Economy of South Korea

The economy of South Korea is the 4th largest in Asia and the 11th largest in the world. It is a mixed economy[7][8][9] dominated by family-owned conglomerates called chaebols; however, the dominance of the chaebol is unlikely to last and engenders risk of slowing down the transformation of Korean economy for the benefit of future generations.[10][11][12] South Korea is known for its spectacular rise from one of the poorest countries in the world to a developed, high-income country in just a few generations. This economic growth is called by some a miracle, and described as the Miracle on the Han River,[13] which has brought South Korea to the ranks of elite countries in the OECD and the G-20. South Korea still remains one of the fastest growing developed countries in the world following the Great Recession. It is included in the group of Next Eleven countries that will dominate the global economy in the middle of the 21st century.

South Korea's rigorous education system and the establishment of a highly motivated and educated populace is largely responsible for spurring the country's high technology boom and rapid economic development.[14] Having almost no natural resources and always suffering from human overpopulation in its small territory, which deterred continued population growth and the formation of a large internal consumer market, South Korea adapted an export-oriented economic strategy to fuel its economy, and in 2014, South Korea was the seventh largest exporter and seventh largest importer in the world. Bank of Korea and Korea Development Institute periodically release major economic indicators and economic trends of the economy of South Korea.[15][16]

Despite the South Korean economy's high growth potential and apparent structural stability, South Korea suffers perpetual damage to its credit rating in the stock market due to the belligerence of North Korea in times of deep military crises, which has an adverse effect on the financial markets of the South Korean economy.[17][18] However, renowned financial organizations, such as the International Monetary Fund, also compliment the resilience of the South Korean economy against various economic crises, citing low state debt, and high fiscal reserves that can quickly be mobilized to address any expected financial emergencies.[19] Other financial organizations like the World Bank describe Korea as one of the fastest-growing major economies of the next generation along with BRIC and Indonesia.[20] South Korea was one of the few developed countries that was able to avoid a recession during the global financial crisis,[21] and its economic growth rate reached 6.2% in 2010, a sharp recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009 when the global financial crisis hit. The South Korean economy again recovered with the record-surplus of US$70.7 billion mark of the current account in the end of 2013, up 47 percent growth from 2012, amid uncertainties of the global economic turmoil, with major economic output being the technology products exports.[22]

Economy of South Korea
20141231 153226 HDR
Incheon, the fourth largest city of South Korea
Currency1,100.7 KRW = 1 USD
1 January – 31 December
Trade organizations
APEC, WTO, OECD, G-20
Statistics
GDPIncrease $1.619 trillion (nominal, 2018 est.)[1]
Increase $2.136 trillion (PPP, 2018 est.)[1]
GDP rank11th (nominal, 2018)
14th (PPP, 2018)
GDP growth
2.9% (2016) 3.0% (2017)
2.6% (2018e) 2.5% (2019e)[1]
GDP per capita
Increase $31,345 (nominal, 2018 est.)[1]
Increase $41,350 (PPP, 2018 est.)[1]
GDP per capita rank
28th (nominal, 2018)
29th (PPP, 2018)
GDP by sector
agriculture: 2.2%
industry: 39.3%
services: 58.3% (2017 est.)[2]
1.351% (2019 est.)[1]
1.477% (2018 est.)[1]
1.944% (2017)[1]
Population below poverty line
14.4% (2016 est.)[2]
Negative increase 35.7 medium (2016 est.)[2]
Labor force
27.75 million (2017 est.)[2]
Labor force by occupation
agriculture: 4.8%
industry: 24.6%
services: 70.6% (2017 est.)[2]
UnemploymentSteady 3.7% (2017 est.)[2]
Main industries
Decrease 5th (2019)[3]
External
ExportsIncrease $577.4 billion (2017 est.)[2]
Export goods
semiconductors, petrochemicals, automobile/auto parts, ships, wireless communication equipment, flat displays, steel, electronics, plastics, computers
Main export partners
 China 25.1%
 United States 12.2%
 Vietnam 8.2%
 Hong Kong 6.9%
 Japan 4.7% (2017)[2]
ImportsIncrease $457.5 billion (2017 est.)[2]
Import goods
crude oil/petroleum products, semiconductors, natural gas, coal, steel, computers, wireless communication equipment, automobiles, fine chemicals, textiles
Main import partners
 China 20.5%
 Japan 11.5%
 United States 10.5%
 Germany 4.2%
 Saudi Arabia 4.1% (2017)[2]
FDI stock
Increase $230.6 billion (31 December 2017 est.)[2]
Decrease Abroad: $344.7 billion (31 December 2017 est.)[2]
Decrease $78.46 billion (2017 est.)[2]
Negative increase $384.6 billion (31 December 2017 est.)[2]
Public finances
Positive decrease 39.5% of GDP (2017 est.)[2]
+1.4% (of GDP) (2017 est.)[2]
Revenues357.1 billion (2017 est.)[2]
Expenses335.8 billion (2017 est.)[2]
Economic aidODA, $900 million (donor) (2009)[4]
aid to North Korea excluded
Foreign reserves
Increase $389.2 billion (31 December 2017 est.)[2]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

History

Historical GDP growth of South Korea
Historical growth of the South Korean economy from 1961-2015

Overview

Following the Korean War, South Korea remained one of the poorest countries in the world for over a decade. In 1960 its gross domestic product per capita was $79,[23] lower than that of some sub-Saharan countries.[24] The growth of the industrial sector was the principal stimulus to economic development. In 1986, manufacturing industries accounted for approximately 30 percent of the gross domestic product (GDP) and 25 percent of the work force. Benefiting from strong domestic encouragement and foreign aid, Seoul's industrialists introduced modern technologies into outmoded or newly built facilities at a rapid pace, increased the production of commodities—especially those for sale in foreign markets—and plowed the proceeds back into further industrial expansion. As a result, industry altered the country's landscape, drawing millions of laborers to urban manufacturing centers.

