150709 영문 08 economy

Economy 경제

8

The Korean Economy – the Miracle on the Hangang River Korea’s Open Market Capitalist Economy Industrial Brand Leaders and Korean Industrial Standards Efforts to Grow as a Global Power

8

South Korea’s five leading export items and export amounts

Economy

Liquid crystal devices 28,160

Liquid crystal devices 25,971

경제

Petroleum products

Petroleum products 56,098

Ships

52,787

Ships

37,168

2012

2013

39,753

The Korean Economy – the Miracle on the Hangang River property shall be guaranteed for every citizen.” In short, the country has adopted the market economy system, respects

Semiconductors

Semiconductors

The Constitution of South Korea stipulates that “the right of

57,143

50,430 Cars 47,201

Cars 48,635

[Unit: Millions of dollars /Source: Ministry of Trade, Industry and Energy]

individuals’ and businesses’ right to conduct free economic Cars Exported from Hyundai Motor’s Ulsan Factory Cars are one of the country’s major export items.

activities, and guarantees the profits and properties made and accumulated by them.

However, the Constitution does not guarantee the limitless,

stipulates that an unjust situation should be rectified if the abuse

unfettered pursuit of capitalistic free economy. The Constitution

of capital is found to cause damage to people as an apparatus set to improve things relating to the free market economy.

South Korea has achieved economic growth at an unprecedented speed. Observers called what the country has accomplished the “Miracle of the Hangang River”, as most of the country’s industrial facilities were destroyed during the three-year-long Korean War, and the country was devoid of capital and natural resources.

In the early 1960s, the country pushed ahead with exportoriented economic development plans. At first, the country’s major export items were mainly light industrial products manufactured in small factories, or raw materials. In the 1970s, the country invested in heavy chemical facilities and laid the basis for the export of heavy industrial products. At present, the country has a number of industries that boast solid international

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241

competitiveness, such as the shipbuilding, iron/steel, and chemical

economic structure centered on large businesses in the process

industries. The foundation of such strong competitiveness was

of pursuing growth as a country with insufficient capital and

built around that time.

resources. Conglomerates came to dominate industry, while the

The country hosted the 1988 Seoul Olympic Games, which provided the country with the momentum to join the ranks of

In November 1997, a foreign exchange crisis hit the country,

the country one of the four Asian tigers, along with Taiwan,

forcing it to turn to the IMF for a bailout. It was the first ordeal

Singapore, and Hong Kong. In December 1996, the country

the country had had to face after years of rapid economic growth.

became the 29th country to join the OECD, which is largely

The country took the drastic step of driving poorly performing

composed of advanced countries.

businesses out of the market and then pushed ahead with

In 1960, South Korea’s exports amounted to US$ 32.8 million;

industrial restructuring. In only two years, the country regained its

but by 2013 they reached US$ 559.6 billion. In 1948 GDP per-

previous growth rate and price levels as well as a current account

capita was a paltry US$ 60; whereas in 2013 it was US$ 26,205.

balance surplus. In the process, some 3.5 million people joined in

GDP 2013

13,043

2013

26,205

2012

22,489

2011

11,164

2011

22,489

2010

10,147 8,344

2008

10,493 5,335

1990

1970

2010

2,703 643 81

(Unit: Hundreds of millions dollars / Source: Bank of Korea)

2008

2,541

19,296

1,547

21,695

2000

1,246

1,233

1,118

11,292

1990

1970

3,848

17,193

2007

1980

4,157

20,759

2009

9,309

2007

242

South Korea’s Foreign Trade Volume (2013)

11,292

2009

the campaign to collect gold to help the government repay the

Per-capita GNI

2012

1980

and imports, leaving it susceptible to external conditions.

semi-advanced countries. The international mass media called

South Korea gradually established an export-oriented

2000

country’s economic structure became heavily reliant on exports

1,075

983

966

6,303 1,660 225

(Unit: Dollar / Source: Bank of Korea)

China

U.S.A.

Germany

Japan

Netherlands France

U.K.

South Korea Hong Kong Canada (Unit: Billions of dollars / Source: IMF)

243

The Signing of the Korea-US FTA Mr. Kim Hyun-jong, the representative of South Korea, and Deputy USTR Karan K. Bhatia, shake hands upon completing the bilateral FTA negotiations.

