¹ See Balassa, Bela, ed., Development Strategies in Semi-Industrial Economies (Baltimore: The Johns Hopkins University Press, 1982)Google Scholar, and The Newly Industrializing Countries in the World Economy (New York: Pergamon, 1981); Chen, Edward K. T., Hypergrowth in Asian Economies (London: Macmillan, 1979)CrossRefGoogle Scholar; Westphal, Larry, “The Republic of Korea's Experience with Export-Led Industrial Development,” World Development (June 1978), 347–82CrossRefGoogle Scholar; World Bank, World Development Report (New York: Oxford University Press, 1983)Google Scholar; Krueger, Anne O., The Developmental Role of the Foreign Sector and Aid (Cambridge: Harvard University Press, 1979).CrossRefGoogle Scholar

² See Evans, Peter, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil (Princeton: Princeton University Press, 1979)Google Scholar; Cardoso, Fernando, “Associated Dependent Development,” in Stepan, Alfred, ed., Authoritarian Brazil (Princeton: Princeton University Press, 1979)Google Scholar; O'Donnell, Guillermo, Modernization and Bureaucratic Authoritarianism: Studies in Latin American Politics, Politics of Modernization Series No. 9 (Berkeley: Institute of International Studies, University of California, 1973).Google Scholar

³ See Jones, Leroy and Sakong , II, Government, Business, and Entrepreneurship in Economic Development: The Korean Case (Cambridge: Harvard University Press, 1980)CrossRefGoogle Scholar; Johnson, Chalmers, “Political Institutions and Economic Performance: The Government-Business Relationship in Japan, South Korea, and Taiwan,” in Deyo, Frederic C., ed., The Political Economy of the New Asian Industrialism (Ithaca, NY: Cornell University Press, 1987)Google Scholar; Haggard, Stephan, Kim, Byung-kook, and Moon, Chung-in, “The Transition to Export-Led Growth in Korea,” presented at Conference on the Role of the State in Economic Development: Republic of Korea (University of California, Los Angeles, August 14–16, 1987)Google Scholar; Young-II Lim, , Government Policy and Private Enterprise: Korean Experience with Industrialization (Berkeley, CA: East Asian Institute, 1981).Google Scholar

⁴ Haggard, Stephan and Moon, Chung-in, “The South Korean State in the International Economy: Liberal, Dependent, or Mercantile?” in Ruggie, John, ed., The Antinomies of Interdependence (New York: Columbia University Press, 1983), 140Google Scholar; Chalmers Johnson (fn. 3), 151; Koo, Hagen, “The Interplay of State, Social Class, and World System in East Asian Development: The Cases of South Korea and Taiwan,” in Deyo (fn. 3), 175.Google Scholar

⁵ Krueger (fn. 1), 21; Kim, Joungwon Alexander, Divided Korea: The Politics of Development, 1941–1972 (Cambridge: East Asian Research Center, Harvard University, 1975), 128CrossRefGoogle Scholar; Jones and Sakong (fn. 3), 210; Cole, David C. and Lyman, Princeton N., Korean Development: The Interplay of Politics and Economics (Cambridge: Harvard University Press, 1971).CrossRefGoogle Scholar

⁶ Krueger (fn. 1), 161; Jones, and Sakong, (fn. 3), 275–78; Haggard and Moon (fn. 4), 144.Google Scholar

⁷ Bank of Korea, Economic Statistics Yearbook, 1973.Google Scholar

⁸ Koo (fn. 4), 173; Mason, Edward et al., The Economic and Social Modernization of the Republic of Korea (Cambridge: Harvard University Press, 1980), 336–37.CrossRefGoogle Scholar

⁹ Koo (fn. 4), 171.

¹⁰ This study draws on several sources of primary data collected by the author while conducting field research in Korea between August 1984 and December 1986, and during the summer of 1988. These data fall into three general categories: (1) statistical yearbooks and other sources of published Korean government data and policy papers; (2) internal government documents made available to the author by government officials who were interviewed for this study (interviews were conducted with approximately 60 government officials who were directly involved in formulating and implementing economic policy); (3) data obtained from approximately 75 foreign business and banking officials in Seoul who agreed to complete questionnaires and to be interviewed.

