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South Korea’s Economy
Agenda

                 Asian
Miracle on                    Industrial     Sectorial
               Financial
Han River                      Policies      Analysis
                 Crisis


   Macro                                   Expenditures
                              Monetary
 Economic     Fiscal Policy                    and
                               Policy
 Indicators                                 Revenues


Banking and
                              Foreign
 Financial     Currency
                               Policy
 Structures
Miracle on the Han River
Reasons

Export fuelled economic growth


Industrialization, education boom, rise in living standards


Urbanization, modernization, 1988 Seoul Olympics

Transformed from ashes of Korean war to a trillion dollar
economy
Revenue Growth
Some Figures

                   Real GDP
     1960                                1989
US$30.3 billion     8.7% per year   US$340.7 billion




     1960
                  GDP per capita         1989
  US$1226                             US$8029
Growth

Outward looking strategy in 1960

Counter - poor natural resource endowment, high
savings rate, tiny domestic rate

Inflow of foreign capital was encouraged

Conservative monetary policy and tight fiscal policy
in 1980’s
Financial Stability

Government Intervention reduced


Liberalization of imports and foreign investment policies


High investment in public projects


Double digit inflation bought under control

First surplus in 1986, US$7.7 billion in 1987 and US$11.4 billion
in 1988
GDP
                                         GDP (official
GDP (purchasing    GDP - real growth   exchange rate):
 power parity):          rate:         $947 billion (2008
                                             est.)
 $1.335 trillion     2.2% (2008
  (2008 est.)           est.)

 $1.306 trillion     5.1% (2007
                                          Rank: 15
  (2007 est.)           est.)

 $1.243 trillion     5.2% (2006
  (2006 est.)           est.)
Labor Force
Labour force
• 24.35 million (2008 est.) [Total Population of 50.06 million]
Labor Force Ranking
Other Details

Poverty Line
• Total population below poverty line: 15%

Household income or consumption by
percentage share:
• Lowest 10%: 2.7%
• Highest 10%: 24.2%
High tech industries
      Samsung Group
      • Worlds largest conglomerate
      • High Tech Electronics

      Hyundai-Kia
      • South-Korea: In top 5 Automakers


      Display-Electronics
      • Worlds largest maker of LCD, Plasma, LED, CRT


      Shipbuilding
      • Worlds largest Shipbuilding industry
      • Hyundai and Samsung Heavy Industries
Asian Financial Crisis
Asian Financial Crisis

     It    • a shortage of foreign exchange in
involves     Asian countries
           • inadequately developed financial
   four      sectors in the troubled Asian
             economies
  basic    • effects of the crisis on both the
problems     United States and the world
           • the role, operations, and
    or       replenishment of funds of the
             International Monetary Fund.
 issues:
Impact on South Korea

In return for IMF emergency
loans, Korea agreed to several
conditions and reforms:

                                          upgrading
              Reducing     Increasing     accounting
  Control
               current    international      and
  inflation
                deficit     reserves      disclosure
                                          standards
Industrial Policies of South Korea
1960-2000
         • Emphasis on exporting products from Light Industries e.g.
1960’s     textiles
         • Export promotion measures e.g. tax deductions and export
           finance schemes

         • Focus shifted from LI to the build-up of high value-added HCI
1970’s     sector
         • Preferential policy loans, selective protection, entry regulations,
           and corporate tax deductions

         • Direction of industrial policy changed toward R&D in economic
           development
1980’s   • Export-led growth strategy was continued in sectors Semi-
           conductors, automotives, shipbuilding, metal, and small-sized
           aircrafts

         • Promotion of IT and biotechnology and development of SMEs
1990’s   • Enactment of the Special Law on Innovation of Science and
           Technology in 1997
R&D Expenditure in Billion won
6000




5000




4000




3000
                                   R&D Expenditure in Billion won



2000




1000




   0
       1980   1990   2000   2003
2000’s


  Exports of semi-conductors increased

 • Increase was from US$4.0 billion in 1989 to US$26.5 billion in
   2004 -10.4 percent of total exports

  Supporting international marketing activities and
  exhibitions abroad


  Tax benefits to R&D activities and FDI inflows


  Recent policy to develop Eco-friendly industriesby
  investing $84.4 bn for next five years
Sector-wise analysis
Energy sector

