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The South Korean Economy   Term Paper ID:27830 Click to get this paper

Essay Subject: Discussion of South Korea's concerted effort to open up its economy to foreign investment, and the problems it faces due to defensive and protectionist sentiments among the population.... More...

5 Pages / 1125 Words 4 sources, 13 Citations, MLA Format $20.00 Return to List of Papers

Paper Abstract: Discussion of South Korea's concerted effort to open up its economy to foreign investment, and the problems it faces due to defensive and protectionist sentiments among the population. Paper Introduction: Overview of South Korea To some extent Korea has never completely escaped from the legacy of the Hermit Kingdom, when the country went into self-imposed isolation almost 400 years ago in response to the Japanese and Manchus. It was one of the last countries in the world to establish contacts with the West in the late 19th century. Subsequent colonial exploitation by Japan during the first half of this century reinforced a defensive mentality among Koreans that still exists today.(Burton 1994) But today the South Korean economy is once again booming after two years of the slowest growth since 1980. As a consequence of this expansion the government is now making a concerted effort to open up the economy to foreign investment. The GNP growth rate is expected to exceed 7% for all of 1994 as Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. One recent survey found thatalmost half of South Koreans opposed direct foreign investment in thecountry, while two-thirds were against the lowering of trade barriers(Financial Times, June 23, 1994). "A hard climb up the ladder," Financial Times. Because steel is liberally consumed by industriessuch as shipbuilding, automobiles and construction, the founding of POSCOsignaled Korea's turn to heavy industry (Amsden 1989). Examples of the government's role in HHI include the following: (1)The government ordered Korea's crude oil deliveries to be carried by theHyundai group's newly created merchant marines as a way to strengthenstagnating demand for HHI's ships, once HHI had demonstrated its capability in shipbuilding;(2) the government provided extensive subsidies for infrastructure, and (3)the government provided HHI (and other shipbuilders with continuous supportbeyond start-up, although the visibility of the government's handdiminished with the arrival of foreign technical assistance (Amsden 1989). || | | | | | ||1982 |49.7 |9.6 |13.5 |9.4 |17.8 || | | | | | ||1984 |55.9 |17.4 |1 . 5. Prior to the creation of Hyundai Heavy Industries (HHI) in1973, Korean shipbuilding could be characterized as one of slow progressinterspersed by scattered government attempts to accelerate growth. 3 million metric tons. Furthermore South Korea has a poor reputation as a location forforeign investment. June 23, 1994, p. bond yield (%) |13.2 |12. Between 1962 and 197 the production structure ofKorea's textile industry was altered to more closely resemble that ofdeveloped countries. Work CitedAbrahams, Paul "Uphill battle for investors, " Financial Times. 3.Amsden, Alice. 1993: $1 = W 8 2.5| | | ||ECONOMY |1992 |1993 || | | ||Total GDP (W ' bn) |2 5.9 |217.2 || | | ||Real GDP growth (%) |5.1 |5.5 || | | ||GDP per capita ($) |6,789 |7,1 7 || | | ||Components of GDP (%): | | || | | ||Private Consumption |54 |54.1 || | | ||Total Investment |36.6 |34.3 || | | ||Government consumption |1 .9 |1 .8 || | | ||Exports |28.9 |29.4 || | | ||Imports |-29.9 |-29 || | | ||Annual Average % growth in: | | || | | ||Consumer prices (%) |6.2 |4.8 || | | ||Wholesale prices (%) |2.2 |1.5 || | | ||Average earnings (%) |15.7 |7.8 || | | ||Industrial Production (%) |5.3 |5.9 || | | ||Unemployment Rate |2.4 |2.8 || | | ||Employment (m) |18.9 |19.2 || | | ||Yield on corporate bonds (%) |14. Asia's Next Giant : South Korea and Late Industrialization. The GNP growth rate is expected to exceed7% for all of 1994 as exports increase due to a weak Korean won andindustrial investments grow in response to overseas demand. kmHead of State Kim Young-samPopulation: 44.1 mil.Currency: South Korean WonAverage Exchange Rate: 1992: $1= W 782. Labor disputeswhich have disrupted industrial production in the past several years arealso on the decline as living standards rapidly improve (Burton 1994). Thus less than twenty years after its founding, POSCO wasexporting technology (Amsden 1989). The Kyongsong Spinning and Weaving Company, founded in1919 was probably Korea's first major nationalist capitalist enterprise.The export drive which Korea launched in the 196 s and 197 s wasspearheaded by textiles. |2.5 |1 .6 |1 . 4.Lucas, Louise . The governmentargues that such reforms will make the economy more efficient as itswitches from governance by bureaucrats to market forces. The report also stated that there wasforeign concern about the high cost of labor, as well as the number ofindustrial disputes and the huge tax bills imposed by the National TaxAuthority (Abrahams 1994).Industry Overview (Shipbuilding, Steel and Textiles) The initiative to enter new manufacturing has come primarily from thepublic sphere. As a consequence of thisexpansion the government is now making a concerted effort to open up theeconomy to foreign investment. |21. June 23, 1994, p. AppendixSouth Korea: Key FactsArea: 99, sq. Today the government wants to reduce strong state intervention in theeconomy. Anironic indicator of the speed of its progress was a joint venture itentered into with United States Steel (USX) in 1986 for the purpose ofmodernizing USX's Pittsburg, California plant. The myriad barriers to