The document provides information on several topics related to economics and business in South Korea:
1) It discusses South Korea's transition from a poor agricultural economy in the 1960s to rapid industrialization and economic growth under President Park Chung-hee's five-year plans. This included developing industries like steel, shipbuilding, and electronics.
2) It outlines the challenges Korea faced in obtaining capital and technology from abroad to fund development while maintaining trade deficits. Loans from countries like Japan and revenues from the Vietnam War helped enable growth.
3) Statistics show Korea's GDP and GDP per capita increasing dramatically from the 1960s to 1990s, transforming it from a poor to middle income country and global manufacturing hub.
3. Richard Bronk
• US model
- The liberal market approach
- Anglo-Saxon countries
• German model
- So-called “co-ordinated” market economies
- Sweden, Japan.
• Hybrid systems: France, Korea(After 1997)
4. Michel Albert
• Albert, Michel. (1991). Capitalisme contre capitalisme. Paris: Seuil
- The Rhineland model (stakeholder economy)
- American or Anglo-Saxon model (shareholder economy)
• The Rhineland Model
- A regulated market economy with a comprehensive system of
social security.
- Government, employers' organisations and labour unions consult
each other on economic goals and on the policy instruments to be
used.
- In the Rhineland, therefore, the welfare state is combined with a
so-called "consultation economy".
- Harmony of interests.
- The primary goal is not the maximisation of short-term profits for
the benefit of the shareholders.
- The main concern is a sustainable, stable and continuous economic
growth and a high level of employment.
5. Michel Albert
• American or Anglo-Saxon model
• Shareholder economy.
• Maximizing short-term profits for those who invest.
• Less regulated than the Rhineland.
• Its focus is said to be not on any harmony of
interests, but on competition and if necessary
confrontation.
• Under the Anglo-Saxon type of capitalism
individual responsibility plays a more important role
than in the Rhineland, with its organized care and
solidarity.
9. Studies of Hofstede
Hofstede, Geert (1982), Culture’s consequences, Sage Publications
Countries Power Individualism Masculinity Uncertainty
distance Avoidance
West Africa 77 20 46 54
Germany 35 67 66 65
Denmark 18 74 16 23
USA 40 91 62 46
France 68 71 43 86
Great Britain 35 89 66 35
Japan 54 46 95 92
Korea 60 18 39 85
The
38 80 14 53
Netherlands
Russia 95 47 40 75
10. Divers styles of management
Meier, Olivier (2006). Management interculturel, Paris:Dunod.
• North American Model :
- Important role of market competitiveness
- Importance of individuals and contracts
- Strong inequality
- Low unemployment
- Low union rate
- Limited state intervention
• Asian Model :
- Different Cultures inside of Asian countries
- Collective value
- Solidarity
- Consensus
- Right and obligation between employees and employers
11. Divers styles of management
Meier, Olivier (2006). Management interculturel, Paris:Dunod.
• European model
- French model :
Strong Intervention of State, Importance of Hierarchy,
Importance of big business,
Conflict between employees and employers
Elite bureaucracy
- German model :
Importance of banks, Importance of small business, Strong
vocational training, Strong labor-union, Co-management.
• African model :
Family conception, Importance of hierarchy, Paternalist
leadership
23. Economic
Growth
Population
Economic Change
in Colonial Period
Industrial
Modernization
24. Wallerstein’s World system theory
(1974)
This division of labor refers to the forces and relations of
production of the world economy: one focusing on labor-
intensive, and the other on capital-intensive production.
25. Electricity cut off in May 14, 1948
• Electricity Production 1,434,000kw
• North Korea: 84%
• South Korea: 16%
• Almost of hydro electricity production equipments are
located in North Korea
• June 17, 1947: South and North Korea’s Electricity
Agreement (4 million dollar value’s merchandise)
• May 10, 1948: General Election in South Korea
- Dang In Ri Thermal power station(1930): 22500kw
• Floating Power Plant Ship – 20000kw (Incheon), 6500kw
(Busan)
• Lack of electricity: limited Electricity Distribution until
1963
27. Electricity Substation
in Gaeseong Industrial Complex
(June 21, 2007)
Supply of South Korean
in Gaeseong Industrial
Complex (2005)
15000kw
100,000~200,000 kw
31. Economic Dependence on
International Aid
• 70% of Korean Import from
International Aid
• From 1948 to 1960, 17% of
Korean GNP depended on
International Aid
• US aid in Korea
- Total US aid in Korea
5,434,000,000 US$
(1946-1962) – the largest
recipient of US aid
- Total US aid in the World
97,675,000,000 US$
(1946-1962)
32. Import substitution industrialization
• Source of capital: Korean Governmental sales of US aid
goods – Source for 43.2% of Korean national budget
• Korea-US Combined Economic Board:
Decision of the orientation of capital use
• “3 white industries”: Textile, Wheat and Sugar industries
• Interest rate lower than inflation rate
- Inflation rate: over than 20%
- Private financial market’s interest rate (사채): 20~25%
- Retail bank’s interest rate: 18.25%
- Korea Development Bank’s interest rate: 3~12%
• Consumer good industry
• Limited impact for the economic development
35. Economic difficulties before 1960’s
• Since financial support from United States
shrank, economic depression deepened.