A downturn in the South Korean economy in 1989 spurred by a sharp decrease in exports and foreign orders caused deep concern in the industrial sector. Ministry of Trade and Industry analysts stated that poor export performance resulted from structural problems embedded in the nation's economy, including an overly strong won, increased wages and high labor costs, frequent strikes, and high interest rates. The result was an increase in inventories and severe cutbacks in production at a number of electronics, automobile, and textile manufacturers, as well as at the smaller firms that supplied the parts. Factory automation systems were introduced to reduce dependence on labor, to boost productivity with a much smaller work force, and to improve competitiveness. It was estimated that over two-thirds of South Korea's manufacturers spent over half of the funds available for facility investments on automation.

Rapid growth from 1960s to 1980s

South Korea's GDP (PPP) growth from 1911 to 2008
TwoKoreasGDPPerCapita
Economy of South Korea, compared to North Korea. North Korea began to lose the economic competition with South Korea after the adoption of Juche in 1974 by North Korea.

With the coup of General Park Chung-hee in 1961, a protectionist economic policy began, pushing a bourgeoisie that developed in the shadow of the State to reactivate the internal market. In order to promote development, a policy of industrialization by import substitution was applied, closing the entry into the country of all kinds of foreign products, except raw materials. Nor did they resort to foreign investment. An agrarian reform was carried out with expropriation without compensation of Japanese large estates. General Park nationalized the financial system to swell the powerful state arm, whose intervention in the economy was through five-year plans.[25]

The spearhead was the chaeboles, those diversified family conglomerates such as Hyundai, Samsung and LG Corporation, which received state incentives such as tax breaks, legality for their hyper-exploitation system and cheap or free financing: the state bank facilitated the planning of concentrated loans by item according to each five-year plan, and by economic group selected to lead it.

Until 1961, South Korea received a 3100 million dollar donation from the United States, a very high figure for the time, a privilege for being on the hottest frontier of the Cold War. This policy of foreign economic and military support continued for decades. Many of those who were the labour force of the South Korean economy working in conditions close to slavery in the 1950s and 1960s, reached old age in misery, as it was only in the 1980s that a retirement regime was created. The level of hyperproduction and exploitation generated the highest suicide rate in the developed world (28.1 per 100,000 inhabitants). In 1980, the work week was the longest in the world.[26]

South Korea's real gross domestic product expanded by an average of more than 8 percent per year,[27] from US$2.7 billion in 1962[28] to US$230 billion in 1989,[29] breaking the trillion dollar mark in 2006. Nominal GDP per capita grew from $103.88 in 1962[30] to $5,438.24 in 1989,[31] reaching the $20,000 milestone in 2006. The manufacturing sector grew from 14.3 percent of the GNP in 1962 to 30.3 percent in 1987. Commodity trade volume rose from US$480 million in 1962 to a projected US$127.9 billion in 1990. The ratio of domestic savings to GNP grew from 3.3 percent in 1962 to 35.8 percent in 1989.[27] In 1965 South Korea's rate of growth first exceeded North Korea's rate of growth in most industrial areas, though South Korea's per capita GNP was still lower.[32]

The most significant factor in rapid industrialization was the adoption of an outward-looking strategy in the early 1960s.[33][27] This strategy was particularly well-suited to that time because of South Korea's poor natural resource endowment, low savings rate, and tiny domestic market. The strategy promoted economic growth through labor-intensive manufactured exports, in which South Korea could develop a competitive advantage. Government initiatives played an important role in this process.[27] Through the model of export-led industrialization, the South Korean government incentivized corporations to develop new technology and upgrade productive efficiency in order to compete in the highly-competitive, global market.[34] By adhering to state regulations and demands, firms were awarded subsidization and investment support to rapidly develop their export markets in the fast-paced, evolving international arena.[34] In addition, the inflow of foreign capital was greatly encouraged to supplement the shortage of domestic savings. These efforts enabled South Korea to achieve rapid growth in exports and subsequent increases in income.[27]

By emphasizing the industrial sector, Seoul's export-oriented development strategy left the rural sector relatively underdeveloped. The steel and shipbuilding industries in particular played crucial roles in developing South Korea's economy during this time.[35] Except for mining, most industries were located in the urban areas of the northwest and southeast. Heavy industries generally were located in the south of the country. Factories in Seoul contributed over 25 percent of all manufacturing value-added in 1978; taken together with factories in surrounding Gyeonggi Province, factories in the Seoul area produced 46 percent of all manufacturing that year. Factories in Seoul and Gyeonggi Province employed 48 percent of the nation's 2.1 million factory workers. Increasing income disparity between the industrial and agricultural sectors became a serious problem by the 1970s and remained a problem, despite government efforts to raise farm income and improve rural living standards.[27]

In the early 1980s, in order to control inflation, a conservative monetary policy and tight fiscal measures were adopted. Growth of the money supply was reduced from the 30 percent level of the 1970s to 15 percent. Seoul even froze its budget for a short while. Government intervention in the economy was greatly reduced and policies on imports and foreign investment were liberalized to promote competition. To reduce the imbalance between rural and urban sectors, Seoul expanded investments in public projects, such as roads and communications facilities, while further promoting farm mechanization.[27]

The measures implemented early in the decade, coupled with significant improvements in the world economy, helped the South Korean economy regain its lost momentum in the late 1980s. South Korea achieved an average of 9.2 percent real growth between 1982 and 1987 and 12.5 percent between 1986 and 1988. The double-digit inflation of the 1970s was brought under control. Wholesale price inflation averaged 2.1 percent per year from 1980 through 1988; consumer prices increased by an average of 4.7 percent annually. Seoul achieved its first significant surplus in its balance of payments in 1986 and recorded a US$7.7 billion and a US$11.4 billion surplus in 1987 and 1988 respectively. This development permitted South Korea to begin reducing its level of foreign debt. The trade surplus for 1989, however, was only US$4.6 billion, and a small negative balance was projected for 1990.[27]