Energy used in power generation consists primarily of
oil, coal, nuclear & LNG

Limited domestic energy resources


Oil supplies 50 % of South Korea’s total energy consumption


South Korea is the 5th largest net importer of oil in the world

Hydropower & other renewable energy sources make up a small
fraction
Agriculture sector

Heavily dependent on imported agricultural commodities

Agriculture's share of GDP has steadily declined to about 3% in the
past two decades

Total imports of agricultural, fishery and forest products in 2008 totaled
$22 billion

Korea is the 5th largest market for U.S. agricultural products


In 2008, agriculture trade deficit was $17 billion
Tourism sector

1988 : a boom year for tourism industry

Continuation of trend in subsequent years & the 2002
FIFA World Cup

Incheon International Airport, rated the best airport
worldwide consecutively since 2005

In 2007, South Korea had 6.4 million visitors making it the
36th most visited country in the world
Industrial sector

Hyundai Kia Automotive Group is the world's fourth largest
automaker, after Toyota, GM and Volkswagen

After recession country’s auto sales posted a combined 2.7%
Y-O-Y increase in 2009

World's leading producer of computer memory chips &
electronic products

World's largest shipbuilder
Macro Economic Indicators
GDP and Growth Rate

Definition
 • The sum of the value of new, final goods produced within the domestic borders of an
   economy.
Expanded 6% over the past 4 years.

Worth 929 billion dollars or 1.50% of the world economy.

Two main reasons for increased GDP growth are:
 • Competitive education system.
 • Highly skilled and motivated workforce.
Shift from centrally planned economy to a more market oriented one.

Major concerns
 • Rapidly ageing population.
 • Structural inefficiencies.
GDP and Growth Rate
(contd…..)
Inflation Rate
Definition:                      Well known measures:
• A general increase in prices   • Consumer Price Index (CPI)
  measured against a standard
  level of purchasing power.     • GDP Deflator




January 2010 figure              Recent trend:
• 3.7 Percent.                   • Agriculture, livestock and fishery
                                   products have gained strength in
                                   recent years.
                                 • Domestic oil prices have come
                                   down and prices of non ferrous
                                   metals has continued to increase.
Inflation Rate (Contd…..)
Unemployment Rate
Labour force v/s non labour force:
• Labour force: The number of people employed plus the number
  unemployed but seeking work.
• Non labour force: Those who are not looking for work, those who are
  institutionalised and those serving in the military.
Recent trends:
• Hiring in the agriculture, forestry & fishery dropped significantly in
  November 2009.
• Sluggish exports led to decreased unemployment in manufacturing
  sector.
• Hiring in private sector remained weak due to downward trend in
  construction sector.
• Employment in services sector soared due to Government’s job
  creation policies.
Unemployment Rate (Contd….)
Fiscal Policy
Pre 1997 era

The average growth rate in Korea had been well
above 7% before 1997

The government had a very low external debt

But the privately owned debt for the country was
quiet significant

It worked on “high-debt, high growth model”
External Debt

                                    External Debt in $Bn
450


400


350


300


250


200


150


100


 50


  0
      1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Present policies

The fiscal policy for 2010 is at 2.9% of the GDP


In order to fight recession the Korean government
has decided to Frontload 70% Of 2010 Budget In
First Half

Presently defense and social welfare constitute the
highest chunk of budget
Monetary Policy
Key Points



Stock prices
                                                                  Pace of
    and                           Banks’     South Korea
                                                                growth was
 exchange                      deposit and     producer                      Increase in
                 Expanded                                          not as
   rates                         lending          price                         Open
               the supply of                                     expected
 exhibited                         rates     inflation hit a                   market
               Korean won.                                     and shows a
    very                        remained       10-month                      Operations.
                                                                 very slow
  unstable                          low           high.
                                                                   pace.
movements.
Interest Rates
Critical Questions

Two Critical Questions Still
Remains
• When will South Korea tighten
  up its monetary policy?
• How Current Monetary policy will
  tackle with ever rising Inflation?
Expenditure and Revenue
Expenditure

Government Spend is relatively very less compared
to rest of the countries.

