Korea

Country starter pack
Introduction to Korea
13
Korea’s initial rapid growth was achieved by extensive state
intervention in the economy with a focus on heavy industry
to produce manufactured products for export. In the 1970s
and 1980s, the Government channelled capital into familycontrolled
chaebols, or otherwise known as conglomerates.
These huge firms also enjoyed trade preferences and
monopoly rights, among other advantages extended by the
Government. This enabled the chaebols, which today include
the Hyundai and Samsung groups of companies, to grow into
massive business empires with brands that are world leaders
in their fields and global household names.
Korea was, however, hit hard by the Asian financial crisis
in the late 1990s, resulting in a significant curtailing of
economic growth. After receiving an emergency loan from
the International Monetary Fund (IMF), Korea was forced
to instigate a series of reforms, including reducing the role of
Government in the economy and an overhaul of the financial
sector. By the early 2000s, Korea had rebounded from the
crisis, averaging a healthy growth rate of 4.4 per cent in the
first decade of the century.
In the more recent global financial crisis of 2008-09, Korea
was one of the few OECD countries to avoid recession.
Nonetheless, the Government adopted numerous economic
reforms in its wake, including greater openness to foreign
investment and imports. By 2014, Korea had risen to be the
world’s sixth largest exporter and seventh largest importer.
Exports represented 50 per cent of GDP in 2014, and
imports 45 per cent (World Bank).
President Park has top priorities of maintaining a balance
between economic growth and social welfare, restoring the
middle class and revitalising the economy. She has unveiled
“small business-first” policies in the name of “economic
democratisation,” which is aimed at correcting what have
been seen as unfair business practices by the family-run
chaebols. With high-tech industry and a sophisticated
consumer market, Korea offers an attractive market
for businesses worldwide to begin or expand their Asian
presence. Along with average annual GDP growth of four
per cent from 2005-2014 (World Bank), strong purchasing
power is another factor that makes Korea an attractive
market.
Manufacturing has driven Korea’s rapid economic
development, transforming it into a global industrial giant.
It is once again the world’s largest shipbuilder, recently
regaining this title from China, fifth largest car maker, and
sixth largest steel maker. In the past, most opportunities
for foreigners have involved establishing labour-intensive
manufacturing or processing operations geared towards the
export market. These days, investors obtain better returns
by utilising the skilled workforce in higher value and high
technology fields.
Korea’s services sector has long lagged behind its dynamic
world-class manufacturing sector in efficiency and
effectiveness. Unlike the export-oriented chaebols, the
services sector is dominated by small and medium-sized
enterprises (SMEs), which account for 80 per cent of the
GDP BY SECTOR, 2013
Mining and quarrying
.2%
Services
59.1%
Construction
5.0%
Agriculture and fisheries
2.3%
MAJOR IMPORT ITEMS BY SECTOR, 2013
Iron & steel products
4.8%
Natural Gas
7.0%
Chemicals
8.4%
Consumer
goods
11.3%
Precision
equipment
Manufacturing
31.1%
Communications,
transport, storage
2.3%
MAJOR EXPORT ITEMS BY SECTOR, 2013
Ships
6.5%
Iron and steel
products
7.8%
Machinery
8.4%
Refined
petroleum
9.5%
Chemicals
11.5%
Textiles
2.5%
IT products
23.4%
Other
17.1%
Cars
13.3%
Other
21.2%
Crude Oil
19.3%
12.1%
Other capital goods
15.9%
Source: Bank of Korea, 2013 Annual Report p.28.