1990s and the Asian Financial Crisis

For the first half of the 1990s, the South Korean economy continued a stable and strong growth in both private consumption and GDP. Things changed quickly in 1997 with the Asian Financial crisis. After several other Asian currencies were attacked by speculators, the Korean won started to heavily depreciate in October 1997.[36] The problem was exacerbated by the problem of non-performing loans at many of Korea's merchant banks. By December 1997, the IMF had approved a US$21 billion loan, that would be part of a US$58.4 billion bailout plan.[36] By January 1998, the government had shut down a third of Korea's merchant banks.[36] Throughout 1998, Korea's economy would continue to shrink quarterly at an average rate of -6.65%.[36] Korean chaebol Daewoo became a casualty of the crisis as it was dismantled by the government in 1999 due to debt problems. American company General Motors managed to purchase the motors division. Indian conglomerate Tata Group, purchased the trucks and heavy vehicles division of Daewoo.[36]

Actions by the South Korean government and debt swaps by international lenders contained the country's financial problems. Much of South Korea's recovery from the Asian Financial Crisis can be attributed to labor adjustments (i.e. a dynamic and productive labor market with flexible wage rates) and alternative funding sources.[36] By the first quarter of 1999, GDP growth had risen to 5.4%, and strong growth thereafter combined with deflationary pressure on the currency led to a yearly growth of 10.5%. In December 1999, president Kim Dae-jung declared the currency crisis over.[36]

2000s

Korea's economy moved away from the centrally planned, government-directed investment model toward a more market-oriented one. These economic reforms, pushed by President Kim Dae-jung, helped Korea maintain one of Asia's few expanding economies, with growth rates of 10.8% in 1999 and 9.2% in 2000. Growth fell back to 3.3% in 2001 because of the slowing global economy, falling exports, and the perception that much-needed corporate and financial reforms have stalled.

After the bounce back from the crisis of the late nineties, the economy continued strong growth in 2000 with a GDP growth of 9.08%.[36] However, the South Korean economy was affected by the September 11 Attacks. The slowing global economy, falling exports, and the perception that corporate and financial reforms had stalled caused growth to fall back to 3.8% in 2001[37] Thanks to industrialization GDP per hour worked (labor output) more than tripled from US$2.80 in 1963 to US$10.00 in 1989.[37] More recently the economy stabilized and maintain a growth rate between 4-5% from 2003 onwards.[37]

Led by industry and construction, growth in 2002 was 5.8%,[38] despite anemic global growth. The restructuring of Korean conglomerates (chaebols), bank privatization, and the creation of a more liberalized economy—with a mechanism for bankrupt firms to exit the market—remain Korea's most important unfinished reform tasks. Growth slowed again in 2003, but production expanded 5% in 2006, due to popular demand for key export products such as HDTVs and mobile phones.

Like most industrialized economies, Korea suffered significant setbacks during the late-2000s recession that began in 2007. Growth fell by 3.4% in the fourth quarter of 2008 from the previous quarter, the first negative quarterly growth in 10 years, with year on year quarterly growth continuing to be negative into 2009.[39] Most sectors of the economy reported declines, with manufacturing dropping 25.6% as of January 2009, and consumer goods sales dropping 3.1%.[39] Exports in autos and semiconductors, two critical pillars of the economy, shrank 55.9% and 46.9% respectively, while exports overall fell by a record 33.8% in January, and 18.3% in February 2009 year on year.[40] As in the 1997 crisis, Korea's currency also experienced massive fluctuations, declining by 34% against the dollar.[40] Annual growth in the economy slowed to 2.3% in 2008, and was expected to drop to as low as -4.5% by Goldman Sachs,[41] but South Korea was able to limit the downturn to a near standstill at 0.2% in 2009.[42]

Despite the global financial crisis, the South Korean economy, helped by timely stimulus measures and strong domestic consumption of products that compensated for a drop in exports,[43] was able to avoid a recession unlike most industrialized economies, posting positive economic growth for two consecutive years of the crisis. In 2010, South Korea made a strong economic rebound with a growth rate of 6.1%, signaling a return of the economy to pre-crisis levels. South Korea's export has recorded $424 billion in the first eleven months of the year 2010, already higher than its export in the whole year of 2008. The South Korean economy of the 21st century, as a Next Eleven economy, is expected to grow from 3.9% to 4.2% annually between 2011 and 2030,[44] similar to growth rates of developing countries such as Brazil or Russia.[45]

The South Korean government signed the Korea-Australia Free Trade Agreement (KAFTA) on December 5, 2013, with the Australian government seeking to benefit its numerous industries—including automotive, services, and resources and energy—and position itself alongside competitors, such as the US and ASEAN.[46] South Korea is Australia's third largest export market and fourth largest trading partner with a 2012 trade value of A$32 billion. The agreement contains an Investor State Dispute Settlement (ISDS) clause that permits legal action from South Korean corporations against the Australian government if their trade rights are infringed upon.[47]

The government cut the work week from six days to five in phases, from 2004 to 2011, depending on the size of the firm.[48] The number of public holidays was expanded to 16 by 2013.[49]

South Korean economy fell miserably in 2019’s first quarter, which was the worst performance since the global financial crisis. GDP declined a seasonally adjusted 0.3 percent from the previous quarter.[50]

High-tech industries in the 1990s and 2000s

2010 Hyundai Genesis Coupe 1
A Hyundai automobile. The automotive line is a key sector in South Korea's industry.

In 1990, South Korean manufacturers planned a significant shift in future production plans toward high-technology industries. In June 1989, panels of government officials, scholars, and business leaders held planning sessions on the production of such goods as new materials, mechatronics—including industrial robotics—bioengineering, microelectronics, fine chemistry, and aerospace. This shift in emphasis, however, did not mean an immediate decline in heavy industries such as automobile and ship production, which had dominated the economy in the 1980s.

