You are here -allRefer - Reference - Country Study & Country Guide - South Korea >

allRefer Reference and Encyclopedia Resource

allRefer    
allRefer
   


-- Country Study & Guide --     

 

South Korea

 
Country Guide
Afghanistan
Albania
Algeria
Angola
Armenia
Austria
Azerbaijan
Bahrain
Bangladesh
Belarus
Belize
Bhutan
Bolivia
Brazil
Bulgaria
Cambodia
Chad
Chile
China
Colombia
Caribbean Islands
Comoros
Cyprus
Czechoslovakia
Dominican Republic
Ecuador
Egypt
El Salvador
Estonia
Ethiopia
Finland
Georgia
Germany
Germany (East)
Ghana
Guyana
Haiti
Honduras
Hungary
India
Indonesia
Iran
Iraq
Israel
Cote d'Ivoire
Japan
Jordan
Kazakhstan
Kuwait
Kyrgyzstan
Latvia
Laos
Lebanon
Libya
Lithuania
Macau
Madagascar
Maldives
Mauritania
Mauritius
Mexico
Moldova
Mongolia
Nepal
Nicaragua
Nigeria
North Korea
Oman
Pakistan
Panama
Paraguay
Peru
Philippines
Poland
Portugal
Qatar
Romania
Russia
Saudi Arabia
Seychelles
Singapore
Somalia
South Africa
South Korea
Soviet Union [USSR]
Spain
Sri Lanka
Sudan
Syria
Tajikistan
Thailand
Turkmenistan
Turkey
Uganda
United Arab Emirates
Uruguay
Uzbekistan
Venezuela
Vietnam
Yugoslavia
Zaire

South Korea

THE GOVERNMENT ROLE IN ECONOMIC DEVELOPMENT

[JPEG]

Woman worker, Hyundai Corporation
Courtesy Embassy of the Republic of Korea, Washington

In 1961 General Park Chung Hee overthrew the popularly elected regime of Prime Minister Chang Myon. A nationalist, Park wanted to transform South Korea from a backward agricultural nation into a modern industrial nation that would provide a decent way of life for its citizens while at the same time defending itself from outside aggression. Lacking the antiJapanese nationalist credentials of Syngman Rhee, for example, Park sought both legitimacy for his regime and greater independence for South Korea in a vigorous program of economic development that would transform the country from an agricultural backwater into a modern industrial nation.

Park's government was the beneficiary of the Syngman Rhee administration's decision to use foreign aid from the United States during the 1950s to build an infrastructure that included a nationwide network of primary and secondary schools, modern roads, and a modern communications network. The result was that by 1961, South Korea had a well-educated young work force and a modern infrastructure that provided Park with a solid foundation for economic growth.

The Park administration decided that the central government must play the key role in economic development because no other South Korean institution had the capacity or resources to direct such drastic change in a short time. The resulting economic system incorporated elements of both state capitalism and free enterprise. The economy was dominated by a group of chaebol (see Glossary), large private conglomerates, and also was supported by a significant number of public corporations in such areas as iron and steel, utilities, communications, fertilizers, chemicals, and other heavy industries. The government guided private industry through a series of export and production targets utilizing the control of credit, informal means of pressure and persuasion, and traditional monetary and fiscal policies (see The Origins and Development of Chaebol, this ch.).

The government hoped to take advantage of existing technology to become competitive in areas where other advanced industrial nations had already achieved success. Seoul presumed that the well-educated and highly motivated work force would produce lowcost , high-quality goods that would find ready markets in the United States and the rest of the industrial world. Profits generated from the sale of exports would be used to further expand capital, provide new jobs, and eventually pay off loans.

In 1961 Park extended government control over business by nationalizing the banks and merging the agricultural cooperative movement with the agricultural bank. The government's direct control over all institutional credit further extended Park's command over the business community. The Economic Planning Board was created in 1961 and became the nerve center of Park's plan to promote economic development. It was headed by a deputy prime minister and staffed by bureaucrats known for their high intellectual capability and educational background in business and economics. Beginning in the 1960s, the board allocated resources, directed the flow of credit, and formulated all of South Korea's economic plans. In the late 1980s, the power to allocate resources and credit was restored to the functional ministries. In 1990 the Economic Planning Board primarily was charged with economic planning; it also coordinated and often directed the economic functions of other government ministries, including the Ministry of Finance. The board was complemented by the Korea Development Institute, an independent economic research organization funded by the government. Other government bodies directing the economy included the Office of the President, which included a senior secretary for economic affairs; the Ministry of Finance; the Ministry of Trade and Industry; the Ministry of Labor; and the Bank of Korea, which was controlled by the Ministry of Finance.

Park's first major goal, which was immediately successful, was to establish a self-reliant industrial economy independent of the massive waves of United States aid that had kept South Korea afloat during the Rhee years. Modernizing the economy and maintaining overall sustained growth were additional goals in the 1970s. Significant economic policies included strengthening key industries, increasing employment, and developing more effective management systems. Because South Korea was dependent on imports of raw materials, such as oil, a major government objective was to significantly increase the level of exports, which meant stressing greater international competitiveness and higher productivity. The early economic plans emphasized agriculture and infrastructure, the latter were closely tied to construction. Later, the emphasis shifted consecutively to light industry, electronics, and heavy and chemical industries. Using these strategies, an export-driven economy developed.

The government combined a policy of import substitution with the export-led approach. Policy planners selected a group of strategic industries to back, including electronics, shipbuilding, and automobiles. New industries were nurtured by making the importation of such goods difficult. When the new industry was on its feet, the government worked to create good conditions for its export. Incentives for exports included a reduction of corporate and private income taxes for exporters, tariff exemptions for raw materials imported for export production, business tax exemptions, and accelerated depreciation allowances.

The export-led program took off in the 1960s; during the 1970s, some estimates indicate, Seoul had the world's most productive economy. The annual industrial production growth rate was about 25 percent; there was a fivefold increase in the GNP from 1965 to 1978. In the mid-1970s, exports increased by an average of 45 percent a year.

Data as of June 1990

South Korea - TABLE OF CONTENTS

  • The Economy

  • Go Up - Top of Page

    Make allRefer Reference your HomepageAdd allRefer Reference to your FavoritesGo to Top of PagePrint this PageSend this Page to a Friend


    Information Courtesy: The Library of Congress - Country Studies


    Content on this web site is provided for informational purposes only. We accept no responsibility for any loss, injury or inconvenience sustained by any person resulting from information published on this site. We encourage you to verify any critical information with the relevant authorities.

     

     

     
     


    About Us | Contact Us | Terms of Use | Privacy | Links Directory
    Link to allRefer | Add allRefer Search to your site

    ©allRefer
    All Rights reserved. Site best viewed in 800 x 600 resolution.