• Under the economic aid, Korea achieved
yearly 3.8% economic growth.
• However, a rate of economic growth decreased
to 1.9% in 1960’s and GNP was $80
37. PARK, CHUNG HEE SYNDROM
Launched five-year plans for economic development
Launched Saemaeul (New Community) Movement
Built the Seoul-Busan expressway
Built an Integrated Steel Plant in Pohang
1962 1979
Average Economic
9.1%
growth rate
World Rank in GDP 101th 49th
Export 5,480 million $ 15 billion $
38. PARK, CHUNG HEE SYNDROM
WHY?
Result of ironic situation in
Korea. "Whether democracy
brings home the rice?"
Korea has become
democratized and the current
administration is of a
democratic political faction,
but the lives of everyday
people are getting harder.
46. Industrialization
• The Economic Planning (established in 1961)
• Program of rapid industrialization based on
exports
• First Five-Year Economic Development Plan
(1962-66)
• Second (1967-71), third (1972-76), and fourth
five-year economic development plan(1977-81)
• Exports also were encouraged by direct subsidies;
all taxes and restrictions on the import of
intermediate goods that were to be used to
produce export products were removed.
47. First Five-Year Economic
Development Plan
• Secured resources (Coal)
• Development of light industry
• Promotion of basic industries (electric product,
textile)
• Increase of agricultural productivity
• Improvement of farm household income
48. First Five-Year Economic
Development Plan
• Lack of Capital –
Government also tried to develop the heavy
industry. However, lack of capital is un obstacle.
• Low saving rate
• Government decreased the interest rate to stimulate
investment. However, this policy caused the
inflation.
• Due to lack of domestic capital, the capital resource for
the economic development had to depend on foreign
capital.
• In 1963, the government devaluated Korean currency
and increased the interest rates.
• Korea joined GATT (1967)
49. Outcome of the first five-year
economic development plan
1962~66
1962 1963 1964 1965 1966
(Average)
GDP 239 247 271 280 307
A rate of Economic growth 4.1 9.3 8.9 8.1 11.9 8.52
A rate of National Saving 0.8 7.0 6.5 5.8 10.5 6.1
1st Industry 33.4 32.5 35.1 32.3 31.7 33.0
2nd industry 21.7 23.0 22.3 24.8 25.7 23.5
3rd industry 44.9 44.5 42.6 42.9 42.6 43.5
Current Account -292.0 -402.8 -221.0 -198.6 -250.6
Export 54.8 86.8 119.1 175.1 253.7
Import 421.8 560.3 405.0 450.0 673.0
Source : The Economic Planning Board, <Economic Policy in Development Era>, 1982
50. Second Five-Year Economic
Development Plan
• Modernization of Industry
• Economic Independence
• Self-sufficiency of food, Increase of export,
modernization of chemical and steel industry
• Expansion of Social overhead capital (SOC)
- Transportation, Harbor, Highways
53. Construction of Highway
• Seoul-Busan Highway
• Commencement of
construction: 1968
• Completion of
construction: 1970
• Solution for
transportation problems
• Fast connection with
producers and
customers.
56. Highway
• U.S. Route 40 an east–west United States
highway (1926)
• Germany: 7000km’s Highway construction
(1930’s)
• First French Highway (1941)
• First French North-South Highway (1970)
57. Outcome of the second five-year
economic development plan (1967-71)
1967 1968 1969 1970 1971 1967~
GDP 320 348 387 408 437
A rate of Economic
Growth 6.6 11.3 13.8 7.6 9.4 9.7
Agriculture 37.5 34.2 33.2 30.4 28.8
Mining and
manufacturing industries 15.1 16.7 17.5 19.5 20.9
SCO 47.4 49.1 49.3 50.1 50.3
Current Account -191.9 -440.3 -548.6 -622.5 -847.5
Export 335 486 658 882 1132
Import 909 1322 1650 1804 2178
Source : The Economic Planning Board, <Economic Policy in Development Era>, 1982
58. Capital Resources
• Normalization of Korea-Japan relations: $800
million loan from Japan
• Severe trade deficit with Japan
• Sending Korean troops to Vietnam: $200
million loan for dispatch of troops
• Sending Korean miners (7936) and nurses
(10723) to West Germany
• The conflict in Indochina stimulated economic
growth
59. Problems
• Foreign Loan – $200 million dollars during the
second five-year economic development plan
• Foreign investors enforced Park, Chung-hee
administration to use their goods.
