Korea: Growth without Natural Resources Chapter 2

1. Korea: Growth without Natural ResourcesChapter 2

2. Beyond the Aggregate Production Function • People • Geopolitical location • Climate • Natural resources • Land

3. The Korean People • The most racially homogenous • Korea is a (very) Confucian country • Korea is a (very) Christian country • Korea may be a dangerous place to live (the North) • Koreans aspire for education • Koreans like to take risks

4. Korea vs Japan: Natural Disadvantages • Korea has less land per capita • (South) Korea is only ¼ the size of Japan • Korea is a peninsula (maritime conditions) • Korea needs more energy because of a harsher climate • Korea has less fishery and forestry resources

5. Korea versus Japan: Natural Advantages • Korea has larger rivers and greater hydroelectric power potential • Higher proportion of arable land: 20% vs 13% in Japan (of total land) • Better endowed with: • Limestone (crucial for the production of cement) • Tungsten • Lead

6. Major Agricultural Indicators for Korea and Japan

7. Koreans and Agriculture • Koreans’ share of agriculture in GNP is lower than that of Japan • Share of non-agricultural income is roughly 50% in Korea versus 80% in Japan • Households cultivate very small plots of land in both countries • Korea heavily depends on imports of food • Koreans import 70% of the grain they consume, but they are self-sufficient in the production of rice • Nature itself forces Koreans to cultivate their land efficiently by enhancing land productivity

8. Korea’s Policy to Deal with the Dearth of Land • Efficient use of land is extremely important • Preventing transfer of non-arable land into non-agricultural uses • Serious land shortage in urban areas (e.g. green belt around Seoul since 1973) • Adverse consequences: price of land and housing surge, also congestion • Transferring arable land into business uses might be a good idea • The natural solution to the problem: the population growth rate decline • Key Point: long-term growth strategy must be non-agriculture oriented

9. Land Use in Korea, 1970 and 2000

10. Why is Land Scarce in Large Cities? • Natural reasons • Low priority to housing and environment policy • Incorrect use-of-land policy (self-sufficiency in rice was key objective since 1960-s) • Expand rice paddies through reclamation, land clearing, conversion of dry fields • Prohibit shift of arable land to urban use by designating ‘absolute arable’ and ‘relative arable’ land • Absolute arable land can never be transferred • Relative arable land can be transferred, but bureaucratic barriers are high

11. Regions and Population Distribution • Seoul has a special city status • 9 Provinces • 6 metropolitan cities • 7 major cities have the status of a province • Seoul and Busan regions are two most important ones • Seoul is the heart of the country • Busan region: Pohang (iron and steel), Ulsan (automobiles, shipbuilding, petrochemicals), Changwon (heavy manufacturing)

12. The Population of Main Regions (th)

13. The Problem of Seoul • Seoul population and industries have been growing high since the early 1960s • Dispersal plans by the government • Industrial relocation plan • New capital city plan • Plan for relocating head offices of major public enterprises • Rural resettlement plan • However, the dispersal plans were rather command and control rather than market oriented

14. Two Lagging Regions • Gwangju and Jeonju regions lie in the South-Western part of the country • These two regions were neglected in investment and development plans • Population of the two regions was on the decrease since 1966 • Strong anti-government sentiment (remember the Gwangju nightmare) • Large-scale manufacturing is hardly possible for lack of good natural harbors

15. Urban (Over) Concentration • 95% of Korean GNP is generated by urban, non-agricultural activities • 92% population live in Korea’s 74 cities and 202 urbanized towns • 89% live in urban areas • Korea’s urbanization level much exceeds that of countries with similar level of income per capita

16. Urban Population by Size

17. Disparity in Urban Growth • Since 1960s the number of urban areas has increased substantially • Cities of different sizes grew at different rates (1960-2000) • Over 1 million: most rapidly (40% to 53%) • Below 50000: dwindled from 22% to 2% • Seoul: 2.4 million in 1960 to 10 million in 1996

18. Government Policies toward Seoul • Overc-oncentrated and vulnerable to North Korean artillery so the Government designed policies: • Green belt system (limits the spatial expansion of Seoul) • New capital-city plan to relocate government offices to around Daejon City • Plans to move central offices of public enterprises away from Seoul • However, waste of resources and not successful

19. The Quest for Urban Policy • Stage of development and urban growth: • Large cities grow fastest in the early stage of development • Middle-sized cities grow fastest in the middle stages • Small cities grow fastest in the late stages • Investment according to size and stage relationship

20. Population North/South Korea

21. Poverty and Population Growth • Why do poor families have more children? (Africa) • Why would wealthier families prefer to have fewer children? (Western Europe) • Ever since 1962, the Korean Government’s objective was to curb the growth of population • At present growth rate of population is 0.7% • Birth control measures by the Government • Increase in employment opportunities

22. Demographic Problems • Emphasis on education and the average number of schooling in: • 1965: 5 years • 1985: 8.6 years • 2000: 11 years • Pensioners and social welfare system • Almost no welfare system in Korea (strong family ties) • Increasing number of dependents