Mainly the expenditure is into
Infrastructure, R&D, national defence, and education.

Mainly defence which accounts for 24% of
expenditure

Now recently it was observed that focus is shifting
from defence to health care.
Revenue

 Tax, mainly indirect taxes


 Disinvestment in Electrification, banking, communication
 and Manufacturing, but still remain major stockholder


 Four Public Enterprises

 •   Government Enterprise
 •   Government invested Enterprise
 •   Government Subsidiaries
 •   Government Backed Enterprise
Banking and Financing structure
Central Bank

   2 parts of financial system:              Central bank:

• Monetary institutions: Central   • Established on June 12, 1950
  bank & deposit taking banks      • Purpose: price stability
• Other financial institutions     • Issuing banknotes and
                                     coins, formulating and
                                     implementing monetary and
                                     credit policy, serving as the
                                     bankers' bank and the
                                     government's bank.
                                   • Governor, the Senior Deputy
                                     Governor, and 5 Deputy
                                     Governors, manage
                                     departments in the head office
                                     and 16 domestic branches
Financing History : A timeline

1960s:
• Foreign credit based which decreased towards 1980s
• Generated need for domestic savings
• Nationalization of banks
1980s:
• Current account became surplus fuelling shortage of
  domestic savings
• De-regulation of interest rates
• 3 new commercial banks and 13 financial institutions
History.. continued

Commercial banks focused on short term loans


Newer sources of funding for commercial banks


Relaxation of FOREX controls

Foreign investors: trust funds, convertible
bonds, bonds with warrants
Banking sector today
 Banks are largely no longer handmaidens to
 the chaebol


 Big Four

 •   Kookmin Bank (KB )
 •   Shinhan Financial Group (SHG )
 •   Woori Financial Group (WF )
 •   Hana Bank -- 70% of the market

 Foreign investments


 Retail banks shrunk to 11 in number
Other indicators : energy
scenario


                               Hydropower
   Oil: fifth:
                                 and other
 largest net     Coal : 24 %
                                renewable
 importer of      primary
                                  energy
  oil in the       energy
                                 sources :
    world
                               small fraction
Currency - won
All @Won

The won (원) (sign: ₩; code: KRW) is the currency of South
Korea

Subunit: 1 Won= 100jeon
Theoretical (not used)


Coins₩1, ₩5, ₩10, ₩50, ₩100, ₩500


Banknotes₩1000, ₩5000, ₩10000, ₩50000
First South Korean won
The won was first used between 1902 and 1910

Japanese invasion in 1910 : The won was replaced at par by the yen, made
up of the Japanese currency and banknotes of the Korean yen.

Post world war II:

 • Division in Korea (North and south)
 • Won replaced the yen at par
 • Only bank notes were issued by the Bank of Joseon
   (1946)

Central bank: Bank of Korea (1950)
Pegs for the first South Korean
won
           Date introduced          Value of U.S. dollar in won
October, 1945                15
July 15, 1947                50
October 1, 1948              450

June 14, 1949                900

May 1, 1950                  1800
November 1, 1950             2500
April 1, 1951                6000
Hwan

First South Korean won was replaced by
the hwan on February 15, 1953

In 1959, coins were introduced in denominations of 10, 50 and 100 hwan




1 hwan = 100 won



The hwan also suffered from inflation and a series of devaluations occurred
Second South Korean won
The won was reintroduced on June 9, 1962
1, 5, 10, 50, 100 and 500 won notes were introduced by the Bank of Korea

Value was pegged at 125 won = 1 U.S. dollar


It became the sole legal tender on March 22, 1975 with the withdrawal of the last circulating hwan
coins.


ISO 4217 code : KRW.


Won was allowed to float on December 24, 1997 after an agreement with IMF


Won was devalued to almost half of its value, as part of the East Asian financial crisis.


