Ўзбекистон иқтисодчилари XIII форуми

Figure 1: GDP per capita in the Republic of Korea and Ghana, 1961-2020, US$ 
Source: World Development Indicators,
https://databank.worldbank.org/ 

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The situation for South Korea worsened in mid-1948, when the supply of electricity from the 
northern part of the peninsula was cut and interzonal trade was interrupted due to tensions between North 
and South. It is no coincidence that the American program of assistance to the Republic of Korea through the 
ECA (Economic Cooperation Administration, 1949–1952) also identified priority tasks that actually 
launched the import substitution processes - the expansion of power generation capacities and the creation of 
fertilizer production. Secondly, for the Republic of Korea during most of the period 1953-1960, the negative 
balance of payments was a problem. The activities of the government of the Republic of Korea in 1953-
1960, aimed at ensuring the growth of import-substituting sectors, were based on three key components - 
protectionist foreign trade policy, restrictive exchange policy (exchange rationing) and expansive credit 
policy.
In the context of the economic recovery after the Korean War in the Republic of Korea, quite 
naturally, there was an increase in demand for imported products (primarily, consumer goods and products 
that do not require further refinement). It should be noted that the system of customs tariffs adopted in 1949 
remained practically unchanged until 1957: it assumed the absence of duties on imports of food, raw 
materials and means of production that were not produced on the territory of the country, as well as rather 
low rates (10–20%) for semi-finished products. In general, in the period 1953-1960, the average tariff for 
imported products remained quite high (40%) and tended to further increase (up to 44% starting from 1957), 
while until 1952 the import of equipment was intended for development of key sectors of the economy. Until 
1957, commercial banks belonged to the government and were leaders in crediting the economy. They 
borrowed bank resources from the Korea Development Bank (Hanguksanŏp Ŭnhaeng) under Ministry of 
Finance, and the latter bank was independent of Bank of Korea (HangukŬnhaeng), i.e. central bank. The 
credit policy pursued resulted in a sharp increase in the volume of borrowed funds provided to the economy, 
from 6.0% of GDP (6.9 billion won) in 1955 to 16.1% of GDP (40.2 billion won) in 1960, while the main 
recipient of these resources was the manufacturing sector [3]. 
The economic policy of import substitution of the Lee Seungman administration (1948-1960) is 
characterized by the fact that since 1953 the government was able to create and further maintain conditions 
for the expansion of import-substituting sectors, as a result of which the production of cement, glass, 
chemical fertilizers, paper as well as light and food industries was built in the country. All this, coupled with 
the expansion of capacity in the electric power industry and the improvement of the state of infrastructure, 
became an important foundation for the subsequent export-oriented growth of the economy under the Park 
Chung Hee administration in 1961–1979 [4]. 
It should be noted that average annual GDP growth rates declined from 5.7% in 1954-1957 up to 
4.7% in 1958-1960. At the same time, the growth rate of value added in the manufacturing industry, despite 
its steady decline, in 1954-1960, almost always exceeded the growth rate of GDP, as a result of which the 
share of this sector in GDP increased from 7.8% in 1953 to 12.1% in 1960 [5]. In this regard, there is no 
reason to assert that by the end of the period under review, the development model with the dominance of 
import substitution was in crisis, but the stagnation of labor productivity in the manufacturing industries 
since the mid-50s against the background of quantitative and structural changes in the industry, indicated that 
the potential of this model is approaching its exhaustion. 
Since 1958, in light of the reduction in US foreign aid in the form of imports in the Republic of 
Korea, discussions have intensified regarding the future models of the country's economic development. A 
key milestone was April 15, 1960, when the government of the Republic of Korea approved the country's 
first five-year economic development plan (1962-1966) and thus recognized the priority for export 
orientation. And although the implementation of the provisions of this plan was postponed for two years due 
to internal political instability, neither the administration of Prime Minister Chang Myung, which came to 
power after the 1960 student revolution, nor the military regime of Park Chonghee, which was established 
after the coup of 1961, did not changed the basic principles of the new economic development strategy. 
Since the beginning of the implementation of the First Five-Year Economic Plan (1961-1966), the gross 
domestic product of the Republic of Korea has been steadily formed mainly due to exports. 
The Government of the Republic of Korea adopted an export development strategy that introduced 
mechanisms to support and promote export activities and set performance targets [6]. 
In 1962, the national agency for the promotion of foreign trade and investment attraction, KOTRA, 
was created, which made it possible to obtain operational information on foreign markets and opportunities 
for South Korean exporters, as well as to provide targeted support to small and medium-sized companies. In 
order to strengthen national support for exports, the Korean Foreign Trade Association CHINA was 
established in 1964, which began to perform not only the function of a trader, but also act as additional tool 

