This case study examines the Republic of Korea’s Rural Electrification Project, which was carried out by the Korean government and Korea Electricity Power Corporation (KEPCO) between 1970 and 1987. The main purpose of this project was to achieve the nationwide electrification by offering long-term, low-interest loans. These loans were to be used for the construction of distribution facilities to rural residents who were regionally and financially disadvantaged, and not on large-scale transmission facilities, which would diminish return on investments. The Rural Electrification Project was a pioneering project intended to upgrade the education, culture, health, and hygiene in these areas, and was designed to develop the economy by increasing the productivity of these rural residents. As was originally planned, the electrification project made incredible progress in Korea within 10 years. Although there were still approximately 50,000 households without electricity on some islands and in remote regions, the project was galvanized again in 1983, leading to an electrification rate of 99.8 percent by 1987. This was deemed an impressive success.
To download and read this case study on rural electrification in the Republic of Korea, written by Yim Hong-Bin, click here.
To read a condensed delivery note on rural electrification in the Republic of Korea, prepared by Christine H. Joo, click here.
Prior to the Electrification Project, 88 percent of rural residents did not have electric lighting. Therefore, the Rural Electrification Project aimed to build basic electrical facilities to supply power to rural areas. However, remote villages were at a disadvantage, with higher investment costs for supply facilities, low profitability, and technical problems with distribution. At the time, developing the rural communities, which accounted for over 60 percent of the total population, was seen as essential for the country’s balanced development and economic growth.
Resources and Planning: Korea did not have the resources for industrial development until the mid-1960s. This included technical expertise, experienced manpower, and a long-term development plan for any industry, including the electric power industry. This became the primary challenge in the planning stage prior to launch of the rural electrification project.
Funding: In light of limited government finances, national capital shortage, and a dismal outlook on private investment, it would be necessary to consider how to fund the effort.
Scaling Up on a Limited Budget: With a limited budget, quickly doubling or tripling the number of customers under existing KEPCO regulations and business practices was not likely to be attained. Therefore, a new approach to rural electrification would need to be devised.
Project Design: When targeting project areas and villages, it was necessary to develop fair and transparent criteria to build consensus around the project and demonstrate that the project was being implemented equitably.
Lessons from the Project
Long Term Development Planning Before Project Launch: This project saw considerable delays and difficulties with coordination among all parties involved at the beginning. Better due diligence and long-term planning might have enabled more efficient and effective implementation of the project.
Importance of Incentives and Spurring Local Participation: Villagers’ voluntary and active participation in the project, made possible by both incentive programs and strong village senior leadership, was critical. In part this was enabled by linking the electrification project with the ongoing Saemaul Undong project.
Setting and Demonstrating Fair and Transparent Criteria: Target areas were selected by Provincial Governors, taking into account provincial development plans. This was coupled with clear criteria stipulated in the Rural Electrification Law, with a particular focus on regional balance and prioritizing low-cost areas. This clear set of criteria was important in showing villagers the impartiality of the project.
Development of the Electricity Industry and Manufacturing: The project benefited from the fact that most equipment came from domestic manufacturers, and that these manufacturers were encouraged to develop equipment and accessories only for rural electrification.
Strong political leadership from the top: This was another critical success factor, as then-president Park Chung-Hee took a strong interest in the project and its results.