South Korea relies largely upon exports to fuel the growth of its economy, with finished products such as electronics, textiles, ships, automobiles, and steel being some of its most important exports. Although the import market has liberalized in recent years, the agricultural market has remained largely protectionist due to serious disparities in the price of domestic agricultural products such as rice with the international market. As of 2005, the price of rice in South Korea is about four times that of the average price of rice on the international market, and it was generally feared that opening the agricultural market would have disastrous effects upon the South Korean agricultural sector. In late 2004, however, an agreement was reached with the WTO in which South Korean rice imports will gradually increase from 4% to 8% of consumption by 2014. In addition, up to 30% of imported rice will be made available directly to consumers by 2010, where previously imported rice was only used for processed foods. Following 2014, the South Korean rice market will be fully opened.

Additionally, South Korea today is known as a Launchpad of a mature mobile market, where developers can reap benefits of a market where very few technology constraints exist. There is a growing trend of inventions of new types of media or apps, utilizing the 4G and 5G internet infrastructure in South Korea. South Korea has today the infrastructures to meet a density of population and culture that has the capability to create strong local particularity.[51]

Data

The following table shows the main economic indicators in 1980–2017. Inflation under 2% is in green.[52]

Year GDP
(in Bil. US$ PPP)
GDP per capita
(in US$ PPP)
GDP growth
(real)
Inflation rate
(in Percent)
Unemployment
(in Percent)
Government debt
(in % of GDP)
1980 83.3 2,184 Decrease−1.7 % Negative increase28.7 % 5.2 % n/a
1981 Increase97.6 Increase2,520 Increase7.2 % Negative increase21.4 % Positive decrease4.5 % n/a
1982 Increase112.2 Increase2,853 Increase8.3 % Negative increase7.2 % Negative increase4.1 % n/a
1983 Increase132.1 Increase3,309 Increase13.2 % Negative increase3.4 % Steady4.1 % n/a
1984 Increase151.0 Increase3,738 Increase10.4 % Negative increase2.3 % Positive decrease3,9 % n/a
1985 Increase167.9 Increase4,116 Increase7.8 % Negative increase2.5 % Negative increase4.0 % n/a
1986 Increase190.6 Increase4,624 Increase11.2 % Negative increase2.8 % Positive decrease3.8 % n/a
1987 Increase219.8 Increase5,281 Increase12.5 % Negative increase3.0 % Positive decrease3.1 % n/a
1988 Increase254.6 Increase6,056 Increase11.9 % Negative increase7.1 % Positive decrease2.5 % n/a
1989 Increase283.0 Increase6,668 Increase7.0 % Negative increase5.7 % Negative increase2.6 % n/a
1990 Increase322.3 Increase7,518 Increase9.8 % Negative increase8.6 % Positive decrease2.5 % 13.4 %
1991 Increase367.5 Increase8,489 Increase10.3 % Negative increase9.3 % Steady2.5 % Positive decrease12.5 %
1992 Increase399.1 Increase9,123 Increase6.2 % Negative increase6.2 % Steady2.5 % Positive decrease12.2 %
1993 Increase436.5 Increase9,879 Increase6.8 % Negative increase4.8 % Negative increase2.9 % Positive decrease11.4 %
1994 Increase486.9 Increase10,907 Increase9.2 % Negative increase6.3 % Positive decrease2.5 % Positive decrease10.1 %
1995 Increase544.7 Increase12,079 Increase9.6 % Negative increase4.5 % Positive decrease2.1 % Positive decrease8.9 %
1996 Increase596.7 Increase13,108 Increase7.6 % Negative increase4.9 % Steady2.1 % Positive decrease8.2 %
1997 Increase642.9 Increase13,990 Increase5.9 % Negative increase4.4 % Negative increase2.6 % Negative increase10.2 %
1998 Decrease614.3 Decrease13,272 Decrease−5.5 % Negative increase7.5 % Negative increase7.0 % Negative increase14.7 %
1999 Increase694.2 Increase14,892 Increase11.3 % Increase0.8 % Positive decrease6.6 % Negative increase16.7 %
2000 Increase773.4 Increase16,452 Increase8.9 % Negative increase2.3 % Positive decrease4.4 % Negative increase17.1 %
2001 Increase826.8 Increase17,454 Increase4.5 % Negative increase4.1 % Positive decrease4.0 % Negative increase17.7 %
2002 Increase901.9 Increase18,930 Increase7.4 % Negative increase2.8 % Positive decrease3.3 % Positive decrease17.6 %
2003 Increase946.9 Increase19,771 Increase2.9 % Negative increase3.5 % Negative increase3.6 % Negative increase20.4 %
2004 Increase1,020.6 Increase21,226 Increase4.9 % Negative increase3.6 % Positive decrease3.7 % Negative increase23.3 %
2005 Increase1,094.8 Increase22,720 Increase3.9 % Negative increase2.8 % Negative increase3.8 % Negative increase27.0 %
2006 Increase1,186.8 Increase24,501 Increase5.2 % Negative increase2.3 % Positive decrease3.5 % Positive decrease29.3 %
2007 Increase1,284.9 Increase26,394 Increase5.5 % Negative increase2.5 % Positive decrease3.3 % Positive decrease28.7 %
2008 Increase1,347.2 Increase27,464 Increase2.8 % Negative increase4.7 % Positive decrease3.2 % Positive decrease28.2 %
2009 Increase1,367.0 Increase27,725 Increase0.7 % Negative increase2.8 % Negative increase3.6 % Negative increase31.4 %
2010 Increase1,473.7 Increase29,738 Increase6.5 % Negative increase2.9 % Negative increase3.7 % Positive decrease30.8 %
2011 Increase1,559.4 Increase31,229 Increase3.7 % Negative increase4.0 % Positive decrease3.4 % Negative increase31.5 %
2012 Increase1,624.6 Increase32,362 Increase2.3 % Negative increase2.2 % Positive decrease3.2 % Negative increase32.2 %
2013 Increase1,698.6 Increase33,684 Increase2.9 % Increase1.3 % Positive decrease3.1 % Negative increase35.4 %
2014 Increase1,786.9 Increase35,212 Increase3.3 % Increase1.3 % Negative increase3.5 % Negative increase37.3 %
2015 Increase1,856.7 Increase36,395 Increase2.8 % Increase0.7 % Negative increase3.6 % Negative increase39.5 %
2016 Increase1,933.5 Increase37,730 Increase2.8 % Increase1.0 % Negative increase3.7 % Negative increase40.0 %
2017 Increase2,029.0 Increase39,434 Increase3.1 % Increase1.9 % Steady3.7 % Positive decrease39.8 %