On June 23, 2009, the Bank of Korea released the 50,000 Won note
FX Rates
                    Wednesday, February 03, 2010
                             1 KRW                 in KRW
American Dollar            0.00087184               1147
Australian Dollar          0.000982502             1017.81
British Pound              0.000546271             1830.59
Chinese Yuan               0.00595169              168.019
Euro                       0.000623455             1603.96
Hong Kong Dollar           0.00676948              147.722
Indian Rupee                0.0400826              24.9485
Japanese Yen                0.0790105              12.6566
Swiss Franc                0.000918849             1088.32
Malaysian Ringgit          0.00296384               337.4
S. Korean Won to US Dollar
Currency Exchange Rate




            Past Trend Present Value
        S. Korean Won per One U.S. Dollar
South Korea:
FOREX and GOLD reserves
FOREX and GOLD reserves
rankings
 Year   Reserves of foreign   Rank   Percent Change
        exchange and gold



 2004   $155,400,000,000       4           -

 2005   $199,100,000,000       4        28.12 %

 2006   $210,400,000,000       4        5.68 %

 2007   $239,000,000,000       5        13.59 %

 2008   $262,200,000,000       6        9.71 %



 2009   $201,200,000,000       6        -23.26 %
South Korea in News for
FOREX
South korea’s National Pension Service(NPS)
announced that official foreign reserves stood at
record high as of January end

According to BOK, Forex amounted to $273.69
billion

Increase is attributed to operating profits on forex
reserves and redemptions at maturity by NPS of its
currency swaps with BOK
Foreign Economic Policy
Exports
Exports
Imports
Imports
International Involvement
  APEC – Asia-Pacific Economic
  Cooperation


