Korea s Economic Development and Its Implications. 27th May 2014

Transcription

1 Korea s Economic Development and Its Implications 27th May

2 'Miracle on the Han River' refers to the miraculous economic growth that has transformed South Korea from the ashes of the Korean War 2

3 Korean Economic Growth From 1953 To 2013 Financial Crisis IMF Crisis per capita income($) ,043 1,927 24,044 GDP(Billion $) ,197 3

4 Korean Economic Growth From 1950 To 2010 Key Policy Characteristics of Society and Economy Five-Year Economic Development Plan Export-Led Growth Light Industry Corruption Eradication Urbanization GATT Growth with Social Stability and Autonomy Liberalization of Import Triple Lows Democratization Privatization Market Opening Growth with Venture and IT Internet Globalization Welfare 1960s 1980s 2000s Key Policy 1950s 1970s 1990s Import-Substitutive Industrialization Farmland Reform Act Export-Led Growth Heavy Chemical Industry Saemaul Undong Strengthen Corporate Competitiveness Real Name Financial Transaction System Characteristics of Society and Economy Korean War UNKRA United Nations Korean Reconstruction Agency Revitalizing Reform Spirit Modernization Globalization Social Reformation IMF Crisis 4

5 Map of Presentation Era Policy & Feature Chapter Title 1960 Five-Year Economic Development Plan Export-Led Growth/Light Industry Starting Up 1970 Saemaul Undong Export-Led Growth/Heavy Chemical Industry Balancing with Innovation 1980 Liberalization of Import Growth with Social Stability and Autonomy Sacrifices and Actions 1990 Real Name Financial Transaction System Strengthen Corporate Competiveness Science and Technology 2000 Privatization Market Opening Growth with Venture And IT Turning 5

6 Table of Contents Ⅱ. Ⅳ. Ⅵ. Ⅷ. Ⅰ. Introduction Starting Up Ⅲ. Ⅴ. Ⅶ. Balancing with Innovation Sacrifices and Actions Turning Closing Science and Technology Small and Medium Industry 6

7 General Facts of Korea Ⅰ. Introduction 10s Location Far eastern edge of Asia Official Name / Capital City Republic of Korea (South Korea) / Seoul Population Approximately 51 million Official Language Korean (Hangeul) GDP / Income per Capita 1,197 Billion$ / 24,044$ Trillion club Trade Volume / Export 1,078 Billion $/ 560 Billion$ (8 th Trillion Dollar 2011) 7

8 Korea, Liberated but had nothing Ⅰ. Introduction 40s August 15th, 1945, Korea is liberated after the end of Second World War There were almost nothing in Korean peninsula 8

9 Korean War and Destruction Ⅰ. Introduction 50s June 25, 1950 the Korean War broke out In July of 1953 the Korean war ended, the country destroyed into ashes - S. Korea heavily relied on foreign aids in 1950s The 50% of budget came from AID - Per capita income was $86 which was one of the lowest, 87 th of the 103 countries part of the economic statistics 9

10 Wall by Foreign Aids Ⅰ. Introduction 60s Korean government heavily relied on the aids but had little power to use them Korean new government insisted on building factories but the aid country did not agree because of inflation 10

12 Map of Presentation Ⅱ. Starting up Chapter Title Policy & Feature Era Starting Up 5Year Economic Development Plan Export-Led Growth/Light Industry 1960 Balancing with Innovation Export-Led Growth/Heavy Chemical Industry 1970 Sacrifices and Actions Liberalization of Import Growth with Social Stability and Autonomy 1980 Science and Technology Real Name Financial Transaction System Strengthen Corporate Competiveness 1990 Turning Privatization Market Opening Growth with Venture And IT

13 1. Summary Ⅱ. Starting up Economic Background 1960s US Aids reduced Few Resources, Fund, Facilities and Human Resources 1970s World economy recession North Korea threat US army evacuation Policy Policy Base Five-Year Economic Development Plan, 1962 Export-Led Growth/ Import- Substitutive Industrialization Consistency and Continuity President s Initiatives Continuity in 1960s policy Turning focus Light to heavy industry Entrepreneurs Training Workers GDP(Billion$) 21(1961) 78(1970) Perfor (371%) mance per capita 82(1961) 255(1970) income($) (311%) 95(1971) 643(1980) (677%) 291(1971) 1,660(1980) (570%) 13

14 Ⅱ. Starting up The President took the Initiatives 60s 70s The president actively led the plan, accompanied the people at the development site, and chaired in the evaluation meetings 14