Foreign Currency Reserves 2013

346.5

2012

327.0

2011

306.4

2010

291.6

2009

270.0

2008

201.2

2007 2000

262.2 96.2

(Unit: Billions of dollars / Source: Bank of Korea)

fund borrowed from the IMF. A total of 227 tons of gold were collected. The world marveled at the Koran people’s voluntary participation in the determined effort to repay its national debts.

country’s accomplishment as a “textbook recovery”.

By 2010, South Korea had emerged as the world’s 7th largest exporting country. From 2011 to 2013, the total volume of

While making concerted efforts to extricate itself from the

the country’s exports and imports stood at US$1 trillion. Thus,

foreign exchange crisis, the country benefitted from certain

the country became the world’s 9th country to attain the

ancillary effects, such as the adoption of the globalized economic

target of US$1 trillion in annual foreign trade. The country’s

and financial system. However, the restructuring process also had

foreign currency reserves stood at US$346.5 billion as of the

its dark sides. The government’s fiscal expenditure increased and

end of December 2013, and the country is in a sufficiently

the income imbalance deepened.

stable position to cope with a foreign exchange crisis, with the

After overcoming the economic crisis, the South Korean economy continued to record solid growth. Nominal GDP doubled from US$504.6 billion in 2001 to US$1,049.3 billion by

percentage of its short-term foreign debts being 27.7% in 2013 The country’s sovereign credit rating has risen in recognition of the dazzling economic results recorded by the country.

2007, recording a high growth rate of 4~5% a year, except during

244

the period of global economic crisis. In fact, during the period

Korea’s Open Market Capitalist Economy

2008-10, when most of the world was experiencing a devastating

South Korea has adopted the open market economy, and is

financial crisis, the country recorded an amazing 6.3% economic

thus negotiating with other countries to sign more FTAs, as

growth rate. The world’s major mass media organs referred to the

well as allowing foreigners to invest in the country freely while 245

encouraging domestic businesses to invest in foreign countries equally freely. The country offers advantages to foreign investors under the long-term objective of establishing itself as a major financial hub and logistics base of Northeast Asia.

Market Opening and FTAs The country has opened its market in most sectors, including agriculture. Koreans have traditionally attached great importance to agriculture, viewing it as the basis of the universe. Nonetheless, the country plans to open its rice market, which will be the last item to be opened in the agricultural sector, completely by 2015.

The country is pushing ahead with the complete opening of the market through FTAs. The country plans to sign FTAs with numerous countries with the aim of expanding its economic territory worldwide.

guarantees the profits earned by foreign investors and offers them

As of June, 2015, South Korea has signed FTAs with 50

a variety of benefits, such as tax incentives, cash support, and

countries, including Chile, Singapore, EFTA, ASEAN, India, the EU,

mitigation of land-related regulations. The country also protects

Peru, the United States, and Turkey. The FTA signed with Columbia,

foreigners’ intellectual property rights and foreign exchange

Vietnam is awaiting effectuation. The country is currently engaged

transactions. Foreign investors are allowed to take the profits they

in FTA-related negotiations with RCEP, Indonesia.

earn in South Korea out of the country, on the basis of creative

A view of Busan Harbour, the largest port in South Korea

and efficient operation.

Support for FDI (Foreign Direct Investment) South Korea encourages FDI under the Foreign Investment

Korean government concerning the land required for the

Promotion Act. In South Korea, “FDI” refers to “a foreigner’s

establishment of a factory or research facilities, the purchase or

acquisition of 10% or more of the equity share of a domestic

lease or construction of a building, or the installation of electric

business through an investment of not less than 100 million won,

or communication facilities. They may ask for partial payment of

or a foreign-based business’s borrowing of a long-term (5 years or

the amount for up to 20 years in cases involving the purchase of

longer) loan from its parent business in a foreign country and the like.”

land owned by either the central or a local government.

Under the Foreign Investment Promotion Act, the government 246

Foreign investors are eligible for support from the South

The government also provides cash support in consideration 247

of the FDI amount and the number of locals to be employed. The

Investment to Become a Regional Logistics Hub

government is ready and willing to provide land and capital if

South Korea is making preparations for a period when its

a foreign business displays excellent technological prowess and

combined export/import volume is expected to reach US$2

maintains the employment of a given number of locals.

trillion. The country is also striving to become a major logistics

FDIs in the country surged right after the foreign exchange

hub of Northeast Asia.

crisis in 1998, with the increasing trend continuing. The

The country is investing heavily in automation and the

accumulated reported amount of FDI as of 3Q of 2014 stood

sophistication of export/import cargo stevedoring facilities, with

at $14.82 billion, the highest among the past 3Q accumulated

the aim of greatly enhancing its logistics competitiveness.

figures. The FDI amount suggests balanced growth trend in terms of business types, regions, and investment types.