  Relationship with US

  • KORUS FTA 2006

  North-South Economic Ties


  FTA with EU
Thank You

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South korea final

  • 2. Agenda Asian Miracle on Industrial Sectorial Financial Han River Policies Analysis Crisis Macro Expenditures Monetary Economic Fiscal Policy and Policy Indicators Revenues Banking and Foreign Financial Currency Policy Structures
  • 3. Miracle on the Han River
  • 4. Reasons Export fuelled economic growth Industrialization, education boom, rise in living standards Urbanization, modernization, 1988 Seoul Olympics Transformed from ashes of Korean war to a trillion dollar economy
  • 6. Some Figures Real GDP 1960 1989 US$30.3 billion 8.7% per year US$340.7 billion 1960 GDP per capita 1989 US$1226 US$8029
  • 7. Growth Outward looking strategy in 1960 Counter - poor natural resource endowment, high savings rate, tiny domestic rate Inflow of foreign capital was encouraged Conservative monetary policy and tight fiscal policy in 1980’s
  • 8. Financial Stability Government Intervention reduced Liberalization of imports and foreign investment policies High investment in public projects Double digit inflation bought under control First surplus in 1986, US$7.7 billion in 1987 and US$11.4 billion in 1988
  • 9. GDP GDP (official GDP (purchasing GDP - real growth exchange rate): power parity): rate: $947 billion (2008 est.) $1.335 trillion 2.2% (2008 (2008 est.) est.) $1.306 trillion 5.1% (2007 Rank: 15 (2007 est.) est.) $1.243 trillion 5.2% (2006 (2006 est.) est.)
  • 10. Labor Force Labour force • 24.35 million (2008 est.) [Total Population of 50.06 million]
  • 12. Other Details Poverty Line • Total population below poverty line: 15% Household income or consumption by percentage share: • Lowest 10%: 2.7% • Highest 10%: 24.2%
  • 13. High tech industries Samsung Group • Worlds largest conglomerate • High Tech Electronics Hyundai-Kia • South-Korea: In top 5 Automakers Display-Electronics • Worlds largest maker of LCD, Plasma, LED, CRT Shipbuilding • Worlds largest Shipbuilding industry • Hyundai and Samsung Heavy Industries
  • 15. Asian Financial Crisis It • a shortage of foreign exchange in involves Asian countries • inadequately developed financial four sectors in the troubled Asian economies basic • effects of the crisis on both the problems United States and the world • the role, operations, and or replenishment of funds of the International Monetary Fund. issues:
  • 16. Impact on South Korea In return for IMF emergency loans, Korea agreed to several conditions and reforms: upgrading Reducing Increasing accounting Control current international and inflation deficit reserves disclosure standards
  • 17. Industrial Policies of South Korea
  • 18. 1960-2000 • Emphasis on exporting products from Light Industries e.g. 1960’s textiles • Export promotion measures e.g. tax deductions and export finance schemes • Focus shifted from LI to the build-up of high value-added HCI 1970’s sector • Preferential policy loans, selective protection, entry regulations, and corporate tax deductions • Direction of industrial policy changed toward R&D in economic development 1980’s • Export-led growth strategy was continued in sectors Semi- conductors, automotives, shipbuilding, metal, and small-sized aircrafts • Promotion of IT and biotechnology and development of SMEs 1990’s • Enactment of the Special Law on Innovation of Science and Technology in 1997
  • 19. R&D Expenditure in Billion won 6000 5000 4000 3000 R&D Expenditure in Billion won 2000 1000 0 1980 1990 2000 2003
  • 20. 2000’s Exports of semi-conductors increased • Increase was from US$4.0 billion in 1989 to US$26.5 billion in 2004 -10.4 percent of total exports Supporting international marketing activities and exhibitions abroad Tax benefits to R&D activities and FDI inflows Recent policy to develop Eco-friendly industriesby investing $84.4 bn for next five years
  • 22. Energy sector Energy used in power generation consists primarily of oil, coal, nuclear & LNG Limited domestic energy resources Oil supplies 50 % of South Korea’s total energy consumption South Korea is the 5th largest net importer of oil in the world Hydropower & other renewable energy sources make up a small fraction
  • 23.
