Sustainable Development Case Study – South Korea By Meherunnesha Binte Mannan 28th April, 2011MGT 789 Special Topic in Technology Management
Contents Sustainable Development (SD) Economic Growth in South Korea and SD Economy Sustainability in Korean Conclusion
Sustainable Development 1987 – First used by the world commission on Environment and Development 1992 – Emphasize in Earth Summit 21st Century - alternative development model in business Korea is following since Earth Summit. Sustainability indicators (Moon, 1998; Ahn et.al. 1990) Sustainable urban and rural development strategy (Oh, 1998; Kim, 2003 et.al.) Sustainable energy strategy (Yoon, 2002, 2003) Residential perception on sustainable development (Choi, 2004)
Sustainable Development First Concept: World Commission on Environment and Development 1987 Development that meets the needs of the present without compromising the ability of future generations to meet their own needs General Definition: Three closely interrelated components : Economical, Social and Environmental (Munro, 1995) To achieve a SD, economic and social development needs to be attainable in a healthy balance apparatus without deteriorating natural environment. • Compromises and trade-offs in one sector are necessary to achieve improvement in another
Economic Growth in South Korea and SD Three phases Growth phase ( 1960s – 1970s) • Economic Take Off under the authoritarian regime Stabilization and liberation period (1980s - 1997) • Little progress in democratization Globalization period (1998 – 2015) • Balanced development of politics with economy Korean development strategies were based on GIO( Growth – industry – and outward-oriented) strategy (Song, 1997)
Economic Growth in South Korea and SD Growth phase ( 1960s – 1970s) : Economic Take Off under the authoritarian regime President Park controlled the market economy suppressing democracy Large scale enterprises (Chaebols) expanded rapidly in the 1960s Further expansion during the heavy and chemical industry promotion period (1973-1979) Example: 10 largest chaebols grew from 7.5 to 25.4 percent from 1972 to 1979 and assets 362 to 5263 billion won Allocated resources by launching a series of EDPs Export-led growth strategy was the best
Economic Growth in South Korea and SD Stabilization and liberation period (1980s - 1997) : Little progress in democratization New Government headed by Chun Doo Whan Shifted from growth first to economy stabilization (without abandoning its economic growth) Gradual reduction in government intervention in the market economy Gradual opening of the Korean market to international market Global Competition owing to rapid growth of developing countries, launce of WTO, and the unprepared acceleration of market opening to meet OECD entry criteria under the Kim Young Sam government.
Economic Growth in South Korea and SD Unbalanced business strategies for external expansion. Problem of ‘high cost and low efficiency’. Less effective financial and real state sectors due to government concentration on few large chaebols. Chaebols were preferred for getting the loan. Growth oriented approach, business resistance to reform and political reasons economic growth raced ahead. Economic Crisis Foreign debt 29.4 to 104.7 billion (1989 to 1996) International investors repatriated capital from Korea. Ironic – Large conglomerate are the growth and crisis factor. Weakened economy basis sustainable development
Economic Growth in South Korea and SDNeed to deal with Sustainable development under Heavy weight on economy Large business strong influence government Impact of IMF crisis
Economic Growth in South Korea and SD Globalization period (1998 – 2015): Pursuing a balanced development (politics with economy) for its structural reforms. Need to consider advanced democracy (i.e. heavy economic growth) • Democratization influence economic development • Economic development could bring financial crisis • This condition forced to follow market based approach rather than monopolistic power. – Focusing on large business creating the problem
Economy Sustainability in S.Korea According to OECD Fact Book of 2005 Korea’s GDP is the 10th high one among OECD countries, showing a rapid economic growth. 3.8% of labor productivity increase rate is the second highest among OECD countries R&D expenditure is the 8th high. The highest percentage of household with PC The least unemployment rate, and The highest education expenditure in OECD countries. On the surface it seems fair to say that Korea has overcome financial crisis in 1997 successfully and is making a firm progress toward economic development.
Economy Sustainability in S.Korea Critics argue that The Korean economy became more vulnerable to international market and foreign capital influence (SERI, 2002). Besides, economic concentration of large business became deepened than before the IMF crisis, making Korean economy more dependent upon large businesses and leave small and medium businesses behind. For example, • the number of subsidiaries of 30 largest businesses increased from 544 in 2000 to 624 in 2001 and • the economic concentration of the four largest businesses is greater than before the financial crisis of 1997.
Economy Sustainability in S.Korea The percentage of total production by the four largest businesses in GDP increased from 6.8% in 1997 to 8.7% in 1998, 9.3% in 1999, and 10.9% in 2000. Total tax payment of the four largest conglomerates was 14.6% in 1997, 15.3% in 1998, 14.9% in 1999, and 18.5% in 2000. With regard to the total amount of export, the proportion has increased from 41.6% in 1997, 44.1% in 1998, 47.4% in 1999, and 49.8% in 2000. As of 2002, the largest 3 business groups in Korea -Samsung, LG, SK- were growing 100% annually since the 1998 and the total value among all businesses listed on the stock market increased from 28% in 1998 to 43% in 2002.
Economy Sustainability in S.KoreaNation’s real GDP growth Averaged 6.3 percent in the 1990s Declined to 5.2 percent during 2000-07 Plunged to 0.8 percent in 2008-09 in the midst of global crisis Potential growth for coming decades has fallen to an annual average 3 Needs to follow market based approach
Conclusion Started from economy growth phase Experienced different phase transformation keeping focus on economy growth first Recent situation forced to follow market based approach Sustainable development contrast to market based approach Pure democratization is not appropriate for sustainable development Environmentally Sound Economic Development.