foreign investment and goods are graduallybeing lowered as South Korea seeks technology and capital from abroad toimprove its global performance. At that time POSCO wassupplying half of the capital requirements or $18 million, for themodernization--providing the PittCal cold-rolled sheet facility with hot-bend coil, undertaking basic design of the facility's modernization jointlywith USX, and training American managers and workers in operations andmaintenance. "Seoul tries to throw open the doors," Financial Times. |12.2 || | | ||Govt. South Korea neglected research anddevelopment as it concentrated on building an impressive industrial base.The country consequently needs foreign technology if it is to achieve itsgoal of becoming an advanced industrial power. South Korea's share of world orders fornew ships vied with Japan's, having reached 17.4% by the mid-198 s (Amsden1989). It was oneof the last countries in the world to establish contacts with the West inthe late 19th century. || | | ||Money growth (M2) |18.6 |17.4 || | | ||FT-A index (% change) |11.1 |27.7 || | | ||Current account balance ($bn) |-4.5 |.5 || | | ||Merchandise exports ($m) |75,169 |81, 24 || | | ||Merchandise imports ($m) |-77,316 |-78,946 || | | ||Trade balance ($m) |-2,147 |2, 78 || | | ||Main Trading Partners |Export |Imports || | | ||U.S. Foreigncompetition in the home market will supposedly help to improve theperformance of the large conglomerates, or chaebols, as they increase theiroperations abroad (Burton 1994). || | | ||Total reserves minus gold ($bn) |17.1 |2 .2 || | | ||Narrow money growth (M1) |13. The studysuggested that South Korea was: (1) the most nationalistic country inAsia;, (2), the most bureaucratic after China and Indonesia; (3) had aneconomy dominated by cartels and state-owned companies; (4) discriminatedmore than any other nation against foreign investment; and (5) was the mostprotectionist nation in Asia. |2.9 |28.9 || | | | | | ||1976 |56. |22.1 |21.4 || | | ||Japan |14.1 |23.9 || | | ||Hong Kong |7.8 |na || | | ||Germany |4.4 |4.7 |Source: Financial Times - June 23, 1994 South Korea is also overhauling its antiquated and tightly regulatedfinancial system that has created distortions in economic development,particularly at the expense of small business, and prevented largeindustrial concerns from obtaining cheaper credit abroad. After severalexpansions (in a total of four phases, with the last phase divided into twostages), the mill reached an annual capacity of 9.1 million metric tons ofcrude steel in 1983. | | | | | | The government created the Pohang Iron and Steel Company Ltd. |5. Oxford University Press, 1989) pp.1-2 .Burton, John. Thus bureaucratic resistance and publicdoubts about the benefits of increased foreign economic influence on SouthKorea could undermine the government's crusade to internationalize thecountry. The major factors which contributedto the success of Korean textiles were: (1) Foreign loans which helpedfinance investments in modern plants and equipment, (2) increasingproductivity through learning by doing, (3) a decline in the importance ofimported raw materials due to technological breakthroughs overseas,especially the discovery of synthetic fibers, and (4) the fact that wagesrose rapidly in Japan, which reduced Japan's competitiveness in textileexports (Amsden 1989). Overview of South Korea To some extent Korea has never completely escaped from the legacy ofthe Hermit Kingdom, when the country went into self-imposed isolationalmost 4 years ago in response to the Japanese and Manchus. It is now actively seekingforeign partners as it builds high-speed rail systems, advancedtelecommunications networks and an indigenous defense industry (Lucas1994). |2.5 |14.2 || | | | | | ||1986 |37.1 |18.9 |8.9 |8.2 |26.9 || | | | | | ||Source: | | | | | ||Amsdon, | | | | | ||1989, | | | | | ||p.27 . However there appears to be considerable psychological resistance inSouth Korea to such economic liberalization. A recent report which appeared in the Financial Timescanvassed opinions of 95 corporate managers and bankers. |19. Subsequent colonial exploitation by Japan duringthe first half of this century reinforced a defensive mentality amongKoreans that still exists today.(Burton 1994) But today the South Korean economy is once again booming after twoyears of the slowest growth since 198 . The industry accomplished this by import substitutingchemical fibers and by reducing the ratio of natural fiber yarns andfabrics in total textile production. || | | | | | ||1978 |43.2 |3.7 |14.9 |11.5 |26.7 || | | | | | ||198 |52.7 |9. POSCO became one of the lowest-cost steel-makers in the world. Textiles, particularly cotton spinning and weaving, is one of Korea'soldest industries. June 23, 1994, p. || | | ||Official discount rate (%) |7. Ignoring the 195 s, when economic policy in Korea was forall practical purposes under foreign control, every major shift inindustrial diversification in the decades of the 196 s and 197 s wasinstigated by the state. Dynamic Comparative Advantage| | | | | | ||Percentage | | | | | ||of New Ship| | | | | ||Orders | | | | | ||Placed, | | | | | ||1974 - 1984| | | | | || | | | | | ||Year |Japan |South Korea|European |Comecon |Rest of || | | |Economic | |World || | | |Community | | || | | | | | ||1974 |38.4 |2.8 |27. In the case of shipbuilding that state acted asvisionary. HHIbegan building its first ship in 1973 and in less than 1 years had becomethe world's largest shipbuilder. (POSCO)in 1968; five years later POSCO began production in the southwest city ofPohang with an annual capacity of 1. |12.7 |4.2 |22. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.