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Public Seminar at NES, Moscow, Russia            The Korean Economy over 50 Years:             The Changing Role of Korea ...
The Korean Economy over 50 Years:  The Changing Role of Korea in the Global CommunityI.    Two Koreas at a GlanceII. Korea...
I. Two Koreas at a Glance                                South Korea   North Korea                                  (2010)...
II. Korean Economy: Then & Now      Before the development                            In 2010• Unfavorable Environment    ...
III. Growth Performance over 50 Years   Per Capita     Income                                                             ...
IV. The Korean economy in the Global Context                                        GDP in 2010        Population       GD...
V. Changes in Employment & Industrial Structure        Employment Structure                                GDP Structure  ...
VI. How? Korea’s Development Strategy  1960($79)→1973($400)→1977($1,000)→1995($11,000)     Development Strategy           ...
VII. Macroeconomic Policies Economic Take-off with Outward-looking Strategy (1960~1980)   • Government-led development   ...
VIII. Lessons from Korea’s Experience  Human Resources Development & Ownership  Importance of Sound Macroeconomic Polici...
IX. Challenges Facing the Korean Economy Slowdown in growth potential Growth without jobs Ageing and low fertility Inc...
X. The Changing Role of Korea in the Global Community          Success Factors                         Before             ...
Annex 1: Overview of the Korean Economy          before the Development Japanese colonization: 1910-45 Liberation (1945)...
Annex 2: The Role of Top Leadership President Park (1961-79): strong leadership commitment  to economic development Part...
Annex 3: Strong Planning Agency : The Functions of Economic Planning Board (EPB) Development plans: setting investment pr...
Annex 4: Major Objectives of the 5 Year Plans     1st       • Expansion of social infrastructure     1962-66   • Promotion...
Annex 4-1: Major Objectives of the 5 Year Plans                (continued)           • Price stability 5th 1982-86   • Eff...
Annex 5: Heavy & Chemical Industry (HCI)                  Promotion in the 1970s Motivation Upgrading export structure f...
Annex 6: Korea’s Development Strategies and            Technology & HRD Policies          Development Goals & Policy      ...
Annex 7: Education & Changing Export Structure:          from Agriculture to Light Industry to HCI              Wig       ...
Annex 8: Korea’s Major Leading Industries (2010) Large LCD (No. 1 in the world)   The total sales: $39billion (50.1% in ...
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The Korean Economy over 50 Years

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The Korean Economy over 50 Years: The Changing Role of Korea in the Global Community
Presenter: Dr. Oh, Jong Nam
Senior Advisor, KIM & CHANG / Professor, Seoul National University
(Former Executive Director of IMF)

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Transcript of "The Korean Economy over 50 Years"

  1. 1. Public Seminar at NES, Moscow, Russia The Korean Economy over 50 Years: The Changing Role of Korea in the Global Community May 16, 2011 Dr. Oh, Jong Nam Senior Advisor, KIM & CHANG / Professor, Seoul National University (Former Executive Director of IMF)
  2. 2. The Korean Economy over 50 Years: The Changing Role of Korea in the Global CommunityI. Two Koreas at a GlanceII. Korean Economy: Then & NowIII. Growth Performance over 50 YearsIV. The Korean Economy in the Global ContextV. Changes in Employment & Industrial StructureVI. How? Korea’s Development StrategyVII. Macroeconomic PoliciesVIII. Lessons from Korea’s ExperienceIX. Challenges Facing the Korean EconomyX. The Changing Role of Korea in the Global CommunityAnnex 1. Overview of the Korean Economy before the DevelopmentAnnex 2. The Roles of Top LeadershipAnnex 3. Strong Planning Agency, The Functions of Economic Planning Board (EPB)Annex 4. Major Objective of the 5 Years PlansAnnex 4-1. Major Objective of the 5 Years Plans (continued)Annex 5. Heavy & Chemical Industry (HCI) Promotion in the 1970sAnnex 6. Korea’s Development Strategies and Technology & HRD PoliciesAnnex 7. Education & Changing Export Structure: from Agriculture to Light Industry to HCIAnnex 8. Korea’s Major Leading Industries (2010)
