South Korean Economy Analyzed

southwest Korea in recent decades has been superstar of the most dynamic economies in the world. over the period from 1965 to 1990, the pose of reaping of per capita megascopic national product was greater than that of any other rustic in the world (Watkins 1999). Major Korean enterprises such as Lucky Goldstar and Samsung ar now common household stigma names all over the world. As tumesce, Hyundai and Daewoo, the ii leading southeast Korean auto manufacturers, twain offer products that ar able to compete on the widely distributed market along with other major(ip) car producers.In analyzing the second Korean rescue, it is definitive to look at the divers(a) factors behind this remarkable success story. The pinpoint and rapid expansion of the Korean parsimony is due generally in pop to the radical changes and parvenue policies introduced on a lower floor the super C Chung Hee brass of 1961-1979. Significant new-made stinting policies included reinforcing the system of chaebol, creating a indemnity of minute substitution with an export-led approach, elevation the exploitation of industries designed to compete effectively in the worlds industrial export markets, nationalizing the commits, as hale as working on to aspirate Koreas large outdoor(a) debt.It is these policies, introduced throughout the 1960s and 70s, which caused a future boom in southeastern Koreas scrimping and continue to influence it at the present day. One extremely writeant aspect of the atomic number 16 Korean economy is the concept of chaebol. Fathitherd by honey oil Chung Hee in the early 1960s, chaebol are conglomerates of some companies agglomerative around genius holding company. The set up company is usually controlled by star family.It started off as a few specially selected large firms encouraged to slue their growth and production targets to meet due south Korean regime objectives and were dependant on state-owned banks for the credit the y needed to operate and grow. Government-chaebol cooperation was substantive to the subsequent sparing growth and dumbfounding successes that began in the mid-1960s. The chaebol were able to grow because of two factors hostile loans and special favors (Song 1997). Access to foreign technology also was critical to its growth throughout the 1970s and 80s.Under the guise of direction capitalism, the judicature selected companies to undertake projects and channeled monetary resource from foreign loans. The political science guaranteed satisfyment should a company be unable to repay its foreign creditors. Additional loans were made on tap(predicate) from domestic banks. In the late 1980s, the chaebol prevail the industrial sector and were especially predominate in maufacturing, trading, and dour industries. Today, the chaebol remains the mother wit of conspiracy Koreas economy. Examples of chaebol include Samsung, Daewoo, and Goldstar.To give an composition to how succes sful and powerful this scotch concept evolved into, in 1983, the coarses three largest corporations, all under the chaebol system, accounted for over a third of South Koreas entire Gross National output (Ibid, p63). The 1960s saw the simplification of U. S. aid to South Korea, aid which had largely kept the country afloat for the past decade sideline the Korean War. This made feasible the import substitution system the Park Chung Hee government had established.Combining a policy of import substitution with an export-led approach, government 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 shape good conditions for its export. Incentives for exports included a reduction of corporate and private income evaluatees for exporters, tariff exemptions for knifelike mater ials imported for export production, business tax exemptions, and accelerated depreciation allowances (Kim 1997).This dodging was largely responsible for establishing Koreas strong export-led industries that exist today. kindly conditions mean that there will evermore be a demand for their product, both domestically and overseas. In the latter fail of Parks reign as president, he fostered the reading of industries designed to compete effectively in the worlds industrial export markets. These major strategic industries consisted of technology-intensive and skilled labor-intensive industries such as machinery, electronics, and shipbuilding.The plan stressed large gruelling and chemical industries, such as atomic number 26 and steel, petrochemicals, and nonferrous metal. As a result, hefty and chemical industries grew by an impressive 51. 8 part in 1981 (Amsden 1992) their exports increased to 45. 3 pctage of total output (Ibid, p103). These victimizations can be ascribed t o a favorable turn in the export performance of iron, steel, and shipbuilding, which occurred because high-quality, low-cost products could be produced in South Korea. By contrast, the heavy and chemical industries of advanced countries slumped during the late 1970s.This strategy helped to establish South Koreas economic fictional character as a major oecumenical industrial exporter, even in a time of turmoil created by the OPEC debacle. It was a plan that was carried right through the 1980s and well into the 90s by successive governments, who recognized its ruler for success. When Park took control in 1961, one of his first orders of business was to extend government control over business by nationalizing the banks. As well, he merged the sylvan cooperative movement with the agricultural bank.The governments civilize control over all institutional credit further extended Parks command over the business community. The Economic proviso Board was created in 1961 and became the n erve revolve about of Parks plan to promote economic development (Kearny 1991). The Board exists to this day it is charged in the first tooshie with economic planning, as well as coordinating the economic functions of other government ministries. The Bank of Korea continues to exist as a government-controlled financial institution, operated by the Ministry of Finance.In 1975 South Korea was the fourth largest debtor among developing countries with remote debt totaling nearly $47 billion U. S. (52 percent of GNP) (Kim 1997). The Park government used its unassailable current account surpluses between 1976 and 1979 to ignore and even repay its foreign debt. South Korean banking institutions were banned from obtaining long-term bank loans until the end of the year. The government also minify the availability of foreign currency loans. This strategy worked, and as a result, South Koreas gross foreign debt dropped to $29. billion U. S. in 1979 (Ibid, p. 74).The dramatic reduction of the debt by the Park government established a solid fundament for economic growth and expansion by successive governments in the 1980s and 90s. Today, South Korea has in place solid debt management policies and has receive from its status as a dry land Bank loan recipient. In analyzing the South Korean economy, it is not hard to enamour why it has developed into the worlds 11th largest economic system (Song 1997). The truth is in the numbers.During the 1970s, rough estimates indicate, Seoul had the worlds most productive economy. The one-year industrial production growth rate was about 25 percent (Ibid, p131) there was a fivefold increase in the GNP from 1965 to 1978 (Ibid, p131). In the mid-1970s, exports increased by an average of 45 percent a year (Ibid, p132). Today, it is a major exporter of electronics, heavy machinery, and automobiles. The remarkable success of this dynamic economy can be attributed to the radical new economic policies and changes brought about by th e Park Chung Hee government of 1961-1979.Significant new economic strategies included developing the system of chaebol, creating the import-substitution policy, fostering the development of industries designed to compete in the worlds industrial export markets, nationalizing financial institutions, as well as working on to reduce South Koreas large external debt. Successive governments continued to implement these policies and many are soundless in place today. South Korea is definitely an economic fireball to be reckoned with, and the world may still have yet to feel the exasperation of this Asian Tiger.