  • 24. Agriculture sector Heavily dependent on imported agricultural commodities Agriculture's share of GDP has steadily declined to about 3% in the past two decades Total imports of agricultural, fishery and forest products in 2008 totaled $22 billion Korea is the 5th largest market for U.S. agricultural products In 2008, agriculture trade deficit was $17 billion
  • 25. Tourism sector 1988 : a boom year for tourism industry Continuation of trend in subsequent years & the 2002 FIFA World Cup Incheon International Airport, rated the best airport worldwide consecutively since 2005 In 2007, South Korea had 6.4 million visitors making it the 36th most visited country in the world
  • 26. Industrial sector Hyundai Kia Automotive Group is the world's fourth largest automaker, after Toyota, GM and Volkswagen After recession country’s auto sales posted a combined 2.7% Y-O-Y increase in 2009 World's leading producer of computer memory chips & electronic products World's largest shipbuilder
  • 28. GDP and Growth Rate Definition • The sum of the value of new, final goods produced within the domestic borders of an economy. Expanded 6% over the past 4 years. Worth 929 billion dollars or 1.50% of the world economy. Two main reasons for increased GDP growth are: • Competitive education system. • Highly skilled and motivated workforce. Shift from centrally planned economy to a more market oriented one. Major concerns • Rapidly ageing population. • Structural inefficiencies.
  • 29. GDP and Growth Rate (contd…..)
  • 30. Inflation Rate Definition: Well known measures: • A general increase in prices • Consumer Price Index (CPI) measured against a standard level of purchasing power. • GDP Deflator January 2010 figure Recent trend: • 3.7 Percent. • Agriculture, livestock and fishery products have gained strength in recent years. • Domestic oil prices have come down and prices of non ferrous metals has continued to increase.
  • 32. Unemployment Rate Labour force v/s non labour force: • Labour force: The number of people employed plus the number unemployed but seeking work. • Non labour force: Those who are not looking for work, those who are institutionalised and those serving in the military. Recent trends: • Hiring in the agriculture, forestry & fishery dropped significantly in November 2009. • Sluggish exports led to decreased unemployment in manufacturing sector. • Hiring in private sector remained weak due to downward trend in construction sector. • Employment in services sector soared due to Government’s job creation policies.
  • 35. Pre 1997 era The average growth rate in Korea had been well above 7% before 1997 The government had a very low external debt But the privately owned debt for the country was quiet significant It worked on “high-debt, high growth model”
  • 36. External Debt External Debt in $Bn 450 400 350 300 250 200 150 100 50 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
  • 37. Present policies The fiscal policy for 2010 is at 2.9% of the GDP In order to fight recession the Korean government has decided to Frontload 70% Of 2010 Budget In First Half Presently defense and social welfare constitute the highest chunk of budget
  • 39. Key Points Stock prices Pace of and Banks’ South Korea growth was exchange deposit and producer Increase in Expanded not as rates lending price Open the supply of expected exhibited rates inflation hit a market Korean won. and shows a very remained 10-month Operations. very slow unstable low high. pace. movements.
  • 41. Critical Questions Two Critical Questions Still Remains • When will South Korea tighten up its monetary policy? • How Current Monetary policy will tackle with ever rising Inflation?
  • 43. Expenditure Government Spend is relatively very less compared to rest of the countries. Mainly the expenditure is into Infrastructure, R&D, national defence, and education. Mainly defence which accounts for 24% of expenditure Now recently it was observed that focus is shifting from defence to health care.
  • 44. Revenue Tax, mainly indirect taxes Disinvestment in Electrification, banking, communication and Manufacturing, but still remain major stockholder Four Public Enterprises • Government Enterprise • Government invested Enterprise • Government Subsidiaries • Government Backed Enterprise
