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- Korea Foundation
- Special Lectures on Korea 2015
- Jung Soo SEO
- KAC, Keimyung University
- Daegu Korea
- October 22, 2015
- Nazarbayev University
On the 70th Anniversary of Korea’s independence from Japanese Annexation, NSO released some interesting statistics for Korea - On the 70th Anniversary of Korea’s independence from Japanese Annexation, NSO released some interesting statistics for Korea
These figures place Korea in 2014 as - These figures place Korea in 2014 as
- 7th largest trading countries by exports & imports (IMF WEO DB)
- 13th largest economy by GDP (IMF WEO DB)
- 13th highest internet penetration ratio (World Bank WDI DB)
- 27th largest country by population size (World Bank WDI DB)
- 31th richest economy by GDP per capita (IMF WEO DB)
- Source: IMF World Economic Outlook Database
- Source: IMF World Economic Outlook Database
Fortune Global 500 (2014), - Fortune Global 500 (2014),
- Ranked Korea on the 7th in terms of the number of companies with 14 companies from Korea was listed
- Source: Fortune (http://fortune.com/global500/)
- Source: Fortune (http://fortune.com/global500/)
It is also indicated that - It is also indicated that
- Korea’s GDP in 2014 is 31,108 folds bigger than that in 1953
- GDP per capita 424 times larger than that in 1953
- Korea’s exports (merchandise) in 2014 was 22,907 times larger than that in 1956
- Korea’s imports (merchandise) in 2014 was 1361 folds bigger than that in 1956
- Thus making Korea’s external merchandise trade 2672 times larger that in 1956
But Korea is small in size of area - But Korea is small in size of area
- with a slightly over 100,000km2 of land area, ranked 109th in size
- Smaller than Victoria but 1.5 times bigger than Tasmania
- Arable land is roughly 17% of the area
- Not well endowed with natural resources
- With a very high imported energy dependence ratio of 95.6%
- Country Size by Area ('14)
- (km2)
| | - Import Energy Dependence ('15.04)(%)
| | - Population Density ('13)
- (persons/㎢)
| | | | Still confronting with hostile North Korea - Still confronting with hostile North Korea
- The devastated economy during the Korean War (1950-1953)
- Short Lived but extremely bloody
- Life loss(incl. deceased, casualties & missing): 2.81 million lives
- S. Korea: 650,000 & UN: 150,000
- N. Korea: 800,000 & Chinese: 1230,000
- Refuges: more than ½ total population
- Highly Destructive to industrial production capacity
- 42% of S. Korea’s manufacturing
- 60% of N. Korea’s industries
- And surrounded with super powers: US, China, Japan and Russia
Korean Economy is - Korean Economy is
- The Miracle on the Han River (World Bank, 1993)
- Asia’s Latest Miracle(Times, 2011.11.15)
- How did Korea achieve such a miraculous economic growth?
Average Growth Rate,1953-1960 - Average Growth Rate,1953-1960
- 5.3%p.a.
- Resulting Market Saturation
- National Priority Goal: Reunification of Korean Peninsula
- Source of Economic Growth?
- Foreign Assistance from US
- Growth Strategy?
- Industrialization & Inward Looking
- Import Substitution
Political Leadership Committed to Economic Development - Political Leadership Committed to Economic Development
- Came into power: 1961 Military Coup
- Government-Led Economic Development
- 1st Five-Year Economic Development Plan(FYEDP) (1962-1966) & 2nd FYEDP
- Average Economic Growth Rate (1962-1971): 9.9% p.a.
- Growth Strategy
- Outward Looking & Export Promotion
- Manufacturing; Labor Intensive manufacturing
Policies and Incentives - Policies and Incentives
- How to make export competitive?
- “Getting Prices Right”
- Unified Exchange Rate System (1961)
- Devaluation of Korean Currency by 50% (1964)
- Tax Concessions
- Import Liberalization
- Free import of materials and equipment used for export activities
- Negative Import List System (1967)
- Generous waste allowance for export business
Policies and Incentives - Policies and Incentives
- How to make export competitive?
- “Getting Prices Right”
- Unified Exchange Rate System (1961)
- Devaluation of Korean Currency by 50% (1964)
- Tax Concessions
- Free import of materials and equipment used for export activities
- Generous waste allowance for export business
Policies and Incentives - Policies and Incentives
- Non-Pecuniary
- Export Target
- Monthly Export Meeting convened by President
- Social Respect
- Normalization of Diplomatic Relationship with Japan (1965)
- Foreign Capital
- Export Market
- Source of Advanced Technology
1972-1981 Average Growth Rate: 9.0% p.a. - 1972-1981 Average Growth Rate: 9.0% p.a.