15 's Policy Ⅱ. Starting up Turning to Heavy Industry 60s As a result of US President Nixon policy, the pulling out of US army began. Then the South Korean government reconfirmed the importance of promoting heavy industry 15

16 's Policy Making bases for turning to heavy industry Ⅱ. Starting up 70s Steel & Shipbuilding Technician Nurturing Industrial Complex Capital Support 16

17 3. 70's Policy Base Training technicians Ⅱ. Starting up 70s Technicians and facilities were needed for heavy industrialization There were approximately 5,000 technicians in Korea, which was too few to complete the 5yEDP So the government provided unprecedented support Technical high school graduates & certified technicians (1979) Specialty Machinery Tech. High School Specialized Tech School Regular High school Number of Graduates/Yr. 2 nd level Certified Technician 10,000 9,000 6,000 25,000 10,000 9,000 6,000 18,000 Total # of Graduates 50,000 17

18 4. 70's Behind Story Even one drop, keep it in the drum Ⅱ. Starting up 70s Your urine can produce foreign money It was very common in public toilet in the 1970s Due to lack of products to export, people sold everything from urine to ladies long hair Success was impossible without the support of the people 18

20 Map of Presentation Chapter Title Policy & Feature Era Starting Up Five-Year Economic Development Plan Export-Led Growth/Light Industry 1960 Balancing with Innovation Saemaul Undong 1970 Sacrifices and Actions Liberalization of Import Growth with Social Stability and Autonomy 1980 Science and Technology Real Name Financial Transaction System Strengthen Corporate Competiveness 1990 Turning Privatization Market Opening Growth with Venture And IT

21 1. Summary of 'Balancing with Innovation' Ⅲ. Balancing with Innovation Balancing with Innovation Back ground Success on 1 st and 2 nd 5yEDP & Export-Led Growth policy Acceleration of village impoverishment Policy Saemaul Undong as a new village development movement started in 1970 and turned to national innovation Nation-wide campaign and movement Performance Balanced development in rural communities contributed to national economic development 21

22 2. Background of 70's Economic Development Ⅲ. Balancing with Innovation One More Thing, Reform of Awareness 40s 50s 60s The general circumstance of the rural area was no different from a century ago Considerable change including establishment of modernized awareness was essential Thatched House(1893) Thatched House(1969) No Difference during one hundred year 22

23 3. Policy for Balanced Development Ⅲ. Balancing with Innovation Saemaul Undong 70s April of 1970, Saemaul Undong was announced for a movement of wealth This movement was a philosophy of behavior with fundamental confidence of We can do it. Result: Household Income from $255.8 in 1970 to $2,227.2 in 1999 Three Doctrines of Saemaul Undong Diligence -근면 is the spirit of putting eyes afar, getting thoughts broadly, and doing action firmly. Self-help -자조 is the spirit of doing my work by myself; realizing that my fate and future depends on myself, and doing the best in my efforts. Cooperation -협동 is the spirit of believing in the power of unity. It is the spirit that cares for others first and encourages each other, and that shares with and help each other and "work and get over together hardness. 23

25 Map of Presentation Chapter Title Policy & Feature Era Starting Up Considerable sacrifices for stacking foreign exchange 1960 Balancing with Innovation Trade promotion by KOTRA and GTC with special actions 1970 Sacrifices and Actions Liberalization of Import Growth with Social Stability and Autonomy 1980 Science and Technology Real Name Financial Transaction System Strengthen Corporate Competiveness 1990 Turning Privatization Market Opening Growth with Venture And IT

26 1. Summary of 'Sacrifices and Actions' Ⅳ. Sacrifices and Actions Environments Sacrifice Many abnormal and special actions were taken, dictatorship in the age of cold war was generally accepted Oil Shocks(1973, 1979) For stacking foreign exchange Individual compensation of $500 million from Japan was used to build Pohang Iron & Steel Co. Export of labor force - Mine workers and Nurses: million $ Deep-Sea Fishery: 36 million$/yr. Action Lowering interest rates from 30% to 16.2% for private loan Government s intervention on exchanges rates and tariffs Policy KOTRA and GTC(General Trading Company) - 종합상사 Building Up Industrial Park Self-sufficiency of Food Entering Middle-East Construction Market Result Exceeding 10B$ Export in

27 2. Environments Ⅳ. Sacrifices and Actions Oil Shock twice(1973, 1979) 60s 70s Inflation accelerated, severely damaging Korean economy Unit: $/Barrel $36.83 Source: SLI,BP $1.90 OPEC Founded $ st Oil Shock 2 nd Oil Shock

