South Korea's Economy
The Heavy and Chemical Industry Drive
How South Korea pushed into steel, shipbuilding, chemicals and cars in the 1970s, the role of POSCO, and the debate about whether this big bet paid off.
In 1973, Korea launched the Heavy and Chemical Industry (HCI) drive, moving beyond light industries like textiles and wigs.
Target industries
- Steel.
- Shipbuilding.
- Petrochemicals.
- Machinery.
- Electronics.
- Cars.
POSCO
The state-owned Pohang Iron and Steel Company (POSCO), founded in 1968, started production in 1973. Many experts and the World Bank doubted it would succeed, but it became one of the world’s most efficient steelmakers.
Why the push
- Upgrading from low-wage light industry.
- Security: building industries for defence.
- Linkages: steel supports shipbuilding, cars and machinery.
Costs
- Overinvestment and debt by the late 1970s.
- Inflation.
- An economic downturn in 1979-80.
The debate
Some economists argue the HCI drive laid foundations for Korea’s later success; others say it caused waste and that success came despite it. Most agree it transformed Korea’s industrial structure.
When Korea sought funding for POSCO, the World Bank judged it unviable. Korea used Japanese war reparation funds instead, and POSCO became a global leader.
It required deliberate, risky investments with uncertain outcomes.
- The HCI drive from 1973 targeted steel, ships, chemicals and cars.
- POSCO became a highly efficient steelmaker despite doubts.
- The drive caused overinvestment and debt.
- Its long-term value is debated but transformative.
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