDS:

• COVID-19
• non-pharmaceutical interventions (NPIs)
• industrial policy
• strategic industry
• public–private partnerships

JEL CLASSIFICATION:

• L52

Acknowledgements

The author is grateful to anonymous reviewers’ and editors’ comments and suggestions that helped substantially improve the manuscript. It is the author’s sole responsibility, however, for the errors and/or mistakes remained in the article.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. The tariff rebate on inputs used for exports, also known as ‘duty drawback scheme’ is the government’s monetary compensation and incentive program given to private enterprises that manufacture internationally tradable outputs relying on inputs imported from abroad. Under this scheme, the government provides rebate for tariff cost added to the price of imported inputs to partially relieve the immediate financial burden associated with tariff-adjusted input price. This micro incentive policy can be made to help increase domestic firms’ export target and international competitiveness. One useful study of this ‘duty drawback scheme’ used in South Korea and Taiwan, see Wade (1991).

2. This paper does not aim to revisit existing theoretical debates over market failure and the case for industrial policy. Interested readers on this issue can find useful references from Rodrik (2009), Wade (2012, 2015), Chang (1993, 2006), and Chang and Andreoni (2020). The paper focuses on how the existing industrial policy framework in Korea has helped formulate and implement highly successful mitigation strategies adopted by public health authority in this country.

3. The purpose and actual usage of publicly designated quarantine sites have changed as time goes by. At the beginning, the public health authority used these converted public buildings to help accommodate the urgent need of quarantining returning Korean nationals who either traveled or resided in Wuhan area in China, the epicenter of the novel coronavirus outbreak. However, beginning from late January of 2020, the Korean government gradually expanded its ‘special entry screening’ programs applied to all incoming travelers to mandatorily get the COVID-19 testing and quarantine for about 14 days in these designated sites. The selected quarantine sites were designated and directly managed by the Central Disease Control Headquarter at first, but later local government health agencies took the charge of flexible operation of these sites. For more detailed information about this special entry screening and quarantine measures, see KDCA (2020).

4. The immediate impetus for upgrading the existing National Infectious Disease Control and Prevention Act was the recognition of multi-governmental coordination failures in coping with the prior outbreaks of infectious diseases such as 2014’s Ebola and the Middle East Respiratory Syndrome (MERS) in 2015. The Korea Centers for Disease Control and Prevention under the Ministry of Health and Welfare proposed the need of amending the existing law in 2016, and the amended act was passed in National Assembly in the same year. The amended law streamlined the intergovernmental coordination process and empowered the public health authority’s access to personal data for identifying epidemiological links of the virus.

5. This is stark contrast to what happened in the US under the Trump Administration. Even after the administration grudgingly declared national emergency (in March 2020) after repeated underestimation and denials of the potential danger of the COVID-19 epidemic, US CDC and NIH (under severe budget constraint) and many private labs were not able to produce properly functioning COVID-19 test kits and frontline workers – medical doctors and nurses and many other ‘essential workers’ were not able to obtain basic personal protective equipment and specialty face mask for a long time. It was hardly believable and tragic to see so many dedicated doctors and nurses were forced to wear patchworked plastic trash bags before approaching COVID-19 patients in many American hospitals for so long. The National Defence Act that temporarily allows extraordinary presidential power to mobilize private sector resources in the face of emergency did not help turn the corner around because of long-lasting deindustrialization of domestic manufacturing base and difficulties in obtaining basic raw materials critical for producing these products.

6. We cannot fully trace the history and implications of the change in planning and implementation of industrial policy framework in Korea. But from a broad historical point of view, we can identify the following distinct periods, in which the existing industrial policy framework underwent substantial changes and modifications. An early attempt to restructure the key governmental agencies that played a dominant role in industrial planning and to abolish the government’s practice for industrial policy was made in the early 1980s. This ‘neoliberal rationalization and restructuring of industry’ was largely driven by the negative consequences of excessive external debt accumulated in the aftermath of global oil shocks in the late 1970s. The persistent democratic social movements and the transition toward the civilian government in political sphere materialized in the late 1980s and early 1990s also involved a radical shift away from the existing hard industrial policy framework as well. The Kim Young-Sam Administration attempted to abolish the presidential Economic Planning Board and reshuffled the Ministry of Finance in 1994, while pursuing domestic financial market deregulation and external capital account liberalization policies in the name of coping with ‘SEGEWHA’ (meaning ‘globalization’ in Korean). It is well known that this pro-globalization policy stance ended up with the Asian financial crisis in 1997-98, which transformed the Korean industrial policy framework further. Even in these tumultuous changes in the relationship between the government and private business sector, the government’s pursuit of soft industrial policies and budgetary practice has remained as one dominant feature of the contemporary Korean political economy. Interested readers can find more detailed references for this aspect from Chang (2006) and Lee and Rhyu (2019) among other.