Sectors

Shipbuilding

A Whale
Shipbuilding is a flagship industry of South Korea that boomed since the 1960s.

During the 1970s and 1980s, South Korea became a leading producer of ships, including oil supertankers, and oil-drilling platforms. The country's major shipbuilder was Hyundai, which built a 1-million-ton capacity drydock at Ulsan in the mid-1970s. Daewoo joined the shipbuilding industry in 1980 and finished a 1.2-million-ton facility at Okpo on Geoje Island, south of Busan, in mid-1981. The industry declined in the mid-1980s because of the oil glut and because of a worldwide recession. There was a sharp decrease in new orders in the late 1980s; new orders for 1988 totaled 3 million gross tons valued at US$1.9 billion, decreases from the previous year of 17.8 percent and 4.4 percent, respectively. These declines were caused by labor unrest, Seoul's unwillingness to provide financial assistance, and Tokyo's new low-interest export financing in support of Japanese shipbuilders. However, the South Korean shipping industry was expected to expand in the early 1990s because older ships in world fleets needed replacing.[53] South Korea eventually became the world's dominant shipbuilder with a 50.6% share of the global shipbuilding market as of 2008. Notable Korean shipbuilders are Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and the now bankrupt STX Offshore & Shipbuilding.

Automobile

The automobile industry was one of South Korea's major growth and export industries in the 1980s. By the late 1980s, the capacity of the South Korean motor industry had increased more than fivefold since 1984; it exceeded 1 million units in 1988. Total investment in car and car-component manufacturing was over US$3 billion in 1989. Total production (including buses and trucks) for 1988 totaled 1.1 million units, a 10.6 percent increase over 1987, and grew to an estimated 1.3 million vehicles (predominantly passenger cars) in 1989. Almost 263,000 passenger cars were produced in 1985—a figure that grew to approximately 846,000 units in 1989. In 1988 automobile exports totaled 576,134 units, of which 480,119 units (83.3 percent) were sent to the United States. Throughout most of the late 1980s, much of the growth of South Korea's automobile industry was the result of a surge in exports; 1989 exports, however, declined 28.5 percent from 1988. This decline reflected sluggish car sales to the United States, especially at the less expensive end of the market, and labor strife at home.[54] South Korea today has developed into one of the world's largest automobile producers. The Hyundai Kia Automotive Group is South Korea's largest automaker in terms of revenue, production units and worldwide presence.

Mining

Most of the mineral deposits in the Korean Peninsula are located in North Korea, with the South only possessing an abundance of tungsten and graphite. Coal, iron ore, and molybdenum are found in South Korea, but not in large quantities and mining operations are on a small scale. Much of South Korea's minerals and ore are imported from other countries. Most South Korean coal is low-grade anthracite that is only used for heating homes and boilers.

Construction

Construction has been an important South Korean export industry since the early 1960s and remains a critical source of foreign currency and invisible export earnings. By 1981 overseas construction projects, most of them in the Middle East, accounted for 60 percent of the work undertaken by South Korean construction companies. Contracts that year were valued at US$13.7 billion. In 1988, however, overseas construction contracts totaled only US$2.6 billion (orders from the Middle East were US$1.2 billion), a 1 percent increase over the previous year, while new orders for domestic construction projects totaled US$13.8 billion, an 8.8 percent increase over 1987.

Seosan Break Water Construction (Hyundai Construction)
Breakwater Construction in Seosan coast (1984)

South Korean construction companies therefore concentrated on the rapidly growing domestic market in the late 1980s. By 1989 there were signs of a revival of the overseas construction market: the Dong Ah Construction Company signed a US$5.3 billion contract with Libya to build the second phase (and other subsequent phases) of Libya's Great Man-Made River Project, with a projected cost of US$27 billion when all 5 phases were completed. South Korean construction companies signed over US$7 billion of overseas contracts in 1989.[55] Korea's largest construction companies include Samsung C&T Corporation, which built some of the highest building's and most noteworthy skyscrapers such as three consecutively world's tallest buildings: Petronas Towers, Taipei 101, and Burj Khalifa.[56][57]

Armaments

US Navy 100727-N-2013O-128 An SH-60F Sea Hawk helicopter flies by Dokdo (LPH 6111)
Korea's remarkable technological advancements and industrialization allowed Korea to produce increasingly advanced military equipment.