¹¹ Koo, Bohn-young, Industrial Structure and Foreign Investment: A Case Study of Their Interrelationship in Korea (Seoul: Korean Development Institute, Working Paper No. 8402, 1984), 7.Google Scholar

¹² In an interview, Bohn-young Koo, Special Economic Advisor to the Minister of the Economic Planning Board, explained the loan approval procedure. He emphasized that, in order to approve a foreign loan, the government must be convinced that a high level of certainty exists that the borrowed capital will generate a rate of return in excess of interest payments; that it will aid the balance of payments; that it will flow to a targeted industry; and that it will flow to a producer with sufficient technical and marketing expertise to meet projected output levels.

Koo's argument was strongly supported by my 1986 survey of 18 major American, Japanese, British, and French bank officers in Seoul. All of them agreed that the screening process allows the state to control the size and sectoral flow of all foreign capital loans. They further agreed that the screening process assures a high level of certainty that foreign loans will aid the balance of payments. Moreover, all but two of the bank officers in the survey agreed that the screening process assures a high level of certainty that borrowed funds will flow to targeted industrial development.

One bank officer who had served in Brazil for five years in the 1970s asserted that in Brazil, the government had little idea of where foreign loans would flow or whether they would lead to increased production. Often, loans were not monitored and were used for consumption. In Korea, the state monitors foreign loan funds closely to ensure that they flow only into approved investment and that output projections are met after the production facility becomes operational.

¹³ Cho, Dong Sung, “Incentives and Restraints: Government Regulation of Direct Investment between Korea and the United States,” in Moskowitz, Karl, ed., From Patron to Partner (Cambridge; Harvard University Press, 1985), 45Google Scholar; Ministry of Finance, Investment Guide to Korea (Seoul: Ministry of Finance, 1984), 19Google Scholar; Westphal, Larry et al., Korean Industrial Competence: Where It Came From (World Bank Staff, Working Paper No. 469, 1977), 18.Google Scholar

In 1981, the making of approval decisions on foreign capital and technological inflows was transferred to the Ministry of Finance. For a comparison of incentives to foreign investment offered by various governments in Asia, see “Special Survey of Foreign Investment in Asia,” The Economist, June 23, 1979, pp. 8–9.

¹⁴ Koo(fn. 11), 18, 26–28.

¹⁵ Cho (fn. 13), 46–47.

¹⁶ Jefferson Coolidge, T. Jr, “The Realities of Korean Foreign Investment Policy,” Asian Affairs 12 (July/August 1981), 370–85Google Scholar; Chang, Dal-joong, Economic Control and Political Authoritarianism: The Role of Japanese Corporations in Korean Politics 1965–1979. (Seoul: Sogang University Press, 1985), 174–78.Google Scholar

¹⁷ Moskowitz (fn. 13), 11.

¹⁸ In an interview, Bohn-young Koo stated that “loans have always been preferred over direct investment because more benefits stay in Korea. Direct foreign investment is restricted to those projects where foreign marketing or technical skills are required. If only capital was required, the government would attempt to borrow it. After the 1974 oil shock, when funds became readily available, this strategy could be followed relatively easily.”

In a survey of foreign bank officers in Seoul (see fn. 10), 81% of respondents stated that the government has consistently followed a strategy of encouraging loans for foreign capital needs.

¹⁹ This conclusion is based upon a series of interviews and questionnaires (see fn. 10). According to the International Monetary Fund's representative in Seoul, “the Korean foreign capital accumulation strategy has been to borrow capital and license technology wherever possible in order to avoid foreign equity ownership.” The general manager of the Chase Manhattan Bank in Seoul asserted that “it has been the conscious and managed policy of the Korean government to use external borrowing to promote growth of the economy. At the same time, it is the conscious and managed policy of the Korean government to ensure that domestic industry is not foreign-controlled. That means more debt and less foreign equity.”

The general manager of Dupont in Seoul maintained that “if technology is locally available, a direct foreign investment will simply not be allowed”; a senior official with Westing-house stated, “the Koreans would prefer to operate totally without foreign investment if that would be possible.”

According to 92% of the foreign bank officers surveyed, Korean borrowing to finance foreign capital requirements has allowed a greater degree of national control over major economic decisions than a similar level of foreign direct investment would have.

