South Korea is a country with a population of about 48.6million people (2008) with an annual population growth of 0.31% (2008). The country's government is a republic with powers shared between the president, the legislature and the courts. In terms of trade, South Korea's exports include:
- electronic products (semiconductors, cellular phones and equipment, computers),
- machinery and equipment,
- crude oil,
- machinery and transportation equipment,
- chemicals and chemical products,
- base metals and articles
The major markets for South Korean exports are China, U.S, Japan, and Hong Kong and its suppliers are China, Japan, U.S., Saudi Arabia, and U.A.E. South Korea's population is one of the most ethnically homogenous populations in the world. Except for a small Chinese community which is about 20,000, almost all Koreans share a common cultural and linguistic heritage. With about 48.6 million people, South Korea has one of the world's highest population densities with major population centers located in the northwest, southeast, and in the plains south of the Seoul area. Half of the population actively practices religion and among this group, Christianity (49%) and Buddhism (47%) comprise Korea's two dominant religions.
Until the 1980s, South Korea was governed by a series of dictators, both civilians and military, under which political differences of opinions led to imprisonment or maybe even a death sentence. However, at this point, the country's political leaders, in the monopolistic Democratic Justice Party, realized that it was now time to relax and control the tight political situation in the country. The question, as ever, was how far to go with the new plan and how fast. Martial law was abolished in 1981. Within five years, a powerful political opposition had emerged and was called the New Korea Democratic Party (NKDP), led by the veteran dissident Kim Dae-Jung. The new party balanced the existing extra-parliamentary opposition, which consisted mainly of student and trade union movements. Unlike the West where student protest is generally ignored by the wider population, South Korea's student movement, the Chondaehyop, was widely supported by ordinary people who felt it could help voice their complaints. The burgeoning labor movement, which emerged with the country's rapid industrialization, was also making its presence felt. It was not until December 1997 that Kim Dae-Jung, the opposition leader, won the presidential elections. His most serious immediate problem when taking office was the fall-out from the Asian currency crisis. This caused a sharp recession and eventually required a substantial and humiliating bail-out by the IMF. The Government was forced to promise to reform South Korea's financial system and end the relationship between Government and the chaebol industrial giants who control much of the economy.
The 1997 crisis, though triggered by external events, was largely a product of internal problems, relating to a weak system of corporate governance, a financial system that did not function well, and poor labor relations within the country (Noland 2000, Krueger and Yoo 2001). South Korea has made considerable progress since that time. In the financial sector, regulations have been strengthened by creating the Financial Supervisory Commission and introduction of new regulatory practices, approaches, and standards. The government was been forced to inject 155 trillion won (roughly 30 percent of national income) into banks and other financial institutions, while shutting down 498 financial institutions which were not capable of developing successfully, reducing the number of commercial banks from 33 to 11, with an obvious consequence of reducing employment in the financial sector by roughly one-third. In the corporate sector, South Korea has experienced the largest corporate bankruptcy in history (Daewoo) and has come close to another (Hyundai). South Korean chaebols have started a process of restructuring encouraged by market forces, political influences, and legal changes, but up to now, their actions have mostly been of withdrawing from activities that are not economic rather than implementing optimistic strategic plans to enhance shareholder value. In the labor market, the government has greatly improved and strengthened the social safety net, but employers still face militant and opposing behavior on the part of unions. Given the state's important role in the economy, labor unrest has been slowing down the progress of public sector reform, and has inhibited the process of privatization of public companies. Labor market problems have also inhibited foreign investment. Nevertheless, South Korea has made better progress in terms of economic reform in the last four years than other heavily affected Asian crisis countries, or even Japan for that matter. Due to the taking over of failing banks by the government or state, at the height of the financial crisis in 1998, the state owned more than three-quarters of the banking system, and it now appears to be reluctant to give up the banks to the private sector. In September 1999, foreign competition was introduced into the South Korean financial services sector, when, after months of controversial negotiations, the government sold the Korea First Bank to Newbridge Capital for $415 million, after indemnifying the firm against debts hidden by opaque, and at times, illegal, accounting practices.