During the 1960s, South Korea was largely dependent on the United States to supply its armed forces, but after the elaboration of President Richard M. Nixon's policy of Vietnamization in the early 1970s, South Korea began to manufacture many of its own weapons.[58]

Since the 1980s, South Korea, now in possession of more modern military technology than in previous generations, has actively begun shifting its defense industry's areas of interest more from its previously homeland defense-oriented militarization efforts, to the promotion of military equipment and technology as mainstream products of exportation to boost its international trade. Some of its key military export projects include the T-155 Firtina self-propelled artillery for Turkey; the K11 air-burst rifle for United Arab Emirates; the Bangabandhu class guided-missile frigate for Bangladesh; fleet tankers such as Sirius class for the navies of Australia, New Zealand, and Venezuela; Makassar class amphibious assault ships for Indonesia; and the KT-1 trainer aircraft for Turkey, Indonesia and Peru.

South Korea has also outsourced its defense industry to produce various core components of other countries' advanced military hardware. Those hardware include modern aircraft such as F-15K fighters and AH-64 attack helicopters which will be used by Singapore, whose airframes will be built by Korea Aerospace Industries in a joint-production deal with Boeing.[59] In other major outsourcing and joint-production deals, South Korea has jointly produced the S-300 air defense system of Russia via Samsung Group, and will facilitate the sales of Mistral class amphibious assault ships to Russia that will be produced by STX Corporation.[60] South Korea's defense exports were $1.03 billion in 2008 and $1.17 billion in 2009.[61]

Tourism

In 2012, 11.1 million foreign tourists visited South Korea, making it the 20th most visited country in the world,[62] up from 8.5 million in 2010.[63] Recently, the number of tourists, especially from mainland China, Taiwan, Hong Kong, and Southeast Asia, has grown dramatically due to the increased popularity of the Korean Wave (Hallyu).

Seoul is the principal tourist destination for visitors; popular tourist destinations outside of Seoul include Seorak-san national park, the historic city of Gyeongju and semi-tropical Jeju Island. In 2014 South Korea hosted the League of Legends season 4 championship.

Trade statistics

2017 Top 10 export partners[64][65]
Country Export (M$) Percentage
 China 142,120 24.8%
 United States 68,610 12.0%
 Vietnam 47,754 8.3%
 Hong Kong 39,112 6.8%
 Japan 26,816 4.7%
 Australia 19,862 3.5%
 India 15,056 2.6%
 Taiwan 14,898 2.6%
 Singapore 11,652 2.0%
 Mexico 10,933 1.9%
Others 176,881 30.8%
Total 573,694 100.0%
2017 Top 10 import partners[64][65]
Country Import (M$) Percentage
 China 97,860 20.5%
 Japan 55,125 11.5%
 United States 50,749 10.6%
 Germany 19,749 4.1%
 Saudi Arabia 19,590 4.1%
 Australia 19,160 4.0%
 Taiwan 18,073 3.8%
 Vietnam 16,177 3.4%
 Russia 12,040 2.5%
 Qatar 11,267 2.4%
Others 158,688 33.1%
Total 478,478 100.0%
2017 Top 10 positive balance (surplus) countries for South Korea[64][65]
Country Balance (M$)
 China 44,260
 Hong Kong 37,233
 Vietnam 31,577
 United States 17,860
 India 10,108
 Philippines 6,891
 Marshall Islands 6,839
 Mexico 6,525
 Turkey 5,373
 Norway 3,391
Others -74,841
Total 95,216
2017 Top 10 negative balance (deficit) countries for South Korea[64][65]
Country Balance (M$)
 Japan -28,309
 Saudi Arabia -14,443
 Germany -11,265
 Qatar -10,832
 Kuwait -8,431
 Russia -5,133
 Iraq -4,909
 United Arab Emirates -4,168
 Iran -3,968
 Taiwan -3,175
Others 189,849
Total 95,216

Mergers and Acquisitions

Since 1991 there has been a steady upwards trend in South Korean M&A until 2018 with only a short break around 2004. Since 1991 around 18,300 deals in, into or out of South Korea have been announced, which sum up to a total value of over 941. bil. USD. The year 2016 has been the year with the largest deal value (1,818 in bil. USD) and the most number of deals (82,3).[66]

Target industries are distributed very evenly with no industry taking a larger share than 10%. The top three target industries are Electronics (9.7%), Semiconductors (9.1%) and Metals and Mining (7.7%). However, over 51% of the acquiring companies originate from the financial and brokerage sector.

See also

References

  1. ^ a b c d e f g h "World Economic Outlook Database, April 2019". IMF.org. International Monetary Fund. Retrieved 13 May 2019.
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Further reading

  • Koh, Jae Myong (2018) Green Infrastructure Financing: Institutional Investors, PPPs and Bankable Projects, London: Palgrave Macmillan. ISBN 978-3-319-71769-2.
  • Lee-Jay Cho, Somi Seong, and Sang-Hyop Lee, eds. (2007). Institutional and Policy Reforms to Enhance Corporate Efficiency in Korea. Seoul: Korea Development Institute. ISBN 978-89-8063-305-0.CS1 maint: Uses editors parameter (link)
  • Stephan Haggard, Wonhyuk Lim, and Euysung Kim, eds. (2003). Economic Crisis and Corporate Restructuring in Korea. Cambridge, UK: Cambridge University Press. ISBN 978-0-521-82363-0.CS1 maint: Uses editors parameter (link)
  • O. Yul Kwon (2010). The Korean Economy in Transition: An Institutional Perspective. Northampton, MA: Edward Elgar. ISBN 978-1-84064-268-1.
  • T. Youn-Ja Shim, ed. (2010). Korean Entrepreneurship: The Foundation of the Korean Economy. New York: Palgrave Macmillan. ISBN 978-0-230-10707-6. Essays on such topics as American-educated technocrats in the 1960s and their role in South Korea's economic growth, and entrepreneurial family companies in South Korea, as well as China and Japan.
  • Byung-Nak Song (2003). The Rise of the Korean Economy (3rd ed.). New York: Oxford University Press. ISBN 978-0-19-592827-3.
  • Sang Chul Suh (1978). Growth and Structural Changes in the Korean Economy, 1910-1940. Harvard East Asian Monographs. Cambridge: Harvard University Press. ISBN 978-0-674-36439-4.

