The Foreign Capital Inducement Into South Korea During the First Five-Year Planning Period, 01/01/1962-01/01/1966
Authors:   , Choung Pil 
Published: February 2023

The purpose of this thesis as described in Chapter I was to analyze the processes of foreign capital inducement for, and the role of foreign loans and investments in, the economic growth and development of Korea for the First Five-Year Economic Development Plan period, 1962-1966. Chapter II described foreign capital requirements for the plan. The plan required that foreign loans and investments amount to 62.3 percent of the total foreign capital requirements. The planned use of these foreign loans was mainly for the development of import-substituting industries and social overhead capital projects. The successful execution of the plan depended largely on the inducement of loans and investments from foreign governments, international financial organizations, and other commercial institutions. Chapter III examined the finalized foreign capital inducement and its proposed projects during the period of the plan. Public loans amounted to 48.5 percent, private loans to 45.2 percent, and direct investments to 6.3 percent. The major contributing nations were the United States, Japan, and West Germany. The proposed projects were mainly for the import-substituting industries, such as oil refineries, fertilizer plants, and cement plants. The social overhead capital projects were financed largely by public loans. Chapter IV described the economic policies enacted by the Korean government to attract foreign investments, thereby providing considerable privileges and immunities for potential foreign investors. Under the laws, foreign investments were given special tax treatment during the first five years of their existence. The government also concluded the Normalization Treaty with Japan, according to which Japan would make available to Korea 800 million dollars in loans and grants. Chapter V described the effect of the induced foreign capital on the growth and development of the Korean economy during the plan period. The induced foreign capital accounted for 10.6 percent of the gross investment in the 1962-1966 period. The foreign loans contributed largely to the promotion of export and import-substituting industries, and social overhead capital such as transportation, power, and communication. The production capacity of import-substitution expanded immensely. Some industrial sectors such as oil completely eliminated importation of products from abroad. The foreign investments helped to make possible the economic growth of Korea at a rate of 8.3 percent during the plan period. Chapter VI, the conclusion, evaluated the foreign capital inducement processes and policies of the government taken during the plan period. The annual repayment remained at 0.2 percent of the GNP during the plan period, and its weight on current foreign exchange receipts remained for the most part at 3 percent. In this regard, the government had done well so far. In order to lessen the repayment debts in the future, the government must borrow mainly from the public lending agencies such as the World Bank and foreign governments.