  • 46. Central Bank 2 parts of financial system: Central bank: • Monetary institutions: Central • Established on June 12, 1950 bank & deposit taking banks • Purpose: price stability • Other financial institutions • Issuing banknotes and coins, formulating and implementing monetary and credit policy, serving as the bankers' bank and the government's bank. • Governor, the Senior Deputy Governor, and 5 Deputy Governors, manage departments in the head office and 16 domestic branches
  • 47. Financing History : A timeline 1960s: • Foreign credit based which decreased towards 1980s • Generated need for domestic savings • Nationalization of banks 1980s: • Current account became surplus fuelling shortage of domestic savings • De-regulation of interest rates • 3 new commercial banks and 13 financial institutions
  • 48. History.. continued Commercial banks focused on short term loans Newer sources of funding for commercial banks Relaxation of FOREX controls Foreign investors: trust funds, convertible bonds, bonds with warrants
  • 49. Banking sector today Banks are largely no longer handmaidens to the chaebol Big Four • Kookmin Bank (KB ) • Shinhan Financial Group (SHG ) • Woori Financial Group (WF ) • Hana Bank -- 70% of the market Foreign investments Retail banks shrunk to 11 in number
  • 50. Other indicators : energy scenario Hydropower Oil: fifth: and other largest net Coal : 24 % renewable importer of primary energy oil in the energy sources : world small fraction
  • 52. All @Won The won (원) (sign: ₩; code: KRW) is the currency of South Korea Subunit: 1 Won= 100jeon Theoretical (not used) Coins₩1, ₩5, ₩10, ₩50, ₩100, ₩500 Banknotes₩1000, ₩5000, ₩10000, ₩50000
  • 53. First South Korean won The won was first used between 1902 and 1910 Japanese invasion in 1910 : The won was replaced at par by the yen, made up of the Japanese currency and banknotes of the Korean yen. Post world war II: • Division in Korea (North and south) • Won replaced the yen at par • Only bank notes were issued by the Bank of Joseon (1946) Central bank: Bank of Korea (1950)
  • 54. Pegs for the first South Korean won Date introduced Value of U.S. dollar in won October, 1945 15 July 15, 1947 50 October 1, 1948 450 June 14, 1949 900 May 1, 1950 1800 November 1, 1950 2500 April 1, 1951 6000
  • 55. Hwan First South Korean won was replaced by the hwan on February 15, 1953 In 1959, coins were introduced in denominations of 10, 50 and 100 hwan 1 hwan = 100 won The hwan also suffered from inflation and a series of devaluations occurred
  • 56. Second South Korean won The won was reintroduced on June 9, 1962 1, 5, 10, 50, 100 and 500 won notes were introduced by the Bank of Korea Value was pegged at 125 won = 1 U.S. dollar It became the sole legal tender on March 22, 1975 with the withdrawal of the last circulating hwan coins. ISO 4217 code : KRW. Won was allowed to float on December 24, 1997 after an agreement with IMF Won was devalued to almost half of its value, as part of the East Asian financial crisis. On June 23, 2009, the Bank of Korea released the 50,000 Won note
  • 57. FX Rates Wednesday, February 03, 2010 1 KRW in KRW American Dollar 0.00087184 1147 Australian Dollar 0.000982502 1017.81 British Pound 0.000546271 1830.59 Chinese Yuan 0.00595169 168.019 Euro 0.000623455 1603.96 Hong Kong Dollar 0.00676948 147.722 Indian Rupee 0.0400826 24.9485 Japanese Yen 0.0790105 12.6566 Swiss Franc 0.000918849 1088.32 Malaysian Ringgit 0.00296384 337.4
  • 58. S. Korean Won to US Dollar Currency Exchange Rate Past Trend Present Value S. Korean Won per One U.S. Dollar
  • 59. South Korea: FOREX and GOLD reserves
  • 60. FOREX and GOLD reserves rankings Year Reserves of foreign Rank Percent Change exchange and gold 2004 $155,400,000,000 4 - 2005 $199,100,000,000 4 28.12 % 2006 $210,400,000,000 4 5.68 % 2007 $239,000,000,000 5 13.59 % 2008 $262,200,000,000 6 9.71 % 2009 $201,200,000,000 6 -23.26 %
  • 61. South Korea in News for FOREX South korea’s National Pension Service(NPS) announced that official foreign reserves stood at record high as of January end According to BOK, Forex amounted to $273.69 billion Increase is attributed to operating profits on forex reserves and redemptions at maturity by NPS of its currency swaps with BOK
  • 67. International Involvement APEC – Asia-Pacific Economic Cooperation Relationship with US • KORUS FTA 2006 North-South Economic Ties FTA with EU

