South Korea Economy

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As an NIE, South Korea has exp

1. South Korea Economic Growth and Development over Last 25 Years 1.1. South Korea Economic Growth

Figure 1 ( South Korea GDP - real growth rate, 2010)

As an Asian country, South Korea has experienced significant downturn and upturns in its economic growth during 1980s, 2997s and 2000s ( South Korea GDP - real growth rate, 2010). For instance, they had been growing rapidly from 1980s to 1990s (see Figure 1) ( South Korea GDP - real growth rate, 2010). During those days, South Korea had been exporting on its garment and electronic products to its trading partners, such as U.S., Hong Kong, Japan, Singapore, Germany China, and Taiwan (Thomas White Global Investing, "Country Profile: South Korea").

Figure 2 (Setser, "This Doesn't Look Good: Taiwan, Korea and China Exports Tank.")

Even after the economy financial crisis in 1998 which contract the GDP to 6.95%, South Korea could recover faster than most of other Asian countries (Thomas White Global Investing, "Country Profile: South Korea"); with the help of World Bank and big government expenditure. But, during the crisis, many big conglomerates like ChaeboI, was helped by the government incentives during 1980s went bankrupt and crashed the GDP ("South Korea GDP - real growth rate," 2010); and most of the businesses are financed by foreign borrowings, although most of it is for short-term (Thomas White Global Investing, "Country Profile: South Korea"). Thanks to the rapid recovery, by the end of 1999, the GDP could rise to 9,486 from -6.854 in 1998 ( South Korea GDP - real growth rate, 2010).

Figure 3 (Setser, "This Doesn't Look Good: Taiwan, Korea and China Exports Tank.")

However, after 1999, South Korea is experiencing slight downturn, and crashed in 2009 as their GDP became -0.987 and their growth rate is 2.20% and ranked number 112 ( South Korea GDP - real growth rate, 2010). This is a bit of shame since South Korea was able to achieve rank number 19 in 2003 as their growth rate was 6.20% ( South Korea GDP real growth rate, 2010). It seems that they are halting their exports in 2008 and dropped the GDP rate (Setser, "This Doesn't Look Good: Taiwan, Korea and China Exports Tank").

Figure 4 (Setser, "This Doesn't Look Good: Taiwan, Korea and China Exports Tank.")

If a straight line is pulled in 0% change, it can also be seen that, they are trying to control their changes in exports to be stable (see Figure 4) (Setser, "This Doesn't Look Good: Taiwan, Korea and China Exports Tank."); not too much, not too low which in effects the recent downturn in their GDP ( South Korea GDP - real growth rate, 2010). But, with the low-level and short-term debt they have, it is predicted that South Korea-along with Australia, New Zealand, Denmark, and Norway-can survive in the future (Zhi, "S Korea stands among world's highest-level fiscal reserve holders: IMF ); rather than U.S.A. and Japan, although South Korea GDP is relatively low (Zhi, "S Korea stands among world's highest-level fiscal reserve holders: IMF ). This can be the reason why they are brave enough to risk their exports and have low GDP.

1.2.

South Korea Economic DevelopmentAfter the Five-Year Economic Development Plan in 1960s to 1980s, entrepreneurships are supported by the Park Chung Hee government to grow and allow

them to do enter the global market (U.S. Library of Congress, "Economic Development"). These businesses were the giant private owned businesses called chaebol, which most of them went bankrupt during the global financial crisis in 1997 (U.S. Library of Congress, "Economic Development"). The chaebol was the key to grow South Korea economy and to increase the standard of living; as the chaebol enter the global market and started to export goods and services which then increase South Korean GDP rapidly (see figure 1) (U.S. Library of Congress, "Economic Development").

Figure 5 (Charles, Harvie and Mosayeb Pahlavani, "Sources of Economic Growth in South Korea: an application of the ARDL analysis in the Presence of Structural Breaks - 1980-2005 #")

Figure 6 (Charles, Harvie and Mosayeb Pahlavani, "Sources of Economic Growth in South Korea: an application of the ARDL analysis in the Presence of Structural Breaks - 1980-2005 #")

Since the Fifth Five-Year Economic Development Plan1 (1982 1986) had been implemented, graduates from high school and college or university have been increasing (see Figure 5) (Charles, Harvie and Mosayeb Pahlavani, "Sources of Economic Growth in South Korea: an application of the ARDL analysis in the Presence of Structural Breaks 1980-2005 #"). Naturally, this develops the economic development since this proves that more Koreans can access better educations from year to year. Logically, the existence of chaebol has increased the standard of livings for Koreans by increasing employed people (see Figure 6) (Charles, Harvie and Mosayeb Pahlavani, "Sources of Economic Growth in

1

This plan was implemented by the Park Government Seven times for every five years in different industries. Its purpose was to improve the economic development of South Korea.