External links

Agriculture in South Korea

Agriculture in South Korea is a sector of the Economy of South Korea. The natural resources required for agriculture in South Korea are not abundant. Two thirds of the country are mountains and hills. Arable land only accounts for 22 percent of the country's land. The most important crop in South Korea is rice, accounting about 90 percent of the country's total grain production and over 40 percent of farm income. Other grain products heavily rely on imports from other countries.With the rapid growth of South Korea's economy and urbanization, areas of farmland have been decreasing and rural populations have moved from the countryside to cities.National Agricultural Cooperative Federation (NACF) is South Korea's Agricultural cooperative, which is a nationwide organization in charge of agriculture banking, supply of agriculture input factors and sales of agriculture products.

Chaebol

A chaebol (; Korean: [tɕɛ̝.bʌl] (listen)) is a large industrial conglomerate that is run and controlled by an owner or family in South Korea. A chaebol often consists of a large number of diversified affiliates, controlled by an owner whose power over the group often exceeds legal authority. The term is often used in a context similar to that of the English word "conglomerate". The term was derived from the Japanese zaibatsu, sharing a similar structure and origins. It was first used in English in 1984. There are several dozen large South Korean family-controlled corporate groups that fall under this definition.

The chaebol have also played a significant role in South Korean politics. In 1988, a member of a chaebol family, Chung Mong-joon, president of Hyundai Heavy Industries, successfully ran for the National Assembly of South Korea. Other business leaders also were chosen to be members of the National Assembly through proportional representation. Hyundai has made efforts to contribute to the thawing North Korean and South Korean relations, but not without controversy. Many South Korean family-run chaebols have been criticized for low dividend payouts and other governance practices that favor controlling shareholders at the expense of ordinary investors.

Comprehensive Economic Partnership Agreement between India and South Korea

The Comprehensive Economic Partnership Agreement (CEPA) is a free trade agreement between India and South Korea.

The agreement was signed on August 7, 2009. The signing ceremony took place in Seoul and the agreement was signed by the Indian Commerce Minister, Anand Sharma and South Korean Commerce Minister, Kim Jong-Hoon. The negotiations took three-and-a-half years, with the first session being held in February 2006. The agreement was passed in the South Korean parliament on 6 November 2009. It was passed in the Indian parliament the next week. Once passed, the agreement came into effect sixty days later. The agreement, passed by Congress government was hugely detrimental for local Indian industries including manufacturing and services. It is equivalent to a free trade agreement. The agreement will provide better access for the Indian service industry in South Korea. Services include Information technology, engineering, finance, and the legal field. South Korean car manufactures will see large tariffs cuts to below 1%. All the while, Korean corporations have flooded India with cheaper imports of raw metal, steel and finished products.

The agreement will ease restrictions on foreign direct investments. Companies can own up to 65% of a company in the other country. Both countries avoided issues over agriculture, fisheries, and mining and choose not to decrease tariffs in those areas. This was due to the very sensitive nature of these sectors in the respective countries. Trade between India and South Korea was $15.6 billion in 2008. This is a major increase from 2002, when the total trade amount was $2.6 billion. The Korea Institute for International Economic Policy believes the agreement will increase trade between the two countries by $3.3 billion. The act came into force on January 1, 2010.

Financial services in South Korea

Financial services in South Korea refers to the services provided in ROK by the finance industry: banks, investment banks, insurance companies, credit card companies, consumer finance companies, government sponsored enterprises, and stock brokerages.

Four Asian Tigers

The Four Asian Tigers, Four Asian Dragons or Four Little Dragons, are the economies of Hong Kong, Singapore, South Korea and Taiwan, which underwent rapid industrialization and maintained exceptionally high growth rates (in excess of 7 percent a year) between the early 1960s (mid-1950s for Hong Kong) and 1990s. By the early 21st century, all four had developed into high-income economies, specializing in areas of competitive advantage. Hong Kong and Singapore have become world-leading international financial centres, whereas South Korea and Taiwan are world leaders in manufacturing electronic components and devices. Their economic success stories have served as role models for many developing countries, especially the Tiger Cub Economies of southeast Asia.A controversial World Bank report (The East Asian Miracle 1993) credited neoliberal policies with the responsibility for the boom, including maintenance of export-oriented policies, low taxes, and minimal welfare states; institutional analysis also states some state intervention was involved. However, others argued that industrial policy and state intervention had a much greater influence than the World Bank report suggested.

International Economic Consultative Organization for Korea

The International Economic Consultative Organization for Korea (IECOK) was a consortium of lenders to the South Korean government. The South Korean government persuaded the World Bank to organize this consortium in order to facilitate and coordinate developed countries' lending activities to South Korea. The IECOK was created in 1966, and held annual meetings of members and observers until it was dissolved in 1984.The main purpose of this consortium was to provide a forum for South Korea to meet its lenders and explain the country's economic policies, performance, and prospects and guarantee easy access to foreign capital which was absolutely needed for the successful development of the economy of South Korea.

Member countries included the United States, Japan, France, Canada, Australia, West Germany, Belgium, Italy and Taiwan. Observers are International Bank of Reconstruction and Development, International Monetary Fund, and United Nations Development Plan.

KOTRA

KOTRA (Korea Trade Promotion Corporation initially, Korea Trade-Investment Promotion Agency since 1995) is a state-funded trade and investment promotion organization operated by the Government of South Korea. KOTRA was established in 1962 as a national trade promotion organization. Since then, it has facilitated Korea's rapid export-led economic development through various trade promotion activities such as overseas market surveys, SME export promotion,trade info services, government-to-gov't export,foreign investment in Korea(FDI) promotion and business matchmaking.