The Promise of the New Economy
The implicit costs of the nation's unequal distribution of wealth are obvious. It is clear that the world is in the midst of a technological revolution that is having a large impact on productivity, relationships within firms and among firms, and the distribution of income and wealth. South Korea has adopted information technology faster than any other economy in Asia. More than one-third of the population uses the internet or has internet access, a higher figure than for economies such as Japan, Taiwan, or Hong Kong. South Korea boasts the highest broadband penetration rate in the world which is double that of Canada, its closest rival and more than three million South Korean homes have high-speed internet access, that is, double the number of people with internet access in Japan. Internet access costs only one-third as much as that of Japan and South Korea websites are generally more sophisticated than those in Japan. In the stock market, nearly two-thirds of all share transactions by value, and a third by number, are now conducted on-line, again, the highest in the world. South Korean firms lead the world in third generation mobile telephones or cell phones, with companies like, Samsung for example.
The advent of information technology is changing the structure of the South Korean economy. Given the rigidities and uncertain futures of the chaebol, there has been an upsurge in start-up activity and initial public offerings in the stock market. In 2000, according to a survey jointly conducted by the London Business School and Babson College, nine percent of adults in South Korea were owning or managing new firms. These new firms are changing South Korean corporate culture as well. In contrast to the secrecy that has characterized the chaebol, the managements of the publicly-listed firms hold regular meetings with institutional investors. In contrast to the strict seniority-based formulas that characterize chaebol renumeration practices, firms such as Locus, a supplier of communications and internet services, have introduced incentive-based pay and stock option schemes. The developments are partly due to generational change, as the ranks of South Korean corporate management are swelled by Western-educated business school graduates.
Economic systems adopted by South Korea
South Korea chose a free-enterprise economy at the time of independence and has since sought to strengthen it with a great deal of success. The mainly agrarian nation began to industrialize in the 1950s, after the Korean War (1950-1953). At the time, it's relatively insignificant industries mainly served its domestic market, until the early 1960s, when the South Korean government encouraged industrialization. Unlike many developing countries, South Korea chose an export-led industrialization strategy to produce labor-intensive products that could be produced more cheaply than in North America and Western Europe and therefore also competitive and exportable to those markets. Initially, the emphasis was on products such as fabric and clothing, but was later supplemented by assembly-line production of electronic products like radios or black-and-white television sets. By the late 1960s, South Korea became a major producer of telecommunication devices and computer parts.
The political economic system that existed during the Park regime was often characterized as a state-led economy. Although it was basically a private market economy it differed from the Anglo-American version of a free market economy in that the state held a commanding position in resource allocation through its control over the decisions of large family-owned enterprises called the chaebol. This was the system of political economy that the Park regime used effectively to promote rapid export expansion and economic growth. This state-led system of political economy resembled the system that was used in Japan during the post-World War II period to achieve rapid economic growth and catch up with the advanced economies of the West.
SECTOR BEING STUDIED AND POLICIES
South Korea is a developed country and had one of the world's fastest growing economies from the early 1960s to the late 1990s. This growth was achieved through manufacturing oriented exports and a highly educated workforce. South Korea is the world's exporter. Moreover it is member of the OECD, South Korea is classified as a high-income economy by the World Bank, an advanced economy by the IMF and CIA.
Market economy of South Korea has led to dramatically improvement of the economy from less developed nations with severe unemployment, negative savings and the lack of exports to rapidly developing country. The gross national product (GNP) has been growing faster than the population as well as gross domestic product (GDP) during last 3 decades. It indicated that the growth in South Korea economy is developing
The industrial achievement that contributes to the development of South Korea is the national strategy. The strong incentive for industrial firm has assist to a better skills and technology. In additional to that, South Korea have implement 19 major type of export promotion oriented industry policy intervention which lead to a great success for South Korea. For example like currency under valuation, targeted infant industry protection, tariff exemption on input of capital goods, tax breaks for domestic suppliers, accelerate depreciation for exporter, direct export subsidies, the setting of export targets, government coordination of foreign technology licensing agreement, import entitlement certificate, and the creation of free trade zone, system of export credit insurance and guarantee and the monopoly rights towards the industrial sector.
