Korea as a Knowledge Economy - ISBN: 9780821372012

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32 Korea as a Knowledge Economy Figure 2.2 Royalty Payments and Capital Goods Imports, 1969–92 growth rate in 3-year moving average, % 50 40 30 20 10 0 –10 –20 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 royalty payments 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 year capital goods imports 1991 1992 Source: Calculated using data from the National Statistical Office. savings imply that Korea’s economic transformation has been achieved by massive capital investment. Korea’s capital accumulation has been made possible through increases in domestic savings; the gap between investment target and domestic savings in the earlier years had been filled using borrowed foreign capital. Second, industrial and labor composition has been changed in the direction of higher productivity as the share of manufacturing has steadily increased. Trade structures have also fundamentally changed, from export of primary goods to export of manufactured products, including capital goods, which were more than 40 percent of total exports in 2002. Third, the changes in the structures of industry, employment, and trade have proceeded with great improvements in human resources and technological capabilities, two of the most important factors for sustaining the economic growth that increases efficiency. Despite the debates on the nature of East Box 2.3 Success Factors of Korea’s Economic Growth Among the factors that account for the success of Korea’s economic development, only three issues—the government’s role in managing the economy, and technology and human resource development—are discussed in this chapter. Former Prime Minister Nam Duck-Woo was one of the key policy makers during the high-growth era in Korea. He accounts for the factors in successful economic development as follows: Economic factors include (a) an outward-looking strategy, (b) good use of foreign resources, (c) a favorable international environment, (d) education, (e) faith in the free enterprise system, and (f) the activist role of government. Noneconomic factors include (a) ethnic and cultural homogeneity and a strong Confucian tradition that places a high value on education, achievement, and loyalty to the nation; (b) security threats; and (c) political leadership (Nam 1997).
Overview of Korea’s Development Process until 1997 33 A major contributing factor in Korea’s economic transformation is the large amount of capital accumulation, which was possible because of high Korean savings rates. Asian growth performance, it is apparent that Korea has poured tremendous effort into upgrading knowledge and human resource bases. Korea’s industrialization process was not only a process of capital accumulation; but also involved the learning process, a key concept of the knowledge-based economy. Elements of a KE development strategy, such as aggressively improving human resources and domestic technological capability, also played key roles in Korea’s economic development in the past four decades. Saving and Investment Rates A very noticeable macroeconomic feature is the continued rise in savings and investment rates (see figure 2.3). Savings and investment rates, measured as a percentage of GDP, had remained low during the 1950s, at about 11 percent. The two rates started to increase as the full-scale industrialization unfolded in the 1960s, growing rapidly afterward until they reached a peak in the 1990s, with 35 percent and 37 percent savings and investment rates, respectively. Except in the 1980s, the investment rates surpassed the savings rates, and the deficiency in savings was made up with foreign investment. The long-run trend of gross investment rates from 1960 to 2006 is shown in figure 2.4, with a trend line that implies a long-run equilibrium path. The figure shows the steep increases in investment rates during the 1960s and 1970s, with rates reaching their peak around the end of the 1980s. The rapid increases in the 1970s were the result of the HCI policies, but those steep increases were slowed in the 1980s by the stabilization and rationalization policies, and the long-run trend began to decline. Figure 2.3 Savings and Investment Rates percent of GDP 40 30 20 10 11 12 15 19 23 29 32 31 35 37 0 1953–60 1961–70 1971–80 1981–90 1991–97 gross saving gross investment Source: Bank of Korea, National Accounts, various issues.
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References Albert, M. B. 1998. The
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References 187 United Nations. 2005
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