  3. 3. I. Two Koreas at a Glance South Korea North Korea (2010) (2008) Geography (thousand 100 120 km2) Population (million) 49 24 GDP (US$ billion) 1,007 23 Per Capita GNI (US$) 20,759 960 Life 80.5 Expectancy 68.3 (2009)
  4. 4. II. Korean Economy: Then & Now Before the development In 2010• Unfavorable Environment •15th economy in the world (US$ 1 trillion) - Damaged from the Korean war - Rural peasant economy - The highest density of people •Per capita income of US$ 20,759• Per capita income of US$ 79 (1960) •Export- driven economic growth• Exports accounted for 3% of GDP •Improved quality of life• Crucially dependent on foreign aid 4
  5. 5. III. Growth Performance over 50 Years Per Capita Income 21,695 (US$) 20,75920,000 19,296 17,193 11,43210,000 Six 5-Year-Economic- Development Plans 7,355 Financial CrisisLiberation 1,000(1977) 100(1963) OECD 67 79 Member 1945 1953 1960 1970 1980 1990 1995 1998 2007 2008 2009 2010
  6. 6. IV. The Korean economy in the Global Context GDP in 2010 Population GDP per capita Rank Country (USD billion) (Persons million) (USD) 1 U.S.A 14,658 310 47,284 2 China 5,878 1,341 4,382 3 Japan 5,459 127 42,820 4 Germany 3,316 82 40,631 5 France 2,583 63 41,019 6 United Kingdom 2,247 62 36,120 7 Brazil 2,090 193 10,816 8 Italy 2,055 60 34,059 9 Canada 1,574 34 46,215 10 India 1,538 1,216 1,265 11 Russia 1,465 140 10,437 12 Spain 1,410 46 30,639 13 Australia 1,236 22 55,590 14 Mexico 1,039 109 9,566 15 Korea 1,007 49 20,759*Source: World Economic Outlook Database, April 2011
  7. 7. V. Changes in Employment & Industrial Structure Employment Structure GDP Structure Service Sector Service Agriculture/ Fisheries Sector 28.3 Agriculture/ Fisheries 63.0 1960 47.3 36.8 7.9 Manufacturing 15.9 Manufacturing Agriculture/ Fisheries Agriculture/Fisheries 6.6 17.0 2.6 2010 30.8 Manufacturing 66.6 Manufacturing 76.4 Service Service Sector Sector 7 *Source: Statistics Korea
  8. 8. VI. How? Korea’s Development Strategy 1960($79)→1973($400)→1977($1,000)→1995($11,000) Development Strategy Side Effect 1. Unbalanced Growth Strategy Gap (Urban & Rural, Rich & Poor, Conglomerates & SMEs) 2. Outward Looking G.S. Weak Domestic Demand (Export-led G.S.) 3. Financing 3-1. Money Supply Inflation 3-2. Foreign Capital External Debt 4. Government-led G.S. Corruption 8
  9. 9. VII. Macroeconomic Policies Economic Take-off with Outward-looking Strategy (1960~1980) • Government-led development • Export-driven industrialization • HCI Drive in the 1970s Changes in Development Strategy (1981~1997) • Stabilization policy in the early 1980s • Market-oriented Reform Financial Crisis in 1997 and the Swift Resolution (1998~1999) • Some people say “blessing in disguise” US originated “Sub-Prime Mortgage Crisis” and Recovery(2008-now) 9
  10. 10. VIII. Lessons from Korea’s Experience  Human Resources Development & Ownership  Importance of Sound Macroeconomic Policies  Competition through Deregulation and Market Opening  Building Good Institutional Environment  Failure Stories as well as Success Stories 10
  11. 11. IX. Challenges Facing the Korean Economy Slowdown in growth potential Growth without jobs Ageing and low fertility Income distribution; concentration of economic power Impact of the global financial crisis Growing public and household debt 11
  12. 12. X. The Changing Role of Korea in the Global Community Success Factors Before Now Foreign Aid Recipient Donor* Building Capacity Sharing Experience Technical Assistance Overseas Training Receiving Trainees Foreign Capital User Supplier Favorable External One Small Member One of the Major Players Environment Country (Bridging Role) * ODA/GNI(%): Korea – 23th, 0.1% (2009) 12
  13. 13. Annex 1: Overview of the Korean Economy before the Development Japanese colonization: 1910-45 Liberation (1945): economic disruption Territorial division – complementarity lost Republic of Korea (ROK) & Democratic People’s Republic of Korea (DPRK) founded (1948) Korean War damages (1950-53) President Rhee (1948-60) Lower priority on major economic development Import substitution in some industries 13
