Lessons for energy-thirsty Kenya from South Korea economic transformation

Some 61 years ago, South Korea was an economic wasteland after a devastating war with its neighbour, North Korea.

Today, it is not only among the world’s largest economies, but also the home of prominent global corporations such as Samsung, Hyundai and LG, whose products dot nearly every home.

An aggressive export-oriented economic transformation after the devastating war has seen South Korea’s per capita gross domestic product (GDP) grow 289 times, from about $82 in 1960 to $23,679 in 2012.

Kenya, with a present GDP per capita of about $900 as estimated by the World Bank, was among nations that financed the rebuilding of South Korea with a $10,000 loan in 1963 that was repaid three years later. Kenya also donated relief food to Korea to assist its starving population.

So what has driven this wonderful transformation that leaves other nations envious?

“Korea has done wonders in one generation rising from the bottom to the top. Our policy in Korea is one of a creative economy and that has helped us generate more value,” says Kun Mo-Chung, a leading technocrat in South Korea and an advisor with the Kenyan National Economic and Social Council (NESC).

Analysts say a focus on reliable energy supplies has helped buttress Korea’s meteoritic rise into an economic power house.

With a small land mass — nearly the size of the former Rift Valley Province — and no natural resources, Korea took to a technology-based economic model that soon posed a challenge in that its thirst for resources to power the industry grew in tandem with the rapid growth.

Energy security

In a radical move, South Korea adopted a nuclear power policy to safeguard its energy security and minimise dependence on unreliable imports that were worsened by an oil crisis in 1973.

“When you want economic growth, power capacity and telecoms technology is key. Korea does not have natural resources yet we needed to develop power for our economy. We opted for nuclear because it is cheaper and cleaner,” says Ahn Hong-Jun, president of the Korea Nuclear Association for International Corporation (KNA).

Korea commissioned its first nuclear plant in the 1970s and today has 23 units. It plans to build an additional six nuclear plants by 2023 to boost its energy security.

The move helped the country’s power capacity to grow by nearly 223 times, from a mere 367 megawatts (MW) in 1961 to 81,806 MW in 2012.

“This shift to nuclear has helped grow its industry in a big way. In the 1960s Korea major industries produced wigs, eye lashes, clothes and plywood, but today we have moved into high yielding but energy-intensive industries such as ship-building, manufacture of automobiles, semi-conductors, electronic goods, steel products and plant assembly,” Peter Jeon, a consultant for the South Korea nuclear industry says.

South Korea’s energy output is huge compared to a country such as Kenya that currently has an installed capacity of about 1,700MW of power.

Statistics by the Kenyan Energy ministry showed that the national peak demand for power as at May 2013 reached 1,347MW, leaving the country on the edge.

This is further worsened by the fact that the country suffers losses of more than 17 per cent on its national grid.

ALSO READ: Unreliable electricity supply hurts Kenya health sector

Kenya depends on hydropower for about 60 per cent of its energy output but this has proved frustrating, especially whenever there are poor rains. Lack of sufficient energy has in turn frustrated industrial expansion for decades. This is despite the availability of huge energy reserves such as wind, coal and geothermal.

“In Kenya I have been advocating for long-term organised energy because in order to power increased economic activity you need constant and reliable sources such as nuclear,” Prof Kun says.

Kenya has reached out to South Korea for partnership and hopes nuclear power will help clear its energy woes and propel its high industrial status.

“Our options to have energy security in Kenya are limited and we have to act decisively and move like the Koreans did,” says Ochillo Ayacko, the executive chairman and chief executive of the Kenya Nuclear Electricity Board (KNEB).

Kenya initially eyes a 1,000-1,400MW advance nuclear reactor plant (APR) at a tentative site in Kilifi County. It hopes to scale up its nuclear output to about 3,000-4,000MW by 2030.

“We have to think about Kenya of the future by addressing the main drivers of the economy such as nuclear energy. The East Africa Community market is interesting and Kenya should pioneer the energy revolution through nuclear power and take to a technology-based economic model because we need value-added activity to drive growth,” Prof Kun says.

READ: Shift Kenya's economic model to fasten growth urges NESC advisor

Since independence, Kenya is reliant on its agriculture sector that contributes about a quarter of its GDP, a position critics blame for the stagnated economic growth.

Over the same period South Korea has radically shifted its economic model from agriculture-based to technology driven. In the early 1970s, agriculture contributed up to 75 per cent of Korea’s economy but that has since been slashed to about four per cent.

Gideon Moi, chairman of the Senate committee on Energy and Transport, says the adoption of nuclear technology could pave way for economic transformation.

“We will support in ensuring we have in place the necessary legislative and policy framework to push the nuclear partnership forward,” Mr Moi said following a week-long fact-finding tour of the South Korean nuclear industry.

Mr Ayacko says Kenya will soon sign a Memorandum of Understanding (MoU) with Korea on nuclear development.

“We already have draft MoUs with several individual institutions and will soon be inviting them to Kenya to sign pacts and cement ties. On the bigger picture we hope to sign a bilateral agreement on government-to-government platform so that we formally begin the journey towards nuclear technology,” he says.

Kenya has already started capacity building for its nuclear industry, with 10 students enrolled at the prestigious KEPCO International Nuclear Graduate School (Kings) in Korea for a two-year specialised engineering programme.

READ: Kenyans get South Korea nuclear scholarships

“We target to train 100 students from Kenya by the time the country goes nuclear. Capacity building and knowledge transfer is critical in such a high skilled industry,” Prof Kun, who is a founding director of Kings, says.

Mr Jeon said capacity building on research and development has helped South Korea transform itself into a technology self-reliant nuclear power country.

Construction

“We began on a turnkey approach in 1970s where we had total dependence on foreign contractors and suppliers. In the 1980s we took on a localisation approach model where only the prime contractors were foreigners. This helped complete the learning curve and since the 1990s we become self-reliant on our nuclear technology,” says.

The Asian nation recently won a $20 billion contract to supply four nuclear reactors to the United Arab Emirates. The first of the four reactors is already under construction.

“Nuclear is a practical alternative and thus demand for nuclear power will be increased,” says Ki In-Han, the dean in-charge of Academic Affairs at Kings.

Prof Kun says though it is costly to set up, nuclear energy is environment friendly and up to one-fifth cheaper than power generated from gas or oil sources. A 1,400MW nuclear power plant is estimated to cost about $5billion to construct . This amount includes the cost of training operators and other components of the turnkey contracts.

Mr Ahn says South Korea could help arrange for funding for countries that have difficulties getting finances to put up plants. Given the ongoing global debate over nuclear safety some financial institutions may find it difficult to support such ventures owing to the high risk factors.

“At first we struggled for financing because we were poor but now we are stable and can afford it. We can help arrange for finances because we know the benefits of nuclear energy,” he says.

[email protected]