²⁰ Study on the Criteria for Foreign Direct Investment and Joint Venture in Korea (Seoul: International Management Institute, Korea University, 1972), 54–56. In interviews, this argument was also made by Kwan-tae Shin, Deputy Director, Investment Promotion Division of the Korean Ministry of Finance; by Bohn-young Koo, Special Economic Advisor to the Minister of the Economic Planning Board; and by Dong-gyu Shin, Assistant Director of the Foreign Capital Policy Division of the Ministry of Finance. Also see Jo, Sung-hwan, Direct Foreign Private Investment in South Korea: An Economic Survey (Seoul: Korean Development Institute, Working Paper No. 7707, 1977), 68.Google Scholar

²¹ Major Statistics of the Korean Economy (Seoul: Economic Planning Board, 1985).

²² Economic Analysis and Projections Department: International Bank of Reconstruction and Development, Consolidated Balance of Payments (Washington, DC: World Bank, May 19, 1978).Google Scholar

²³ Moskowitz (fn. 13), 11.

²⁴ Barone, Charles A., “Dependency, Marxist Theory, and Salvaging the Idea of Capitalism in South Korea,” Review of Radical Political Economics 15, no. 1 (1983), 48.CrossRefGoogle Scholar In a survey of 45 foreign investors in Korea (fn. 10), 100% of the respondents asserted that the Korean state exercised much more control over the pattern of direct foreign investment than other capitalist developing states with which they were familiar. All respondents also maintained that the Korean government effectively excluded foreign investment in areas where domestic producers could meet production demands.

²⁵ Koo(fn. 11), 26–28.

²⁶ Ministry of Finance data (fn. 10). For the same period, comparable figures are: almost $8 billion in foreign direct investment in Taiwan, $17 billion in Mexico, $24 billion in Brazil, and $7 billion in Singapore (U.S. Department of Commerce, Overseas Business Reports, 1987).

²⁷ Ministry of Finance data (fn. 10).

²⁸ Economic Planning Board data (fn. 10).

²⁹ Koo (fn. II), 21.

³⁰ Ministry of Finance data (fn. 10).

³¹ Curhan, Joan P., Davidson, William H., and Suri, Rajan, Tracing the Multinationals (Cambridge: Cambridge University Press, 1977), 314Google Scholar, as cited in Koo, Bohn-young, The Role of Foreign Direct Investment in Korea's Recent Economic Growth (Seoul: Korean Development Institute, 1983), 26.Google Scholar

³² Ministry of Finance data (fn. 10).

³³ Chang (fn. 16), 137.

³⁴ Ibid., 134–36.

³⁵ Information on the Korean repurchase of foreign-held equity in the oil refinery sector has principally been obtained in interviews with Caltex officials, Korean government officials, and professors at Seoul National University School of Business and Management.

³⁶ Koo(fn. II), 82.

³⁷ This information was collected in interviews with Amoco and Samsung officials in Seoul.

³⁸ Eul Young Park, “An Analysis of the Trade Behavior of American and Japanese Manufacturing Firms in Korea,” in Moskowitz (fn. 13), 24, 31.Google Scholar

³⁹ Westphal et al. (fn. 13), 53.

⁴⁰ Survey of 45 foreign investors (fn. 10).

⁴¹ Business Korea, July 1985, 76.

⁴² Vernon, , The Storm over the Multinationals: The Real Issues (Cambridge: Harvard University Press, 1977), 72Google Scholar; Evans (fn. 2, pp. 103–25) defines denationalization as the displacement of local enterprises by foreign ones. He traces the denationalization of several industries in Brazil and highlights a Brazilian industrial ownership structure where, because of the superior capital and technological levels of multinational corporations, local enterprise tends to survive only in small-scale, non-capital-intensive enterprises.

⁴³ Economic Planning Board data (fn. 10).

⁴⁴ The information on the divestiture of foreign-held equity was obtained through an interview with the Seoul branch manager of a major Japanese bank who was personally involved in the negotiations to buy out several Japanese firms.

⁴⁵ Chang (fn. 16), 192.

⁴⁶ See Evans, Peter, “National Autonomy and Economic Development: Critical Perspectives on Multinational Corporations in Poor Countries,” in Keohane, Robert O. and Nye, Joseph S. Jr, eds., Transnational Relations and World Politics (Cambridge: Harvard University Press, 1972), 328–30Google Scholar; Barnet, Richard and Muller, Ronald, Global Reach (New York: Simon & Schuster, 1974), 152–65Google Scholar; Economic Commission for Latin America, External Financing in Latin America (New York: United Nations, 1965)Google Scholar; Devlin, David T. and Kruer, George R., “The International Investment Position of the United States,” Survey of Current Business 50, no. 1 (October 1970).Google Scholar