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for export promotion. The most important component of the second stage of reforms was the formation of 
chaebols, which played a special role in the development of export potential. These South Korean 
conglomerates, created with the active support of the state, have become pillars of the foreign economic 
development of the national economy. So, in 1969, the Electronic Industry Promotion Act was adopted, 
which gave conglomerates access to external capital and domestic loans, and also provided preferential 
taxation and priority in the development of infrastructure projects.
Having embarked on the path of export-oriented development, South Korea from the early 1960s to 
the mid-1970s pursued a policy of severe import restrictions. Its priority tasks were to protect the interests of 
the national manufacturer and meet the needs of export industries in the necessary industrial equipment, as 
well as raw materials, semi-finished products and components. By signing an agreement to join the GATT in 
1967, South Korea managed to maintain significant quantitative import restrictions until 1975. But since the 
second half of the 1970s, in the foreign economic policy of the Republic of Korea, a new stage begins, 
characterized by the gradual liberalization of imports. The next stage in the liberalization of South Korean 
import policy was the preparation of national economy in 1989-94 to the modification of the rules of 
international trade in the context of the transformation of the GATT into the WTO. The government 
measures of that period assumed: the regulation of tariffs, that is, the elimination of import preferences for 
individual companies, a decrease in the average tariff burden on importers. Import tariffs were reduced, but 
businesses that met the established export quotas gained access to subsidized loans and other benefits. By 
lowering the quantitative restrictions on the import of foreign goods, South Korea closed a 30 -year phase of 
protectionist policies and adopted an economic strategy for greater openness [7]. With the exception of the 
remaining limits on the import of agricultural products, import restrictions now apply to only a small 
segment of goods and services (medicines and cosmetics). Exports grew at a very high rate - in 1963-1969 
the average annual growth was 35%, while imports grew by an average of 22% annually. However, it should 
be noted that throughout this period, net exports remained negative with an average level of -6.9% of GDP in 
1962-1971. Maintaining such a persistent and significant foreign trade deficit required an inflow of external 
capital - first financial aid, then investment and debt. 
By virtue of its peculiarities - the most favored nation treatment and the amendment on the least 
developed countries - the GATT made it possible for Korea, as a developing country, to simultaneously 
combine openness in trade with industrial protectionism. In particular, by gaining access to the markets of 
developed countries and transporting its goods at reduced rates of customs duties, Korea maintained high 
protective duties on imported manufactured goods, using the “emerging industries” argument often used by 
emerging economies in the 1970-1980s. 
Since joining the WTO in 1996, Korea has made tangible progress here, lowering the average 
applied rates from 20% to 9.8% on manufactured goods and from 72.4% to 58% on agricultural goods 
between 1996 and 2018 [8]. In the WTO system, Korea has also rather successfully defended its right to 
developing country status, which provided it with more flexible tariff reduction schemes and longer 
transition periods for weak sectors of the economy, especially agriculture, the service sector and the 
protection of intellectual property rights. 
After using the multiple exchange rate required to form before the early 1960s a closed self-
sufficient economy with the adoption of an export-oriented development course after the devaluation of the 
national currency - won, a single exchange rate was established at which exporters sold currency to the 
Central Bank. In 1965-74, the policy of maintaining a floating exchange rate was pursued, and in order to 
maintain the preferred ratio between exports and imports for the economy, the won was devalued several 
times during these years. Since March 1990, South Korea has set the market rate for the won, keeping its 
monetary policy unchanged since then. 
In the 1960s and 70s, the South Korean government initiated the emergence of export industrial 
zones as a mechanism for debugging interaction with foreign investors in the creation of specialized export 
industries. 
The next stage in the formation of an effective state system of export support was carried out in the 
early 1990s, when new elements of the export support infrastructure were created. It included the Korea 
Trade Insurance Corporation (K-SURE). In addition, the Export-Import Bank of Korea (KEXIM), operating 
since 1978, opened 9 representative offices in Southeast Asia, Latin America, as well as in London, Moscow 
and Washington. As a result, in 1995, the export of the Republic of Korea exceeded the $ 100 billion. A 
country without significant natural resources, destroyed by war, with a per capita income of less than $ 100 
in 1962, reached $ 10,000 by 1995, and the average annual GDP growth was 10%.