  14. 14. Annex 2: The Role of Top Leadership President Park (1961-79): strong leadership commitment to economic development Partnership with big businesses (Korea, Inc.) Strong incentives provided while closely monitoring big businesses Largely free from corruption & interest group pressure Monthly meetings presided by the President Economic Conditions Review Meetings Meetings for Monitoring Export Performance 14
  15. 15. Annex 3: Strong Planning Agency : The Functions of Economic Planning Board (EPB) Development plans: setting investment priorities Policy coordination among “economic ministries” Minister = Deputy Prime Minister: chairing economic ministers’ meetings President’s top economic advisor Budget preparation Control of mobilizing & distributing foreign capital (later transferred to MOF) 15
  16. 16. Annex 4: Major Objectives of the 5 Year Plans 1st • Expansion of social infrastructure 1962-66 • Promotion of exports • Self-sufficiency in food 2nd 1967-71 • Promotion of key industries: chemical, steel, machinery 3rd • Rural development 1972-76 • Promotion of heavy/chemical industries • Social development (distributive equity, etc) 4th • Enhancing self-sufficiency in investment finance 1977-81 • Technology development16 16
  17. 17. Annex 4-1: Major Objectives of the 5 Year Plans (continued) • Price stability 5th 1982-86 • Efficiency enhancement through institutional reforms • Enhancement of economic efficiency: promotion 6th of competition, market opening, industrial restructuring 1987-91 • Promotion of equity: balanced regional develop., social welfare, etc. • Strengthening of growth potential New 7th • Acceleration of globalization 1993-96 • Improvement in people’s living environment17 17
  18. 18. Annex 5: Heavy & Chemical Industry (HCI) Promotion in the 1970s Motivation Upgrading export structure for sustained growth • Rising protectionist barriers • Increasing wages: difficulty in competing with late- comer developing countries Strengthening defense capabilities (Nixon Doctrine) Targeted industries Iron & steel, non-ferrous metal, shipbuilding, general machinery, chemicals, & electronics 18
  19. 19. Annex 6: Korea’s Development Strategies and Technology & HRD Policies Development Goals & Policy Stage of Directions Technology S &T Policies HRD Policies Development Build production base Imitating Build legal basis1960s for exports foreign & administrative Reduce illiteracy • Expand light industries • Mobilize capital technologies frameworks Build self-reliant growth base Indigenizing Set up S&T infra. Expand1970s • Promote HCI foreign (Daeduck vocational • Build SOC technologies Science Town) training Expand tech-intensive Promote industries Developing business R&D & Expand higher1980s • Industrial rationalization advanced launch a national education • Trade liberalization technologies R&D program system (NRDP) Enhancing productivity Promoting Encourage1990s through innovation creative frontier research Develop life-long • Nurture venture business research & innovation learning system • Build ICT infrastructures clusters
  20. 20. Annex 7: Education & Changing Export Structure: from Agriculture to Light Industry to HCI Wig Textile Automobile Semiconductor 80% HCI Product Automobile Semiconductor, Shipbuilding, Mobile Phone, DTV, Display,50% etc. Light Industry 14% Product 6% Agricultural Product 1960 1970 1980 1990 2000 20
  21. 21. Annex 8: Korea’s Major Leading Industries (2010) Large LCD (No. 1 in the world) The total sales: $39billion (50.1% in the world market) Shipbuilding (No. 2 in the wold) The amount of orders: 12million CGT (34.8% in the world market) Semiconductor (No. 3 in the world) The volume of manufacture: $41billion (13.5% in the world market) Car (No. 5 in the world) The total output: 4.3million cars (5.5% in the world market) Petrochemistry (No. 5 in the world) The output of ethylene: 7.6million tons (5.5% in the world market)
  22. 22. Thank You !
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