28 3. Sacrifice Ⅳ. Sacrifices and Actions Indemnity Compensation, Export of Labor Force, Deep-Sea Fishery 60s 70s Considerable sacrifices for stacking foreign exchange 1965 Indemnity Compensation from the Japanese Colonial Rule Individual compensation of $500 million was used to build Pohang Iron & Steel Co Export of labor force - Mine workers and Nurses Total of million $ 1969 Deep-Sea Fishery 37 million $ every year in 1970s 28

29 4. Key Policies Ⅳ. Sacrifices and Actions 70s Self- Sufficiency of Food Middle East Construction Industrial Park GTC KOTRA 29

30 4.1. Key Policies -1 Ⅳ. Sacrifices and Actions KOTRA(Korea Trade Promotion Agency) 60s Korea selected policies that focused on external trade for economic development KOTRA was established to provide support in facilitating export at a national level 30

31 4.2. Key Policies -2 Ⅳ. Sacrifices and Actions GTC(General Trading Company) 70s GTC had privileges such as priority in international bidding, requirement relaxation in importing raw materials, permission to local L/C and specialty in export financing GNP(Nominal),Billion $ Export by GTC,Billion $

32 4.3. Key Policies -3 Ⅳ. Sacrifices and Actions Building Up Industrial Park 60s 70s The major export items were wigs, sewing, and toys To concentrate on production, the government constructed industrial complex, Cluster (1965) 32

33 4.4. Key Policies -4 Ⅳ. Sacrifices and Actions Self-sufficiency of Food 70s To reduce food imports, various breeds were developed to produce large amount of harvest As a result in 1971, new rice of 17% yield more was developed ,7 86,2 degree of food self-support(%) 76 75, ,1 81,7 75,9 74,2 85, ,5 69,6 33

34 4.5. Key Policies -5 Ⅳ. Sacrifices and Actions Entering Middle-East Construction Market 70s Oil Shock gave big cash to the middle east countries To get a golden chance, Korean construction company took part in expanding the infrastructure Korean workers made a miracle under an inadequate and unfamiliar desert condition 34

35 5. Result Ⅳ. Sacrifices and Actions Exceeding 10B$ Export in s The plan of 1970 was to export $5.4 billion by 1980 In 1972, the government changes the plan to $10 billion. This was a goal possible with 25% annual growth rates Crazy as it sounds, in February of 1977, exports exceeded $10 billion 35

37 Map of Presentation Chapter Title Policy & Feature Era Starting Up Improvements/amendments in legislations Propelling research project for development 1960 Balancing with Innovation Development of industrial technology Expansion of R&D investments 1970 Sacrifices and Actions Acceleration of industry-academic cooperation study 1980 Science and Technology Building up technological innovation system by private sector 1990 Turning Efficiency Promotion of R&D investments

38 1. Summary of 'Science and Technology' Ⅴ. Science and Technology 60s 70s Science and Technology Back ground Policy for promoting science and technology started in early 1950s In preparing the economic development plan in 1960s, science and technology strategy was also included Policy Administrative support, establishment of structured system such as institute and laboratory are executed in schedule KIST(Korea Institute of Science and Technology) has considerably contributed to Korean economic development Reckless technician training plan and program were forced Performance Amount of R/D in Korea ranks second in the world after 2000s 38

39 2-1. Background Aid turned to loan Ⅴ. Science and Technology 50s Science and Technology Investment AID Internal Competitiveness Waste Economic Development 39

40 2-2. Background Nurturing Technicians Ⅴ. Science and Technology 60s 70s Winners at the International Vocational Training Competition(1977) Asia Car Manufacturing Factory(1970s) The majority of the skills heavily relied on foreign nations. Structure for science and technology promotion was settled Technicians were on the top of training list 40

41 3. Key Policy Case Establishment of KIST(Korea Institute of Science and Technology) Ⅴ. Science and Technology 60s 70s In January 1966, KIST was built with aid from USA, taking a central role as the first comprehensive research agency for the promotion of the nation s economic growth and the modernization of engineering fields 41

42 4. Policy Base Ⅴ. Science and Technology With persistent Promotion of Science and Technology National R&D Investment Amount and Ratio to GDP Ratio to GDP(%) Amount(Trillion Won) Investment on science and technology does not give a direct effect, therefore it becomes a pending problem for many countries With persistence of the leader, it became the very reason of transitioning from agricultural society to industrial society 42

44 Map of Presentation Chapter Title Policy & Feature Era Starting Up Five-Year Economic Development Plan Export-Led Growth/Light Industry 1960 Balancing with Innovation Saemaul Undong Export-Led Growth/Heavy Chemical Industry 1970 Sacrifices and Actions Liberalization of Import Growth with Social Stability and Autonomy 1980 Science and Technology Real Name Financial Transaction System Strengthen Corporate Competiveness 1990 Turning Privatization Market Opening Growth with Venture And IT