The country is striving to invigorate its air cargo network and expand industrial complexes situated close to airports. The

The government continues to improve the system for the

country ranks third in the world in terms of ICAO-subscribed

provision of support to foreign investors. In October 2010, the

heavy cargo transportation, while Incheon International Airport

government mitigated the criteria for cash support for foreign

ranks second in the world in terms of its international cargo

investors and expanded the scope of state/municipality-owned

handling capacity.

land eligible for private contracts in a bid to mitigate the FDI

Air cargo has high added value. It accounts for about one

conditions. Korea improved the conditions for FDI. In 2014, the Enforcement Decree and the Enforcement Rules of the Foreign Investment Promotion Act were amended to provide the basis Foreign Direct Investment

for the recognition of headquarters and R&D facilities of global

19,003

business. The country also plans to attract FDIs by providing cash

16,286

15,454

support for such headquarters and R&D facilities and incentives

14,548

13,673

such as tax reduction/exemption, including holding IR sessions, etc.

11,563

11,712

2005

2008

9,093

The country also invites newly emerging countries with surplus funds, including China and the Middle Eastern countries, to invest in the service sector of the country with high added value. To that

3,204

end, the “China Desk” was launched in May 2010, and a “red carpet service” is also provided to foreign investors. The country also designates locals in the Unites States, the United Kingdom, China,

1996

1999

2002

2011

2012

2013

2014

(Unit: Millions of dollars / Source: Ministry of Trade, Industry & Energy)

and Japan as PR ambassadors for FDI in the country.

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Incheon Airport as a Hub Airport One important prerequisite for a regional hub airport i s a l l - we a t h e r ro u n d the-clock operation. In Northeast Asia, the main re gi o n a l hu b a i rp o r t s include Kansai Airport in Osaka, Chek Lap Kok Airport in Hong Kong , Pudong Airport in Shanghai, and Incheon Airport in South Korea.

(Photo: A view of Incheon International Airport)

tracking. It is expected that the volume of international cargo handled at Incheon International Airport will increase dramatically from 2.72 million tons in 2010 to 3.5 million tons by 2015.

It is noteworthy that Incheon International Airport has ranked first in the world for nine consecutive years in the annual evaluation of airport services conducted by the ACI (Aviation Consultants, Inc), a consultative council for more than 1,700 airports around the world. This testifies to the sheer quality of operation of Incheon International Airport. Furthermore, the airport became the first airport in the world to be registered with the Airports Council International Hall of Fame.

Located on the peninsula, South Korea has many international trade ports including Busan, Incheon, Pyeongtaek, Gwangyang,

Trends in air Cargo through put and transshipment volume at Incheon International Airport 50.1

quarter of the total transportation charge, although it accounts for only 0.2~0.3% of all forms of transportation cargoes in terms

46.7

46.2

46.4

48.1

46.2

49.2 47.8

44.2

43.8

of weight. The South Korean government has expanded the cargo terminal of Incheon Airport and trains talented young people to take charge of airfreight logistics at the relevant educational institutions.

1.70

1.84

2002

2003

2.13

2.15

2004

2005

2.34

2.56

2.42

2.31

2008

2009

45.6

44.6

42.9

40.6

2.68

2.54

2.46

2.46

2.56

2010

2011

2012

2013

2014

1.18

In addition, the country is committed to improving the airfreight logistics system to a great extent, using high-end information technology. Incheon International Airport operates a sophisticated system for information-based operation of airfreight

2001

2006

Cargo throughput (in metric tons)

2007

(Source: Ministry of Land, Infrastructure and Transport)

Transshipment volume (% of cargo throughput)

logistics, which handles such matters as airfreight booking and 250

251

Cargo Volume (including transshipment) handled at ports in South Korea 39.7 37.7

36.4 35.4

34.9

35.5

35.5

35.1

34.5

35

35.7 34.3 21.61

31.1

9.99

2001

11.89

2002

13.19

2003

14.52

15.22

15.97

2004

2005

2006

17.54

17.93

2007

2008

22.55

23.47

2012

2013

19.37 16.34

2009

Container throughput (in millions of TEU)