Besides that, South Korea also has implemented conglomerates known as cheabol in an industrial strategy in order to develop the economy. This involves the subsidiary and privileges that given the investor including is the restriction of foreign firm entry in their country such as restrictive trader licensing. It secured the adequate market and satisfactory rate of return on investment.
On the other hand, the opportunity for their country's investor will be higher. Therefore the cost of production will be lower compared to import products. Conjunction with that the usage of technology and skilled worked is a main factor for the industrial development. The good infrastructure in South Korea helps to maintain a good facilities and distribution of product among the firm.
Trade and industry in South Korea has targeted new material, computer base tools, bioengineering, microelectronic, optic, aircraft and so on due to high technology. Research and development have been implemented in order to identify the need and want in the market. It leads to create their brands name product and distribution network.
The government intervention also an essential factor for the success of south Korea whereby they have carry out some strategy such as upgrading policies, using dept rather than direct foreign equity investment, limiting the role of multinational and corporation. In additional the government sector and the private sector are collaborated in order to manufacture a good product and service in market level.
As a conclusion, South Korea is a well developing country that has good prospect among the other countries. This country has a competitive advantage that brings a success for the country. The strategy and the government policy have an efficient effect towards the economy of South Korea. The country has maintained a good diplomatic relation among all over the country in order to have a better network that enhances the growth of the countries.
South Korea would grow very quickly after the country was destroyed by the Korean War (1950-1953). The country was divided into two, the North and the South. It did not have any infrastructure, and there were no natural resources at all. But now, South Korea is well known for its rapid economic growth, based on its centrally planned and trade-oriented economic policies. The reason why South Korea's rapid economic development because the nation had a well-organized, government development plan, a well educated and trained labor force that has a strong work-ethic, as well as to desire to increase their standard of living. The impact of globalization on South Korea is Koreans including all levels of civil servants turned to be more 'open mind'. These things, makes South Korea open its huge market and fulfill the global standards. From the issue of global standard, the South Korea economy has to go a long way to go to become "globalized". It is because of the central and the government had too much regulation and too many interventions. To become more globalization, South Korea needs to have orderly and well-organized action plans and preparations. A suitable approach has to apply to institute a good globalization process. Other impact of globalization is South Korea economy become well because of market expansion and the ability to become more competitive, through increased competition. As we all know, South Korea invest more in Research and Development (R&D) in education, industrial sector and other things. The nation wants to compete with US and Japan. With a good R&D, they can create a high-technology products and South Korea will exports their products around the world. The impact of international trade on South Korea is the economy of South Korea is influence by foreign investment. The amount of foreign investment inflows increased, and such substantial growth has contributed in enhancing the economic performance of the Korean economy, by creating job opportunities, boosting economic investment, encouraging technological transfer, intensifying competition in the domestic market, and most importantly, by increasing foreign exchange reserves. That is why South Korea was easily recovered from the economic recession. However, although South Korea itself has showed continuous progress in terms of foreign investment attraction, this country still records the lowest Gross Domestic Product (GDP) ratio of all OECD member nations. But in South Korea economic performances, the nation still have resulted in positive outcomes for the economy.