South Korea: an application of the ARDL analysis in the Presence of Structural Breaks 1980-2005 #"); thus, this will able the Koreans to pay for their educations.

Figure 7 (International Human Development Indicators, "Korea (Republic of)")

After all the hard times, South Korea in 2008 had the HDI rate of 0.921 and ranked 26/ 179 ("Human Development Index Statistics," 2008). Then the HDI goes down to 0.877 with health, scored as 0.947 (International Human Development Indicators, "Korea (Republic of)"); education in 0.891 (International Human Development Indicators, "Korea (Republic of)"); and income in 0.800 (International Human Development Indicators, "Korea (Republic of)"). The HDI had been rose by 1.2% since 1980 (see Figure 7), annually, from 0.616 (International Human Development Indicators, "Korea (Republic of)").

2. South Korea Changes in Production and Consumption 2.1. South Korea Changes in ProductionFrom years to years, South Korea had experienced many major changes in its domestic industries. Their major productions are: steel, automotive, and electronics (Thomas White Global Investing, "Country Profile: South Korea"). The changes in productions will be explained in a brief timeline below. Early in 1970s, South Korea was producing its own armaments with an elaboration of Vietnam (U.S. Library of Congress, "South Korea - Industry"); it includes the production of M-16 rifles, artillery, ammunition, tanks and other military vehicles (U.S. Library of Congress, "South Korea - Industry"). After that, in 1970s to 1980s, South Korea had been the leader in producing ships (U.S. Library of Congress, "South Korea - Industry"); such as oil supertankers, and oildrilling platforms (U.S. Library of Congress, "South Korea - Industry"). During the year of 1970, they also produced chemicals from raw materials to support textile, plastic, synthetic rubber, rubber shoe, and paint factories and self-supplied themselves with the chemicals (U.S. Library of Congress, "South Korea - Industry"). Then in 1980s, South Korea was moving its industries into producing and exporting automobiles and automotive parts (U.S. Library of Congress, "South Korea - Industry"). Beside automobiles, South Korea also produced and exported textiles and footwear in 1980 (U.S. Library of Congress, "South Korea - Industry"). Then, finally, in 1989, South Korea had been producing electronics such as color televisions, videocassette recorders,

microwave ovens, radios, watches, personal computers, and videotapes (U.S. Library of Congress, "South Korea - Industry").

2.2.

South Korea Changes in Consumption

Figure 8 (Kim, "Changing Lifestyles and Consumption Patterns of the South Korean Middle Class and New Generations")

Ever since 1980s, South Korea has been experiencing an inequality for its distribution of income (Kim, "Changing Lifestyles and Consumption Patterns of the South Korean Middle Class and New Generations"). Therefore, there were significant differences of the looks between the rich and the poor (Kim, "Changing Lifestyles and "). Thus, Koreans always think that you are what you wear (Export Entreprises SA, "Country profile South Korea - Consumption trends"); and thus, it makes people tend to

follow the latest trend (either from famous singers, artists, etc), until now (Export Entreprises SA, "Country profile South Korea - Consumption trends"). Because of this reason and habits, they tend to increase their consumerism level from year to year (see Figure 8).

Figure 9 (Kim, "Changing Lifestyles and Consumption Patterns of the South Korean Middle Class and New Generations")

It also was not possible for Koreans to spend more than their real income in some years (since their real income was decreasing from 1991 to 1997), especially in 1993, 1995, and 1996 (Kim, "Changing Lifestyles and "). But, in 1997, there was a currency crisis and the government chose to buy all of the Koreans gold jewelry for government bonds (Kim, "Changing Lifestyles and "); thus, the government was able to buy two billion dollars (Kim, "Changing Lifestyles and "). Therefore, they were able to stimulate the economy well after the financial crisis in 1998, and return the GDP rate to normal (through government big spending) in 1999 ("South Korea GDP - real growth rate," 2010).

Figure 10 (Kim, "Changing Lifestyles and Consumption Patterns of the South Korean Middle Class and New Generations")

Figure 10 is about the percentage of Koreans possessing durable goods from 1970 to 1990. It is showing that the Koreans are becoming addicted to urban products and modernism (Kim, "Changing Lifestyles and "). The figure above, however, can