Korean Economic Developments and Prospects

Abstract

South Korea's economic success is well-documented. It shows that a country can leap from being one of the poorest in the world to one of the richest (an OECD member) in just one generation. This paper first reviews the broad literature, both in English and Korean, on Korean economic developments and the major contributing factors over the last 33 years . It then attempts to shed some light on the prospects for the Korean economy. Major contributing factors for Korea's rapid economic development include a high accumulation of physical and human capital, a high saving rate, an export-led development strategy, state intervention in the economy, efficient management and conducive culture. The prospects of the Korean economy appear bright but it would be difficult for other developing countries to emulate the Korean model.

Exports, imports and economic growth in South Korea and Japan: a tale of two economies

“…In particular, these sustained high rates of economic expansion transformed South Korea in just three decades from one of the poorest developing countries to a newly industrialized nation (Kwon, 1997). Similarly, Japan has achieved a miraculous economic development to become the first country to move from less-developed to developed economy status in the post-WWII era (Goto, 2001).…”

“…The Korean War (1950-3) resulted in the devastation of the South Korean economy such that until 1962 its scarce resources, supplemented by large inflows of foreign aid, were devoted to reconstructing the wardestroyed economy and embarking on a strategy of import-substitution industrialization (Kwon, 1997). However, by 1963 South Korea switched to an outward-looking, exportoriented strategy, seeking to overcome a lack of natural resources and a small domestic market.…”

“…In the 1970s, South Korea restructured the composition of exports in favour of heavy and chemical industries, whilst in the 1980s its export strategy was again modified with investment focused on technological innovation in light industries. Finally, since the 1990s, it has concentrated on high value-added, knowledge and technology intensive-industries (Kwon, 1997).…”

The Korean financial crisis: implications for international business in Korea

“…Population growth in Korea is slowing and the population is rapidly ageing, leading to a fall in the share of the working-age population and pushing down the national savings rate. Educational standards in Korea are already as high as in advanced countries (Kwon 1997), and are unlikely to rise further. As a result, overall human capital accumulation will grow at a moderate rate.…”

“…The author wishes to thank the two referees for their helpful comments on an earlier version of this paper. 2 For information on Korea's economic success over the period from 1963 to 1996, see Kwon (1997). 3 As a result of restrictions on agricultural imports, the prices of many food products in Korea are much higher than the world average, and per capita spending on food as a proportion of income is more than double that of the US, and one of the highest in the world (American Chamber of Commerce in Korea 1999).…”