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Country Study: South Korea

Country Study: South Korea. Overview. Until 20 th century, Korea existed as an independent country. In 1910, it became a colony of Japan After WWII, Republic of Korea was set up in Southern Peninsula Current President Lee Myung-bak was elected in February 2008. Overview.

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Country Study: South Korea

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  1. Country Study: South Korea

  2. Overview • Until 20th century, Korea existed as an independent country. In 1910, it became a colony of Japan • After WWII, Republic of Korea was set up in Southern Peninsula • Current President Lee Myung-bak was elected in February 2008

  3. Overview • Population: 48.5 million • Working age population (15-60 years): 72% • Urban population: 81% • Rate of urbanization: 0.6% • Infant mortality rate: 4.26/1000 • Literacy: 97.9% • Education expenditures as % of GDP: 4.6%

  4. Overview • GDP(PPP) per capita income: $26,000 • Inflation: 4.7% • Population below poverty: 15% • Gini coefficient: 0.31%

  5. Development Model • 1960’s was marked by land reforms, literacy and import substitution • Government played a critical role in developing private sector • A deliberate policy to encourage big businesses (Chaebols) with government direct credit, import restrictions, and incentives • Government sponsored semiconductor industry to make it competitive globally

  6. Development Model • Another example is South Korea’s shipbuilding industry • Strong labor unions • Inflation prone economy and recent labor shortages • Only South Korea (in Asia) financed its development with foreign debt • South Korea combined a policy of import substitution and export promotion by sponsoring strategic industries • In mid-1970’s exports increased by 45% per year, export-led growth took off in 1960’s

  7. Trade Policies • Heavy emphasis on the imports of capital goods, restrictions on consumer goods • High savings and investment rates, yet borrowed heavily (external debt - $380 billion) • Exports of semiconductors, ships, steel computers & motor vehicles • Trade with U.S. accounts for 12.4% of total trade • Protection for big businesses

  8. Asian Financial Crisis • GDP went down by 6% • South Korea Won was down by 33% • Heavy debt, unregulated financial sectors and government policy of encouraging big businesses were among some of the causes of the crisis • IMF bail-out with $60 billion • Recovered in 2000

  9. Current Problems • Strained relations with North Korea • Inflation • Unequal distribution of income • Global recession affecting exports • Labor shortages • Financial markets hit hard in 2008 • Stock prices fell by 40% • Won depreciated by 26% • Government is taking steps to stimulate the economy • ($11 trillion economy plan)

  10. Korean Culture • Hardest working people in the world • Some pain and hurt from the split between North Korea and South Korea • Love to sing • Emphasize education of children from early age • Male-dominated society, strict parenting

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