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Korea in the World

Economic Growth

Photo-Gold collection movement to overcome the 1997 financial crisis (left), Signing ceremony of the EU–South Korea Free Trade Agreement, held at the headquarters of the European Council in Brussels, Belgium (right)
Between 1986 and 1988, South Korea enjoyed unprecedented economic growth thanks mainly to changes in global markets, including lower oil prices, lower US exchange rates, and lower interest rates. The weak dollar against other major currencies helped raise the price competitiveness of Korean export items in the global market, while lower oil prices helped reduce the cost of purchasing raw materials. Lower interest rates reduced the burden of repaying foreign loans. Thanks to prosperity based on the phenomenon of the above-mentioned “three lows,” South Korea achieved a surplus in its trade balance for the first time since it opened a port to foreign trade in 1876. A country once categorized as one of the newly industrializing countries (NICs) in the 1970s, South Korea reached a new level of success during this period.

From a long-term perspective, South Korea suffered from periodic economic crises in the process of accomplishing rapid economic growth. During the 15 years between 1965 and 1980 when the nation entered a phase of “high growth rates,” the nation also suffered three sudden periods of economic decline. According to the official estimation of the Bank of Korea, the nation’s business cycle hit bottom three times in May 1972, June 1975, and December 1980, respectively. Especially between the late 1970s and the early 1980s, the nation recorded a minus growth due to the second global oil crisis and corporate insolvencies in the 70s that resulted from excessive and overlapped investments in the heavy chemical industry. Then in 1997, a year after it became a member country of the Organization for Economic Co-operation and Development (OECD), the nation became mired in unprecedented economic crisis. The Asian financial crisis, which devastated Southeast Asian nations, also dealt a heavy blow to South Korea. Having been vulnerable to external shocks in the aftermath of rapid liberalization that had been pushed for since 1993, the nation experienced a sharp decline in its foreign exchange reserves. In order to prevent a sovereign default, the government agreed to take the International Monetary Fund (IMF) bailout package to help overhaul its economic structure.
Photo-Assembly line at the Kia Motors manufacturing plant in Žilina, Slovakia (left), An employee carries mother glass, which will be used in smartphone displays, at an LG Display production plant (right)
In order to overcome this unprecedented economic crisis, the nation had to implement reforms to improve its overall economic conditions. These reform measures, which were carried out by the Kim Dae-jung administration, can be summarized as follows: the restructuring of the financial industry, renovation of corporate governance, and the liberalization of capital markets. First, the government eliminated or rearranged any unsound financial institutions and saw that companies observe their capital adequacy ratio to ensure stable operations. The government also encouraged companies to increase transparency in their accounting practices and lower debt ratios. It had large companies resolve their mutual payment guarantees among affiliates and reorganize overlapping sectors through business swaps. In the end, the government completely opened the foreign exchange market and the capital market by easing regulations on foreign exchange rates and abolishing the ceiling for foreign investment in stocks. Apart from the government’s efforts, the private sector also played a role in redeeming foreign loans by staging a gold collection campaign through which millions of South Koreans went to banks to sell or donate their gold to raise badly needed dollars.
Photo-Panorama of a shipyard (left), Night view of the Yeosu National Industrial Complex (right)
Boosted by high-intensity restructuring and an increase in exports, as well as the efforts of citizens to help the nation overcome the foreign exchange crisis, South Korea quickly repaid its debts and successfully extricated itself from the IMF bailout package system. Various reform policies adopted during the restructuring process were established in the form of laws and systems, and later served as a foundation for the growth of the Korean economy. South Korea subsequently continued to see economic growth and overcame the global financial crisis of 2007–2008 with relative ease.
Photo-Korean volunteers participate in a campaign to drill wells in Cambodia The Republic of Korea overcame the calamities of colonization and war to enter the ranks of developed countries in a remarkably short period of time. In fact, South Korea is one of the few countries since World War II that has gone from a low-level foreign-aid recipient to a top-level foreign-aid donor within a single generation. As of 2015, South Korea ranked 11th and 26th in the sectors of nominal gross domestic product and per capita GDP. In 2015, South Korea was the fifth largest exporter and ninth largest importer in the world. Major South Korean export items include electronics and semiconductors, automobiles, petrochemical goods, and shipbuilding. Some of the major large business groups are Samsung, Hyundai Motor Company, LG, SK, and Lotte. As of 2017, South Korea is endeavoring to achieve economic democratization by solving the problem of deepening income inequality and consolidation of the chaebol (family-owned conglomerates) system, while seeking new growth engine industries and improving productivity for long-term sustainable economic development.

Korea in the World
It is not easy to understand a foreign country in a short time. is a brief introduction of Korea for educators unfamiliar to Korea. The booklet collects and summarizes significant historical, cultural, and politico-economical traces of Korea. An essential material for educators who want to bring Korea in the textbook and to classroom.

Publication | The Academy of Korean Studies

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