We collected South Korea's yearly GDP and GDP per capita from the year 2000 to 2010. The GDP is recorded in South Korean national currency which is the Korean Won (KRW) and as from the data we found that the South Korean GDP has been increasing from 2000 to 2008. This means that South Korea was experiencing economic growth. There may be many reasons to why a country may experience growth but in this case it is because of a system of close government and business ties, including directed credit and import restrictions, and the government promoted the import of raw materials and technology at the expense of consumer goods, and encouraged savings and investment over consumption. The Asian financial crisis of 1997-98 exposed longstanding weaknesses in South Korea's development including high debt/equity ratios and massive short-term foreign borrowing. But after the crisis, South Korea adopted numerous economic reforms including greater openness to foreign investment and imports. This was meant to allow foreign countries to invest in the local market as a way of bringing foreign income and with the global economic downturn in late 2008, South Korean GDP growth slowed to 2.2% in 2008 and declined 0.987% in 2009. In the third quarter of 2009, the economy began to recover, in large part due to export growth, low interest rates, and an expansionary fiscal policy by the South Korean government.Korea (Republic of) The Human Development Index
The HDI provides a measure of three dimensions of human development: living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and gross enrolment in education) and having a decent standard of living (measured by purchasing power parity, PPP, income). The index is not in any sense a comprehensive measure of human development because it does not, for example, include important indicators such as gender or income inequality nor more difficult to measure concepts like respect for human rights and political freedoms. What it does provide is a broadened prism for viewing human progress and the relationship between income and well-being.B
etween 1980 and 2007 Korea (Republic of)'s HDI rose by 0.97% annually from 0.722 to 0.937 today. HDI scores in all regions have increased progressively over the years (Figure 1) although all have experienced periods of slower growth or even reversals.Building the capabilities of women
The gender-related development index (GDI), which was introduced in Human Development Report 1995, measures achievements in the same dimensions using the same indicators as the HDI but captures inequalities and achievements between women and men. It is simply the HDI adjusted for gender inequality. The greater the gender disparity in basic human development, the lower is a country's GDI relative to its HDI.
Korea (Republic of)'s GDI value, 0.926 should be compared to its HDI value of 0.937. Its GDI value is 98.8% of its HDI value. Out of the 155 countries with both HDI and GDI values, 97 countries have a better ratio than Korea (Republic of)'s.Migration
Every year, millions of people cross national or international borders seeking better living standards. Most migrants, internal and international, reap benefits in the form of higher incomes, better access to education and health, and improved prospects for their children and families.
According to the human development report of 2009, the life expectancy of South Korea was 79.2 years, which is a very good number. That means the people in the country are expected to live up to 79years old before they die. This ranks South Korea as the 26th when compared with other countries of the world. The adult literacy data was not provided during the time of publishing. The combined gross enrolment ratio measures the percentage of enrolment in education and we can see that it is very high in south Korea at a percentage of 98.5 ranking at the 26th spot in the world. This shows that there is a great deal of enrolment in the education system of South Korea. Life expectancy index is at 0.904 and the education index is also high at 0.988. The GDP index is also high at 0.920.
In terms of health and education, we can see that the government expenditure on health as a percentage of GDP is at 11.9%, meaning that the government spends 11.9% of its GDP income on health. It also spends 15.3% of its GDP income on education, showing that health and education are one of the most important aspects in the country. The percentage of adults with low educational attainment level is relatively high at 36.2% compared to those with high educational attainment at 23.4%. Still, those with medium educational attainment are the ones dominating the country at 40.4%. the healthy life expectancy at birth is 74 years, which means that most children born are expected to live up to around 74 years and the unhealthy life expectancy in the country is at 7%, which is very low.
In conclusion, South Korea is now considered as a developed country with a fully functioning democratic rule. It is one of the world's leading producers of mobile phones with its company, Samsung leading mobile phone brands. It also has a two way trade relationship with North Korea, which they exchange goods and services in order to facilitate trade between the two countries. South Korea joined the United Nations in 1191 and has also managed to develop relations and joined the Association of South East Asian Nations and also the East Asian Summit.Some of the recognitions of South Korea are:
- Asia's largest oil exporter.
- World's highest internet connectivity or access with one of the fastest networks as well.
- World's largest manufacturer of screen displays (LCD, CRT, Plasma, etc).
- World's largest electronics manufacturing firm: Samsung Electronics.
- World's second largest steel maker: POSCO
- World's largest producer of computer memory chips.
The entire above are clear and existing proof that indeed South Korea is now a developed country with a rapidly growing economy.