Korea’s rapid economic ascent over the past few decades was powered by huge conglomerates like Samsung. Now the country is aiming to encourage more startups and entrepreneurs.
By Tyler Makepeace
The Republic of Korea is one of the greatest economic development success stories in history — going from one of poorest countries in the world and a major aid recipient to a high-income country and a major aid donor in just a single generation. Both the head of the World Bank and the United Nations claim Korea as their birthplace.
The “Miracle on the Han River” which led to Korea’s stunning economic growth was based on an export-oriented industrialization model, similar to that of Japan, Taiwan, and later China. However, this model of fast growth has now run its course, and for Korea to continue onto the next stage of economic development it will require a different model for economic growth based on an innovative society.
In response to this need, President Park Geun-hye announced in her 2013 inaugural speech the beginning of the “Second Miracle on the Han River” through a new policy called the Creative Economy. This initiative seeks to create a supportive ecosystem for entrepreneurs and SMEs, especially in the tech sector, in order to boost job creation and pursue greater economic democratization within the country.
In recent years, the private sector has been increasingly responsive to supply chain issues. This is a result of two distinct forces – one related to corruption, and the other related to issues such as human trafficking and child and other labor issues. While the focus on corruption has largely resulted from legislation such as the FCPA and UKBA, interest in labor-related supply chain issues has often been spurred by NGOs, public pressure, and the media.
However, investigations resulting from the Rana Plaza garment factory collapse may change that. On April 24, 2013, over 1,130 people were killed in the building collapse while many employees were making clothing for western companies. While the accident and the resulting public outcry drove some companies to sign accords promising to establish fire and building safety programs, other companies did nothing.
In July of this year, the Bangladesh Anti-Corruption Agency filed charges against 18 people in connection with the disaster, finding that they “grossly breached the building code.” Although bribery may have played a role in the accident — municipal workers were held liable for giving Rana permission to build more floors on top of the existing structure, although they had no authority to do so — the commission’s decision makes no mention of bribery or corruption. Instead, they hold private sector actors accountable directly on the basis of violating local building codes.
Corruption is a systemic problem that plagues many transitional countries across the world, rooted in weak rule of law and lack of private property rights. Not only does corruption erode trust in public institutions, such practices also hinder economic growth and weaken democratic governance.
The corruption challenge can be addressed by building responsive institutions that offer basic assurances of private property rights and ensure law and order. CIPE programs address the root causes of corruption through a multi-pronged approach. CIPE programs mobilize the private sector to raise anti-corruption standards and advocate for reforms; streamline regulations and reduce implementation gaps to limit opportunities for corruption; improve corporate governance to strengthen firm-level integrity; facilitate collective action to level the playing field and coordinate company efforts; and equip small and medium-sized enterprises to resist bribery and meet the requirements of global value chains.
Two recent case studies, described below, show these CIPE approaches in action.
The United Nations Universal Declaration of Human Rights states that “Everyone has the right to own property [and] no one shall be arbitrarily deprived of his property.” In Burma, a country in the early stages of its emergence from a half century of military rule and central economic planning, property rights violations could threaten democracy itself.
Burma lacks many institutions necessary for a market-oriented democracy, such as a reliable court system, dependable electricity, and accessible financial services. The country’s physical infrastructure is also woefully inadequate. Paramount among these issues is rampant corruption and terrible public governance – issues that manifest in the “land-grabbing epidemic” which is sparking protest and civic unrest.
Read the rest of this article at the Thomson Reuters blog.
“The recent workshop by CIPE on the 19th of May 2014 in Port Moresby in Papua New Guinea is important as firstly puts our vision into action but most importantly it gave a boost for those women to take a bold step towards starting a business or “enterprise”. The women learnt how to transform their ideas or hobbies into a business. They learnt the importance of innovation, implementation, ability to market products and to understand numbers in a business environment. The breakaway discussions and activities were not only fun but useful in emphasis important business skills like to know how to negotiate pricing in a business time management and knowing specifications before you start dealing with suppliers. So many positive feedback from the participants. Can’t wait for the next one.” – Janet Sios, Interim Vice President PNGWCCI
CIPE is working with a newly established women’s chamber of commerce in Papua New Guinea (PNG) to become a strong voice of women-owned businesses a country that is known for its unequal treatment of women.
According to the World Bank’s Doing Business 2014 report, PNG is getting worse in areas such as Starting a Business (101st in the world, down 9 places from 2013) and Getting Credit at 86th in the world (down 4 spots from 2013). In such an environment, it is extremely challenging for women to start an entrepreneurial initiative. This forces many women to remain in the informal sector.
During the course of recent capacity building sessions held in May 2014, CIPE organized a workshop for Papua New Guinea Women Chamber of Commerce members titled “Starting Your Own Enterprise.” CIPE Deputy Country Director for Pakistan, Hammad Siddiqui led the session that covered basic concepts of starting a business, challenges for small businesses, analyzing market opportunities, etc.
The first shipment of liquefied natural gas is set to leave the shores of Papua New Guinea (PNG) in late May. This multi-billion dollar project is among the largest investments in the country’s history, and its success contributed to the country’s strong GDP growth in recent years. Foreign direct investment is up, and the current government is pursuing a largely free-market and pro-investment economic strategy.
This good news has an unfortunate caveat, however: women have had virtually no input in the country’s policy dialogues, and the country’s economic performance is occurring despite the continued economic marginalization of women.
Papua New Guinea ranks among the world’s worst performers in almost every global indicator of gender inequality. This sad reality is manifested in shocking statistics of gender-based violence, social inequality, political exclusion and economic marginalization.
Last week Chinese e-commerce giant Alibaba filed paperwork with the U.S. Securities and Exchange Commission for an initial public offering (IPO). As one of the largest companies in the world’s second largest economy, Alibaba represents an enormous opportunity for investors. They are expected to raise between $15 and $20 billion, making this IPO potentially bigger than Facebook’s.
While Alibaba already handles more sales volume than eBay and Amazon combined, there is added room for growth as internet penetration in China is only around 45 percent. Online shopping is projected to increase at a rate of 27 percent per year as the still-poor country grows richer and more connected.
Regardless of the perceived opportunities, foreign investors are not entirely convinced that Alibaba will be a good buy. The attitude toward Chinese companies in general is one of skepticism and uncertainty — perpetuated most recently by concerns about the transparency in auditing practices. Alibaba’s complex network of businesses and a lack of details surrounding partnerships with domestic logistics companies also raise some questions for potential investors.
In all the buzz surrounding Alibaba’a IPO, however, there is a missing element that could be cause for additional concern. By selling shares in the U.S., Alibaba opens itself to more exposure to the Foreign Corrupt Practices Act (FCPA), a piece of legislation that makes it illegal for companies to bribe officials of foreign governments. A number of multinational companies from around the world have already been ensnared in FCPA investigations as a result of corruption in China and the idea that Alibaba has grown within a market rife with corrupt acts could be cause for increased suspicion. Compounding this risk is the fact that the company has been the subject of investigations by domestic authorities in the past.