• Under this condition, it was very hard for
Korean industries to develop themselves.
60. Problems
• In order to develop economy, technology and
capital were indispensable.
• Foreign capital goods, raw materials, core
components had to be bought.
• Korean industry produce its products with
imported raw materials and Korean cheap
labors.
• More export, More import!
61. Outcome of the third five-year
economic development plan (1972-76)
• Investing in steel, machinery, shipbuilding,
electronics, chemicals
• Automobiles began to be exported to a few
markets.
• The plan sought to better prepare South Korea
for competition in the world market.
63. Production Global Ma
Global Rank Company in 2005 rket Country
(million tons) Share %
1 Mittal (Baa3/BBB+) 63 5.56 Netherlands
2 Arcelor (Baa2/BBB) 47 4.15 Luxembourg
3 Nippon (A1/BBB) 32 2.82 Japan
4 Posco (A2/A-) 31 2.74 South Korea
5 JFE (Baa1/BBB) 30 2.65 Japan
6 Baosteel (BBB+) 24 2.12 China
7 US Steel (Baa1/BB) 20 1.77 United States
8 Corus (B1/B+) 18 1.59 United Kingdom
9 Riva 18 1.59 Italy
10 Nucor (A1/A+) 18 1.59 United States
11 ThyssenKrupp (Baa2/BBB) 17 1.50 Germany
12 Tangshan 16 1.41 China
13 Gerdau (Baa1/BB+) 15 1.32 Brazil
14 Severstal (B2/B+) 14 1.24 Russia
15 Evraz (B2/BB-) 14 1.24 Russia
Others 756 66.73
Source: Iron and Steel Statistics Bureau
65. First Lady, Yuk, Young-Soo’s
(Inauguration of first ship of
Hyundai Heavy Industry, 1974)
70. Hyundai Construction (Jubayl , Saudi Arabia)
Contract was signed in 1976
930 million US$ - equivalent to ½ Korean Budget
72. Side effects of growth-oriented
economic strategy
• The situation began to deteriorate in 1978.
• The emphasis on exports had produced a shortage of
domestic consumer goods
• It was exacerbated by the increasing demands created
by rising wages and the advance in living standards.
• Price controls imposed on producers of consumer
goods discouraged the manufacture of these goods.
• Meanwhile, the inflow of dollars rapidly expanded the
money supply and inflation became a serious problem.
• According to a Bank of Korea report, consumer prices
rose only 14.4 percent in 1978, but most observers
agreed that the actual rate was near 30 percent.
76. Plaza accord
• An agreement between the governments of France,
West Germany, Japan, the United States, and the United
Kingdom
• Depreciation of the U.S. dollar in relation to the
Japanese yen and German Deutsche Mark by
intervening in currency markets.
• The five governments signed the accord on September
22, 1985 at the Plaza Hotel in New York City.
• The value of Korean currency, KRW(Won) was linked
to the US $.
• Korean product’s price competitiveness
79. KOREA 86 87 88 89 Total
Balance of current account 47 101 145 53 346
Balance of Trade 43 75 113 43 274
Current Price GDP 111 140 188 231 670
80. Seoul Olympic Games
• South Korea hosted the Asian games in 1986
and the Olympic games in 1988
• Seoul, South Korea hosted the 6th Asian
Games in 1970.
• Due to the economic and security difficulties,
South Korea had to drop its bid.
• The 6th Asian Games were held from
December 9, 1970 to December 20, 1970 in
Bangkok, Thailand.
89. Labor productivity growth
85~89 89~97 98~01
1person~9persons 14.08 7.55 6.89
10~19 12.73 8.45 8.55
20~99 12.44 8.87 12.07
100~299 11.58 10.64 9.33
More than 300 persons 8.92 11.25 12.74
From the end of 1980’s, Capital intensive industry leads
the Korean Economy
90. Asian Financial Crisis 1997
• The crisis started in Thailand with the financial
collapse of the Thai baht.
• Facing to the attack on Thai Bath, Thai
Government used almost of foreign reserve. It had
to decide to abandon Peg System of Thai Bath to
the USD.
• As the crisis spread, the local currencies
experienced sharp depreciation of currency.
• Indonesia, South Korea and Thailand were the
countries most affected by the crisis.
96. IMF’s intervention
• On 3 December 1997, the Korean government
signed the papers with the IMF that prescribe
these basic guidelines for the 'revitalization' of the
Korean economy.
- Guidelines on macroeconomic policies including
monetary and fiscal policies
- 4 major sectors: financial sector, private sector,
public sector and labor
- Liberalization policies on capital market,
investment and trade.