Editor's Notes

  1. Korea is heavily dependent on imported agricultural commodities due to limited domestic agricultural capacity.Total imports of agricultural, fishery and forest products in 08 totaled $22 billion, of which $6.3 billion (or 28.5%) was from the United States. Korea is the fifth largest market for U.S. agricultural products. Key U.S. exports to Korea include corn ($2.4 billion), wheat ($660 million), hides and skins ($300 million), pork ($209 million), beef ($165 million) and soybeans ($240 million).Agriculture's share of GDP has steadily declined to about 3 percent as the amount of agricultural land and the rural population has decreased in the past two decades. This trend is expected only to accelerate in the future. People are leaving the rural areas because of a lack of jobs, income, educational opportunities, medical support and modern housing. Those involved in agriculture account for only 6 percent of the labor force and 63 percent are over the age of 60.2
  2. South Korea's hosting the 1988 Seoul Olympics made 1988 a boom year for tourism. More than 2 million tourists spent US$3.3 billion, an increase in the number of tourists and the dollars spent, respectively, of 24.9 percent and 42.2 percent over 1987 Japanese visitors accounted for 48 percent of the total; tourists from the United States made up 14.9 percent.This trend continued in subsequent years, with 2.95 million foreign visitors arriving in 1990 and 3.8 million in 1995. After the FIFA World Cup in 2002, tourism to South Korea was much promoted throughout the world
  3. The growth of the industrial sector was the principal stimulus to economic development.MS Oasis of the Seas, the world's largest passenger ship, was built in Finland by South Korean shipbuilding group STX Europe. South Korea is the world's largest shipbuilderSouth Korea's KTX-II is the world's fourth high-speed train to surpass the 350km/h mark.
  4. "Won" is a cognate of the Chinese yuan and Japanese yen. All three names derive from the Chinese character 圓(원), which means "round shape." The won was subdivided into 100 jeon (Hangul: 전; Hanja: 錢; RR: jeon; MR: chŏn), which means "money"; this word is also of Chinese origin and refers to the bronze and copper coins of old.. After the Japanese invasion in 1910 and subsequent occupation, the won was replaced at par by the yen, made up of the Japanese currency and banknotes of the Korean yen.In 1945 after World War II, Korea became divided, resulting in two separate currencies, both called won, for the South and the North. Both the Southern won and the Northern won replaced the yen at par. The first South Korean won was subdivided into 100 jeon. Only banknotes were issued, initially circulating alongside banknotes of both the Japanese and Korean yen and Japanese coins.BanknotesIn 1946, the Bank of Joseon introduced 10 and 100 won notes. These were followed in 1949 by 5 and 1000 won notes. The designs were similar to those of the yen notes from the Japanese occupation period. However, there were two subtle and important differences. The new notes replaced the paulownia, the badge of the government of Japan, with the five-petalled Rose of Sharon, South Korea's national flower. The clause referring to exchangeability with the Japanese yen was also removed.A new central bank, the Bank of Korea, was established in 1950, and assumed the duties of Bank of Joseon. Notes were introduced (some dated 1949) in denominations of 5, 10 and 50 jeon, 100 and 1000 won. 500 won notes were introduced in 1952. In 1953, a series of banknotes was issued which, although it gave the denominations in English in won, were, in fact, the first issues of the hwan.
  5. Only bank notes were issuedalongside banknotes of both the Japanese and Korean yen and Japanese coins.
  6. The South Korean won was initially pegged to the U.S. dollar at a rate of 15 won = 1 dollar. A series of devaluations followed, the later ones in part due to the Korean war. 
  7. ISO 4217 is the international standard describing three-letter codes (also known as the currency code) to define the names of currencies established by the International Organization for Standardization (ISO). On February 27, 1980, efforts were initiated to lead to a floating exchange rate. The won was finally allowed to float on December 24, 1997 when an agreement was signed with the International Monetary Fund.[2] Shortly after, the won was devalued to almost half of its value, as part of the East Asian financial crisis.In 1982, with inflation and the increasing popularity of vending machines, 500 won coins were introduced on June 12, 1982In 1962, 10 and 50 jeon, 1, 5, 10, 50, 100 and 500 won notes were introduced by the Bank of Korea. The first issue of 1, 5, 10, 50, 100 and 500 won notes were printed in the U.K.With the economic development from the 60s the value of the 500 won notes became lower, resulting in a greater use of cashier's checks with higher fixed denominations as means of payment, as well as an increased use of counterfeited ones.[3] In 1970, the 100 won notes were replaced by coins, with the same happening to the 50 won notes in 1972.Higher denomination notes of 5000 won and 10,000 won were introduced in 1972 and 1973 respectively. 
  8. ISO 4217 is the international standard describing three-letter codes (also known as the currency code) to define the names of currencies established by the International Organization for Standardization (ISO). On February 27, 1980, efforts were initiated to lead to a floating exchange rate. The won was finally allowed to float on December 24, 1997 when an agreement was signed with the International Monetary Fund.[2] Shortly after, the won was devalued to almost half of its value, as part of the East Asian financial crisis.In 1982, with inflation and the increasing popularity of vending machines, 500 won coins were introduced on June 12, 1982In 1962, 10 and 50 jeon, 1, 5, 10, 50, 100 and 500 won notes were introduced by the Bank of Korea. The first issue of 1, 5, 10, 50, 100 and 500 won notes were printed in the U.K.With the economic development from the 60s the value of the 500 won notes became lower, resulting in a greater use of cashier's checks with higher fixed denominations as means of payment, as well as an increased use of counterfeited ones.[3] In 1970, the 100 won notes were replaced by coins, with the same happening to the 50 won notes in 1972.Higher denomination notes of 5000 won and 10,000 won were introduced in 1972 and 1973 respectively. 
  9. South Korea's reserves of major currencies last hit a record high in November but fell in December as the yen and euro weakened, reducing their value in dollar terms. The reserves are largely invested in securities and deposits, according to the central bank. A small component is a notional currency called Special Drawing Rights which are overseen by the International Monetary Fund. Gold accounts for the smallest portion. South Korea's reserves had peaked at $264.25 billion in March 2008 but declined to $200.51 billion in November. In October of that year they recorded their biggest monthly decline on record $27.4 billion as authorities dipped into the pool of cash to battle the effects of the global credit crisis. The reserves steadily rose again as the global financial system stabilized. As of the end of December 2009 the reserves remained the world's sixth largest behind those of China, Japan, Russia, Taiwan and India. The country's foreign reserves had declined for the eighth straight month in November as the foreign exchange authorities tapped their dollar holdings to bolster the sliding local currency and ease a dollar crunch.
  10. This entry gives the dollar value for the stock of all financial assets that are available to the central monetary authority for use in meeting a country's balance of payments needs as of the end-date of the period specified. This category includes not only foreign currency and gold, but also a country's holdings of Special Drawing Rights in the International Monetary Fund, and its reserve position in the Fund.Source:CIA World Factbook