Kaesong Industrial Region

The Kaesong Industrial Region (KIR) or Kaesong Industrial Zone (KIZ) is a special administrative industrial region of North Korea (DPRK). It was formed in 2002 from part of the Kaesong Directly-Governed City. On 10 February 2016, it was temporarily closed by the South Korean government and all staff recalled by the Park Geun-hye administration, although the incumbent President of South Korea, Moon Jae-in, has signalled his desire to "reopen and expand" the region.Its most notable feature is the Kaesong industrial park, operated as a collaborative economic development with South Korea (ROK). The park is located ten kilometres (six miles) north of the Korean Demilitarized Zone, an hour's drive from Seoul, with direct road and rail access to South Korea. The park allows South Korean companies to employ cheap labour that is educated, skilled, and fluent in Korean, whilst providing North Korea with an important source of foreign currency.As of April 2013, 123 South Korean companies were employing approximately 53,000 DPRK workers and 800 ROK staff. Their wages, totalling $90 million each year, had been paid directly to the North Korean government.At times of tension between North and South Korea, southern access to the Industrial Park has been restricted. On 3 April 2013, during the 2013 Korean crisis, North Korea blocked access to the region to all South Korean citizens. On 8 April 2013, the North Korean government removed all 53,000 North Korean workers from the Kaesong industrial park, which effectively shut down all activities. On 15 August 2013, both countries agreed that the industrial park should be reopened.On 10 February 2016, the South Korean Ministry of Unification announced that the industrial park would be "temporarily" closed down and all staff recalled, partly in protest over continued North Korean provocations, including a satellite launch and a claimed hydrogen bomb test in January 2016. The next day, the North announced it was expelling all South Korean workers and said it will freeze all South Korean assets and equipment at the jointly run factory park. All 280 South Korean workers present at Kaesong left hours after the announcement by the North. In 2018, plans were made to restore the region.

List of South Korean regions by GDP

This is a list of South Korean regions by GDP. All data are sourced from the latest regional statistics published by the South Korean Government, the OECD and the International Monetary Fund (IMF). The South Korean won has been converted to the international dollar using the IMF's Purchasing Power Parity conversion rate.

List of South Koreans by net worth

This is a list of South Korean billionaires based on an annual assessment of wealth and assets compiled and published by Forbes magazine in 2017.

List of exports of South Korea

The following is a list of the exports of South Korea. Data is for 2012, in millions of United States dollars, as reported by The Observatory of Economic Complexity. Currently the top twenty exports are listed.

Ministry of Trade, Industry and Energy (South Korea)

The Ministry of Trade, Industry and Energy (MOTIE) is a branch of the South Korean government. It is concerned with regulating some economic policy, especially with regard to the industrial and energy sectors. The ministry also works to encourage foreign investment in Korea. The current minister is Joo Hyung-Hwan.

Miracle on the Han River

The Miracle on the Han River refers to the period of rapid economic growth in South Korea following the Korean War (1950–1953), during which South Korea transformed from a developing country to a developed country. The rapid reconstruction and development of the South Korean economy during the latter half of the 20th century was accompanied by events such as the country's successful hosting of the 1988 Summer Olympics and its co-hosting of the 2002 FIFA World Cup, as well as the ascension of family-owned conglomerates known as chaebols, such as Samsung, LG, and Hyundai.The term "Miracle on the Han River" was coined after the phrase "Miracle on the Rhine" was used to refer to the economic rebirth of West Germany after World War II. This analogy was incorporated by Chang Myon, prime minister of the Second Republic of South Korea, in his New Year's address of 1961, in which he encouraged South Koreans to bear difficulties in the hope of achieving a similar economic upturn. The resultant growth has been attributed to the hard work of the labour force, in terms of which the phrase's use of "miracle" may be seen as a misnomer. Following the Miracle on the Han River, South Korea has been held as an economic model for other developing countriesand acceded to the G20 in November 2010, capping a successful sixty-some years of rebuilding and modernization.

Real estate in South Korea

Real estate in South Korea

Sampo generation

Sampo Generation (Hangul: 삼포세대; Hanja: 三抛世代; RR: samposedae, "Three giving-up generation") is a neologism in South Korea referring to a generation that gives up courtship, marriage, and having kids. Many of the young generation in South Korea have given up those three things because of social pressures and economical problems such as increasing cost-of-living, tuition payments, and affordable housing scarcity. There is also the opo sedae, or "five giving-up generation", which takes the same three and adds employment and home ownership. The chilpo sedae ("seven giving-up generation") further includes interpersonal relationships and hope, while the gupo sedae ("nine giving-up generation") extends to physical health and appearance. Finally, the sippo sedae ("ten giving-up generation") or wanpo sedae ("total giving-up generation") culminates in giving up life. The Sampo generation is similar to the Satori generation in Japan, and generally overlaps in age with Western millennials.

South Korea and the International Monetary Fund

South Korea and the International Monetary Fund (IMF) partner to assist the country in managing its financial system.

Trade unions in South Korea

The Ministry of Labor announced on 19 September 2008 that as of December 2007, 10.8% of workers were in trade unions in South Korea, a 0.5% increase from 10.3% in 2006. Korea’s unionization rate peaked in 1989 at 19.8% and fell to 10% 2004.There are two national trade union centres in South Korea: the Federation of Korean Trade Unions (FKTU) and the Korean Confederation of Trade Unions (KCTU). In 2007, the FKTU had 740,308 members (43.9% of trade unionists in Korea), the KCTU had 682,418 members (40.4%), and 265,056 workers were members of independent trade unions affiliated to neither national centre.

Youth unemployment in South Korea

The rate of youth unemployment in South Korea fluctuated in the 9–11% range between 2001 and 2016.

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