It does not look like there’s much difference between what South Korea imports and what it exports. Well, not until you notice it. You see, South Korea ranks in the world’s top 10 for both imports and exports as it is the 8th largest importer and the 7th largest exporter in the world. In 2011, the country imported $ 525 billion worth of stuff and exported goods worth $ 558 billion. These combined statistics would actually give it a slight margin if it were a business.
On the other hand, Brazil is the 20th largest importer with $ 219.6 billion worth of imports in 2011. It is the 23rd largest exporter with $ 256 billion worth of exports in 2011. Again, not bad because they did manage to make a small profit.
Kenya was the 84th largest importer and managed $ 11.87 billion worth of imports in 2011. It was also the 110th largest exporter managing to export just half of what it imported to a tune of about $. 5.443 billion. Maybe the country needed to borrow, or perhaps it needed to produce lots of stuff to cover for the large difference in imports and exports.
Meanwhile, the unemployment rate in South Korea is at 3.4 percent, and in Brazil, the rate is currently at 4.9 percent while Kenya has a disappointing rate of 40 percent.
In 1960, Korea was recovering from a war, with more than half of its budget funded by donors. In 2008, the country formally joined the “donor community”, as it is often referred to in Kenya. The country does not have much in terms of minerals, does not produce much in terms of agricultural produce and does not have any hint of oil.
Brazil, on the other hand has the world’s fourth largest company, an oil and gas company by the name of Petrobas. Some of the minerals it boasts of include iron ore, tin, copper, pyrochlor, and bauxite (aluminium) and even gold (was once world leading producer) and kaolin (china clay). The country is the largest exporter of cattle and has significant global production of coffee, sugarcane, wheat, soybean, rice and maize.
Brazil notably exports iron ore, soybeans, shoes, coffee and vehicles. Notable exports also include the Embraer plane, which Kenya Airways is among key clients.
South Korea exports steel (processed iron), petrochemicals, semiconductor and electronics, and well, ships. With the country being among the top 10 importers and top 10 exporters, they may as well build ships and while they’re at it, ferry around all the stuff they import and export. Interesting fact: half of the world’s ships are built by Samsung, Daewoo and Hyundai.
Funny how South Korea and Brazil have pursued varying trade policies only to end up at where they are today.
So how did they do it?
Brazil pursued an import substitution program to date. The program emphasised on manufacturing items in the country, rather than importing them, thus creating jobs and saving on forex. Imports were highly restricted and to date, the country still frowns upon them. Their strategy did not come cheap. A lack of exports meant that there was little forex inflow. In addition, machines, and quite expensive ones at that, had to be imported for manufacturing and this quickly consumed forex.
(Ideally, with import substitution, industries grow slowly over time as they start manufacturing what they find to be commonly needed).
Meanwhile, South Korea focused on promoting exports, and encouraging the manufacturing of stuff for export. Raw materials have little or no tax on them, encouraging massive importation of the same, which it then processed for export. Export manufacturing firms were given huge incentives including the financing purchase of machinery. The initiative was deployed in five year strategic plans, each focusing on a different sector of the economy. A single generation has seen South Korea move from a third world country to a first world nation (anyone over the age of 50 has seen South Korea transform in their lifetime).
South Korea had also implemented an import substitution program, though not as strict as Brazil’s. They later did away with it as the population grew wealthy.
Though Brazil recently overtook the United Kingdom to rank as the world’s 6th largest economy, while South Korea is ranked 15th, it cannot escape the criticism that South Korea’s annual production per individual stands at about $ 30,000 (KSh. 2.6 million). This is almost three times that of Brazil which stands at about $ 11,000 (KSh. 956,000). An average Kenyan produces $ 1,700 (Ksh. 147,730) worth of goods and services annually.
Few countries have been able to export as much as South Korea does, and especially when the company basically has nothing to export. Meanwhile, South Korea’s bet seems to have paid off quite handsomely.
When will Kenya pick its own strategy? And will it be Brazilian or Korean?