- 3rd (1972-1976) and 4th (1977-1981) Five Economic Development
- Creating Comparative Advantage
- Heavy Government Intervention
- By promoting Heavy and Chemical Industries
- Iron & Steel, Non-Ferrous Metal, Shipbuilding, Petrochemical, Machinery and Electrical
- Capital-Intensive & Energy-Intensive
Backgrounds - Backgrounds
- Losing comparative advantage & Needs to Upgrade Industrial & Export Structure
- due to rapidly rising wages
- Catching-up by ASEAN
- Protectionist barriers against NIES’ export
- Non-Economic and Political Reasons
- The Nixon Doctrine (1969)
- Koreanization of Korean Security: Withdrwal of US troops from Korea
- The fall of Vietnam (1975)
Policies Used - Policies Used
- “Carrots and Sticks”
- Government Subsidies and Tax Concession
- Preferential & Policy loans to HCI
- Negative interest rate, combined with higher inflation rate
- Easy excess to foreign capital with government guarantee
- Protection of HCI against import
- 2nd stage import substitution
Policies Used - Policies Used
- “Carrots and Sticks”
- Export Promotion by promoting large firms
- Created General Trading Companies
- Highly Restrictive export target
- 1975: US$50 million; 1979: US$301 million
- In returns for substantial rewards including cash subsidies for export earnings
- SMEs were discriminated
Five Year Economic Development changed to Five Year Economic and Social Development - Five Year Economic Development changed to Five Year Economic and Social Development
- 6th (1982-1986) & 7th (1986-1991) FYESDP
- Emphasizing Stability, Balance, Efficiency
- Through Stable Prices, Openness, Competition, Social Development, Social Welfare
- Average Growth Rate 1982-1991: 10.2% p.a.
Backgrounds for Switch Over - Backgrounds for Switch Over
- Internal Pressure
- Sectorial Imbalance and Social Inefficiency
- Associated with HCI Drive & Moral Hazard
- Socialization of Private Risk
- Excessive Capacity with Lower Capacity Utilization: 20%
- Political Instability
- Assassination of President & 2nd Military Coup
- Poor Harvest
- High Inflation associated with Rapidly rising international oil and resources prices
- External Pressures
- High International Interest Rate
- Slowdown of Global Economy
General Policy Stance - General Policy Stance
- To correct excesses and imbalances
- From export earnings to enhanced international competitiveness
- By giving more private initiatives
- Continuing liberalization
- Unilateral Import Liberalization
- Privatization of banks by selling government shares(1981 & 1983)
- Retained the gov’t right to appoint CEOs of commercial banks
- Privatization of Interest rate (1988)
- Introduction of a negative list system for Inward FDI (1984)
Political Liberalization - Political Liberalization
- June 29 Declaration of Democratization (1987)
- 1st Democratic Change of Government
- Accompanied Massive Industrial Dispute & Outward FDI
- Hyper Economic Growth (1985-1988): 11% p.a.
- Due to favourable external conditions: “3 Lows” or “3 Blessings”
- Low International Interest Rate
- Low Currency Value
- Low International Oil and Resource Prices
8th FYESDP (19912-1996) - 8th FYESDP (19912-1996)
- Crisis Hit the Korean Economy (1997-1998) & Massive Economic and Social Reforms were Conducted
- Average Growth Rate (1992-1996): 7.2% p.a.
- Background
- International Competitiveness Eroded
- Due to fast rising wages
- Growth of Nominal Wages: over 19% p.a.
- Revaluation of Currency by 8.65% (1987-1989)
8th FYESDP (1992-1996) - 8th FYESDP (1992-1996)
- Background
- Slowdown of the Economy
- Current Account turned in deficit again
- Further Acceleration of Globalization
- Capital Account Liberalization
- Korea Joined OECD in 1996
Crisis Hit the Korean Economy in 1997 - Crisis Hit the Korean Economy in 1997
- Massive contraction of the Korean economy
- By - 5.5%
- The Value of Currency Plummeted
- By 40% in1998, relative to that in 1997
- Unemployment skyrocketed
- Unemployment rate in 1998: 7%
- No of the unemployed in 1998: 1.49 million people
Reforms conducted - Reforms conducted
- Corporate sector reforms including Chaebols
- Public Sector
- More Foreign firms’ investment
- Increased FDI, especially M&As
- Government-led Reforms
- Reforms slowed down with a quick economic recovery
- 9.6% p.a. Growth Rate (1999-2000)
In the Post Asian Financial Crisis period: Globalization and Regional Trading Agreement (RTAs) - In the Post Asian Financial Crisis period: Globalization and Regional Trading Agreement (RTAs)
- Actively Pursuing Free Trade Agreements
- Background
- Substantial Slowdown of Korean Economy
- Average Economic Growth Rate (2001-2014): 4% p.a
- Slow Down of Population Growth and Aging
- Average Population Growth Rate (2001-2014): 0.5%
- People with 65 and Older: 13%
- RTAs expanding rapidly,
- esp. since the establishment of WTO(Jan1,1995)
- 604 RTAs Reported to WTO & 398 RTAs are being effective (January, 2015)
- Free Trade Agreement (FTA): 220 (58%)
- Source: WTO (http://wto.org/english/tratop_e/region_e/regfac_e.htm)
Korea’s FTA Status: - Korea’s FTA Status:
- FTAs in force (11)
- Chile, Singapore, EFTA(4), ASEAN(10), India, EU, Peru, USA, Turkey, Australia, Canada
- FTAs signed (5)
- Columbia, Turkey, China, New Zealand, Viet Nam
Korea actively participated bilateral free trade agreement as well as mega-regional trade agreement such as RCEP or TPP - Korea actively participated bilateral free trade agreement as well as mega-regional trade agreement such as RCEP or TPP
- Shifting Korea’s Trade Policy paradigm
- Why?
