Industrial Policies and Outcomes: A Comparison of Pre-liberalized Korean and Turkish Economies

ABSTRACT

Since the 1960s Korea and Turkey have been among the fastest growing economies globally with a transformation of their economic structures from an agrarian into an industrial one. However, design and implementation of their industrial polices have been different, leading to different industrialization paths and end points. This paper reviews and contrasts the industrial policies in the two countries on a comparative basis during their periods of rapid industrialization that precede economic and financial liberalization (1960–80 for Turkey and 1962–97 for Korea). Korean industrial policies were more focused; targeting specific industries and complementing this with manpower and technology policies. While import substitution has been prevalent in both countries, Korea has simultaneously emphasized export orientation and Turkey has not. Macroeconomic management was more prudent in Korea than in Turkey. Repressive financial policy together with directed credits were common in both, as were tax incentives favouring industrial investments.

KEYWORDS:

• Industrial policy
• economic development
• import substitution
• export orientation
• Turkey
• Korea

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Corrigendum

Acknowledgements

This research was supported by the Korea Institute of International Economic Policy (KIEP). This is a shortened version of a paper by the author while he was a visiting scholar at KIEP in September 2014. TÜBİTAK support to the author is also acknowledged.

ORCID

Murat A. Yulek http://orcid.org/0000-0001-7533-5882

Notes

¹Development planning is still conducted in Turkey. The phrase “planned period” generally refers to 1960–80 when planning went hand in hand with import substitution and protective policies.

²Some well-known accounts of Korean development are by Amsden (1992), SaKong and Koh (2010), World Bank (1993) and Westphal (1990).

³SaKong and Koh (2010) note, with reference to Park (2005) that in order to maximize capacity utilization, the HCI drive plan specified funding requirements for each project and care was taken not to exceed the budget ceiling. Even during the HCI drive, priority was accorded to production of finished products rather than intermediate and raw materials to increase capacity utilization and bring in cash flows. Even in the case of the defence industry, 80 percent of the capacity was allocated to civilian products.

⁴Japan followed more or less a similar combination of financial policies (see Yülek, 1997).

Additional information

Notes on contributors

Murat A. Yulek

Murat Yülek is a professor of economics at Istanbul Ticaret University and the Director of the Center for Industrial Policy and Development. He is also a partner at PGlobal Global Advisory and Training Services Inc. Previously, he has been Vice Rector and Dean of the Faculty Business Administration at THK University. He has also served as member and chairman of boards of directors as well as CEO of financial and non-financial institutions. Responsibilities at the International Monetary Fund, Islamic Development Bank and Turkey’s State Planning Organization, exposed him to development issues in a wide range of economies. He has taught at various universities including at Georgetown University and served as consultant at the World Bank, Islamic Development Bank and UNCTAD, among others. His research concentrated in development economics and industrial and financial policies. He co-edited Designing Public Procurement Policy in Developing Countries: How to Foster Technology Transfer and Industrialization in the Global Economy published by Springer in 2012. He holds Ph.D. and M.A. degrees in economics from Bilkent University, an MBA degree from Yale University, an MSM (Management) degree from Boston University and a B.Sc. degree (mechanical engineering) from Boğazici University.