How Korea’s Five Year Plans Drove Industrial Growth

South Korea’s economic miracle, transforming from a $79 GDP per capita in 1960 to $20,579 by 2010, was no accident. Central to this was the Five Year Economic Development Plans (1962–1996), which guided Korea’s export-oriented industrialization. As a Master’s student studying development economics, I’m fascinated by how these plans orchestrated Korea’s growth, as detailed in Sung-Hoon Jung’s The Korean Development Strategy (2011). For Nepal, struggling with underdevelopment, Korea’s strategic planning offers valuable lessons. This post explores the Five Year Plans’ role and how Nepal can adapt similar strategies.

The Five Year Plans: A Roadmap to Prosperity

Korea’s Five Year Plans, spanning seven terms, were the backbone of its developmental state model. They targeted industrial restructuring, infrastructure, and exports (Jung, 2011, p. 460):

• 1st–2nd Terms (1962–1971): Focused on light industries (e.g., textiles) and infrastructure like power plants and the Gyeongbu Expressway. Policies included import restrictions and export promotion via KOTRA.
• 3rd–4th Terms (1972–1981): Shifted to heavy industries (e.g., steel via POSCO, shipbuilding) and technological capabilities, supported by industrial complexes.
• 5th–7th Terms (1982–1996): Emphasized high-tech sectors (e.g., semiconductors) and market liberalization, despite challenges like the 1997–1998 financial crisis.

Exports grew from <10% of GDP to 50% by 2010, driven by these plans (p. 454).

Key Mechanisms

• Industry Selection: The state prioritized competitive sectors, nurturing chaebols with loans and tax incentives (p. 456).
• Infrastructure Investment: Projects like the Gyeongbu Expressway boosted connectivity (p. 460).
• Export Promotion: Free export zones and exchange rate reforms enhanced competitiveness (p. 461).

Lessons for Nepal

Nepal’s National Planning Commission could adopt a similar approach, targeting hydropower (40,000 MW potential) and tourism. A five-year plan could outline goals like doubling hydropower capacity or increasing tourist arrivals by 50%. Infrastructure projects, such as upgrading the East-West Highway, could mirror Korea’s efforts. However, Nepal’s political instability requires bipartisan support to ensure continuity, unlike Korea’s authoritarian stability.

Explore more in our series:

• How South Korea Became an Economic Powerhouse for an overview.
• Korea’s Infrastructure Boom for infrastructure insights.
• Nepal’s Path to Industrial Growth for policy ideas.

How can Nepal implement strategic plans? Share your ideas below!

References:

• Jung, S.-H. (2011). The Korean Development Strategy. Journal of the Economic Geographical Society of Korea, 14(4), 453–466.
• World Bank. (2023). Nepal Development Report.