South Korean Development and Economic Achievement -2-
To get familiar with the South Korean governmental and economic development we may look for the answers of following four questions:
1-) What are the historical aspects of Korea’s achievements in economic development? What are three turning points for Korea’s economic development?
Korea’s background is going parallel with Japan as it was a colony of Japan amid 1910–45. Due to sustaining conflict Japan became the cause of Korea’s devision into South and North Korea. Korea during post-war era had many difficulties such as American penetration, military coup led it to be a Third World country. In 60s as many third world countries Korea was basing its economy on agriculture more than half of its workforce (68.3%). Rest was fishery and forestry. In an industrial perspective just 1,5% was manufacturing share in their economy. Park Chung Hee launched a growth program and it flourished economy when 80s came. manufacturing reached 27,7%. This was legitimizing tool of a military rule. In 62, GNP was increased from 12% to 35% and export from 2,4% to 31%. First two five year plans were the most rapid increase era for all the indicators of economy of South Korea (1962–72). During that period the government provided several promotions for export and incentives to encourage manufacturing. Another crucial move was eliminating the biases against the export which were; devaluation, free trade regime, no indirect taxes on domestic inputs used for exports. When the gates of export is tried to be open, exporters got fair share of incentives provided by government such as discount rate for infrastructure, electricity, rail and road, decreased income taxes. These developments paved the way of Korea’s being one of the big economic pair of U.S.
2-) What is the role of Japan and relations with Japan in Korea’s economic achievement road?
Japan was conflicted in the post war era with South Korea and was kind of superior. Japan was supported more by American operators. South Korea (as well as the North) suffered from being alone in the development phase. Military of S. Korea eventually took the ropes in hand and set that two main goals; export promotion and import substitution. An interesting turning point amid Korea’s and Japan’s interrelations happened in the steel industry. When Korea attempted to revive steel production, consortium of Western consisted by ten countries and five international financial institutions refused help in Korea in this regard and took action against the Park Hee’s regime; Japan was the one who conducted technical assistance in the establishment of Pohang Iron and Steel Co. in 1968. Which can be understood here is although both of them conflicting they had a historical connection and potential to be economic pairs where the U.S. and Germany found this project as unfeasible. After the Second World War, Japan was defeated so their capital was confiscated and eliminated in Korea. Korea did not have any FDI after the Japanese colonial era ended, which was an advantage for Korea to not be dependent on foreign capitals. Especially after 1965 kind of normalization amid the two when other countries were not keen on investing in Korea.
3-) How has the economy of Korea reflected the government’s attitude over decades (especially public establishments and privatization of some certain industries) to be a global competitor in certain technologies today?
One of the turning points in this regard was establishment of “the Office of National Tax Administration” to maintain systematically the tax easing policies by fully supported by government. Another one was public enterprises (PEs) which established for producing the vitals like fertilizers, petrochemicals, refined petroleum products. Actually why PEs launched due to inability of private sector to invest that much on a project in once. PEs were essential and special fields of manufacturing so they played a great role compared to any other countries. They were not fully independent, following the five year goals of Park. One more another is establishment of Economic Planning Board (EPB) that base on the idea that the resources of country shall be used in a active and planned manner to be more efficient.
4-) What is the position of five largest chaebols in the development period of South Korea’s economy?
When the main urgent need for an infrastructure of manufacturing in a big scale was fulfilled like the iron and steel industry, electricity, rail, road, management institutions and economic policies set down the story of these big companies started. Samsung, Hyundai, Lucky-Goldstar, Daewoo and Sunkyong came into stage working in similar fields stared the combined sales. They were competing against the dominating U.S and Japanese companies who penetrated the world market in the same sector. Against all the odds South Korea placed among top ten countries in terms of GNP (1980s) and quarter of the GNP was relying on those five companies who now became global giants and crossing the borders of single sector, producing even in construction sector. Especially in this achievement; Korea Institute of Electronics Technology and Fine Instrument Centre Centre (FIC), later incorporated into the Electronics Industry Association of Korea played an important role to manage and implement the governmental policies for development.