- To reduce costs associated with the Spaghetti Bowl Effect
- Asia is the most active in Global Supply Chain Management
- Need to help firms to improve efficiency in production
- To counteract the possible trade diversion effect of mega-trading blocs such as EU,NAFTA, MERCOSUR etc.
- To Tone down regional security threats
- Can Korea-Kazakhstan be Partners in the era of FTAs and Mega FTAs?
How Did Korea Achieve it? - How Did Korea Achieve it?
- 7.5% p.a. Economic Growth Rate (1953-2014)
- With a fairer income distribution
- Gini Coefficient: 0.344 (1965) => 0.307 (2012)
- Significant Structural Changes
- From Primary to Industry
- From Light Manufacturing to Capital Intensive and Technology Intensive
- Why?
- Leaders Committed to Economic Growth and Development
- Accountability and transparency in International Economic and Trade Policy
- Outward Orientation
- Globalization through a main level of openness
- Strategic, Pro-active Policy makings
- Competitive Macroeconomic Policy
- Promoting Competition
Rapid economic growth - Rapid economic growth
- Accompanied a Fair Income Distribution: Gini Coefficient
- Significant structural changes
- In Outputs
- Agriculture-Industry-Service
- In exports
- Primary – Manufacturing
- L-intensive-K-intensive-Knowledge-intensive
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Heavy and Chemical Manufacturing
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Primary(Agriculture, Forestry & Fishery)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Gov’t Entrepreneurial Leadership
- Gov’t Leadership
- & Business Power
- Gov’t Leadership
- & Business Power & People Power
- Kazakhstan and Korea: Now
| | | | | | | | | | | | | | | - Population (million; 2015) (ranking)
| | | | | | | | | | | - Population Growth Rate (%; 2014)
| | | - Birth Rate (per 1000 popltn) (ranking)
| | | - Fertility Rate(child born per woman) (ranking)
| | | | | | | | | | | | | - oil and oil products, natural gas, ferrous metals, chemicals, machinery
| - semiconductors, petrochemicals, automobile/parts, ships, wireless communication equipment, flat display, steels,
| | | | | | | - machinery and equipment, metal products, foodstuff
| - crude oil, petroleum products, semiconductors, coal, steel
| - Major Natural Resources Reserves
- (ranking)
| - Crude Oil: 30 billion barrel (12th)
| | | | - Natural Gas: 2.407 trillion m3 (15th)
| | | | | | - Internet Users (2014) (ranking)
| | | | | | | - Military Expenditure (% of GDP)
- (2012)
| | | - Korea-Kazakhstan Diplomatic Relationship
- January 28, 1992
- Korea-Kazakhstan Trade has expanded rapidly
- US$88 million (1993) to US$1468 million(2014)
- Exports
- US$41million(1993) to US$907 million (2014)
- Imports
- US$ 47 million (1993) to US$ 561 million (2014)
- But still remained below its potential
| | | | | | | | | | | | | | | - Petroleum and Petroleum Products
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Chemical Products, n.e.s.
| | | | | | - Electrical Apparatus and Machinery
| | | | | | - Textile and Textile Waste
| | | | | | - Industrial Machinery and Equipment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Communication and Recording Equipment
| | | | | | - Electrical Machinery and Equipment
| | | | | | - Other Scientific and Control Apparatus and Equipment
| | | | | | - Special Industrial Machinery
| | | | | | | | | | | | - Industrial Machinery and Equipment
| | | | | | - Furniture, Bedding, Mattress etc.
| | | | | | - Other Food and Food stuffs
| | | - In total , US$ 2.45 billion
- Finance & Insurance (29.1%)
- Construction (17.1%)
- Manufacturing (15.6%)
- Realty and Lease (11.0%)
Economic partnership between Korea and Kazakhstan - Economic partnership between Korea and Kazakhstan
- In trade and FDI: getting stronger but remained less than its potential
- Why?
- Lack of mutual understanding
- Other reasons?
- How?
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