45 1. Summary of 'Turning' Ⅵ. Turning Background From development to Stability and furthering to Welfare Environments Boom in virtue of Triple Low (Oil price, Exchange & Interest rate) Financial Crisis by early popping champagne Moral Hazard IMF Relevant Activity Introduction of the real-name financial system Restructuring and Advancement Activity Purpose Constructing of Advanced and Transparent Economic System Overcoming National Economic Crisis Economic Restructuring while overcoming crisis Government Policy for Welfare after set stability Enterprise Securing Cash and Foreign Exchange 45

46 2. Environment : IMF Crisis Financial Crisis Ⅵ. Turning 90s Signing for Borrowing money from IMF(1997) Jobless persons by Financial crisis are waiting for free meal(1998) Although implementing economic transparency, corruption and negations were prevalent When foreign exchange holdings showed its bottom, the government borrowed money from IMF. Big restructuring began 46

47 3. Activity & Result National Movement for restructuring Ⅵ. Turning 90s Loan pay back with 4 years (Nov. 1997, 30.2b dollars Aug. 2001, Payed back all loans) Movement for Gathering Gold (1998) GNI per person( ) The entire nation joined to rebuild the collapsed economic pillar People took gold from their vaults and deployed Anabada movement, which is Korean abbreviation of Save, Share, Exchange ad Re-use Anabada: Save, Share, Exchange and Reuse Things 47

49 1. Summary and implication of 'Small and Medium Industry' Ⅶ. Small and Medium Industry Background The role of conglomerates (chaebol) was massive Small and Medium industry is small outside but firm at the core Policy Amendments in fundamental law of SME(Small and Medium Enterprise) Policies to protect SME business Opening SME Administration Strategic accompanied growth with SME Vitalization Job Growth Competitiveness 49

50 Unit: Person 2. Background Ⅶ. Small and Medium Industry Small outside but Firm at the core The role of big biz. was massive in the economic growth of S. Korea Armed with entrepreneurship spirit, the small to mid size business filled the vacancy of large businesses. Small to mid size industries influence many aspects of economic activities by creating jobs in the local community Change of the Employee for each company type SME accounts for 86.8% of workers And 99.9% of number of business firm Large Company 50

51 3. Policy for SME Ⅶ. Small and Medium Industry Minor Enterprise Act Early SME policies focused more on the protection from big company General and structural policies of SME Strategic accompanied growth with SME Bail-out program as a result of financial crisis Promotion of innovated SME Venture (1990s) Innovation (2000s) Export (1970s) Technology (1980s) Policies to protect SME business Legislation on modernization of SME Opening SME Administration Amendments in fundamental law of SME Drastically increased budget support 51

52 4. Result Ⅶ. Small and Medium Industry SME, Doing Important Role in Economic Development Since 1990s the importance of small-medium sized business started increasing. Below statistics show that SME business is the future growth engine Number of Corporate SME Number of Corporate Large Company

54 We, Korea was same Ⅷ. Closing Begging, Homeless, Thieves, Chronicle Poverty There were times when children begged American soldiers for chocolates, homeless and thieves were overflowing on the streets, and some were not shamed of selfish and despicable behaviors 54

55 Environment Change makes always crisis Ⅷ. Closing Is it Crisis or Risk? No It's a Chance Environment always changes up and down In the East, crisis embeds the meaning of both risk and opportunity In order to change risk to opportunity, resource is needed. Creation and application of human capital and physical capital is the Final Punch of success + Human and Resources 危機 (Risk) (Opportunity) 55

56 Summary of Key Success Factor Ⅷ. Closing 5yEDP, Focusing and Saemaul Undong (경제개발 5개년 계획-Plan, 집중-중공업 & 희생- Do, 새마을운동-Spirit The 3 key success factor of Korea s economic development in 1970s can be summed up as the 5-year Economic Development Plan(5yEDP), industry policy centered around on exports and big business(chaebol) and Saemaul Undong that rooted modernized mindset 5yEDP 56

57 Key Success Factors Ⅷ. Closing The historic and current economic situation of your nation will vary greatly from that of the past South Korea Korea s economic experiences cannot be applied to all situation Resources to support economic growth + understanding leadership and environmental factors + willpower = overcome hardships Regardless of any era, place or race, one thing is for sure if the nation work together as one, nothing is impossible IF YOU WANT TO GO FAR GO TOGETHER. 57

58 Thank you for your attention 58