2010

2011

(Source: Ministry of Oceans and Fisheries)

Transshipment volume (% of container throughput)

Ulsan, Pohang, and Donghae. In 2013, the volume of cargo

in 2012, the number of those enjoying the highest world market

handled at the country’s ports stood at 1,358.96 million tons,

share stood at 143 items, including memory semiconductors,

showing an overall increase of 1.5% year-on-year. Of this,

TFT-LCDs, seawater desalination facilities, LNG carriers, and flash

container throughput amounted to 23.47 million TEU and trans-

memory. Their number has increased year on year.

shipment volume amounted to 9.32 million TEU, a 4.1% increase

Information technology is the strongest element of the

and 9.7% increase, respectively, from the previous year. Such

country’s economy, a sector that encompasses all the skills

growth served to cement the nation’s role as a major logistics

required for management innovation and administrative reform

base in Northeast Asia.

as well as skills relating to computer software, the Internet,

Competitiveness in shipbuilding South Korea's shipbuilding industry boasts a competitive edge in ships with high added value associated with resource development and transportation.

multimedia, and communication devices.

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South Korea is the world’s leading force in mobile communications

Industrial Brand Leaders and Korean Industrial Standards

technology, with a formidable communications infrastructure:

The government is committed to diversifying export items and

there are currently two nationwide 4G networks, using WiBro

enhancing their quality through the annual selection of first-

and Long-Term Evolution (LTE) technologies. On the back of this

rate quality goods. Among the first-rate quality goods selected

infrastructure, the country’s IT-related foreign trade recorded a 253

Hanbit Nuclear Power Plant South Korea has made continuous investments in nuclear power generation.

Nuclear power occupies an important position in the country’s power generation. The country displayed its technological prowess worldwide with the export of a Koreantype nuclear power plant to the UAE in 2011.

surplus of more than US$70billion in both 2011 and 2012. The

number of cars produced (4.56 million), apparently as a result

country displays solid international competitiveness in cellphones,

of efforts to improve quality and the signing of FTAs with other

semiconductors, computers, and peripheral devices, and continues

countries. It is noteworthy that the number of cars produced in

striving to maintain its leading position in these sectors amid the

2012 was a record figure achieved amid a worldwide economic

rapidly changing information technology environment.

recession and high international oil prices.

Shipbuilding is another South Korean success story, and

Many countries use nuclear power, but most of these rely

in 2011, the country won orders worth 13.55 million CGT,

upon a handful of countries to design and build their nuclear

accounting for 48.2% of global shipbuilding orders. The country

power plants for them. Currently only five countries: the US,

boasts strong competitiveness- particularly in the building of

Japan, Russia, France, and now South Korea are equipped with

ships and structures with high added value, such as offshore

nuclear power plant technology. The country became the

plants, large-sized container ships, and LNG ships.

world’s 6th nuclear power plant exporting country by supplying

In 2012, the country ranked 5th in the world in terms of the 254

Video Games, Leading Cultural Contents South Korea has emerged as a leading exporter of cultural contents, such as K-Pop, broadcast programs, and video games, as well as cars and electronic goods.

(Photo: young people playing video games at the G-Star 2013 event held in Busan.)

a Korean-developed plant to the UAE. The country also boasts 255

people spend their time playing video games in them.

In 2012, the country’s video game industry generated 10 trillion won in domestic sales and exported goods worth a combined total of 2.853 billion won. The cultural contents industry is important for its significant contribution to the economy in terms of exports and job creation, and has great growth potential as a promising sector of the future.

South Korea is doing its utmost to enhance its international competitiveness in the information technology sector. The country is pushing ahead with the work of integrating information technology with other technologies under the blueprint Vision 2020 - A Country with IT-related Creative Ideas. Such ideas include the convergence of communications technology with the carmanufacturing industry or the enhancement of safety by fusion information technology with the shipbuilding industry. It is expected that such efforts will go a long way towards improving quality and promoting the development of sectors with high The G20 Seoul Summit 2010.

solid international competitiveness in the iron/steel and

added value.

chemistry sectors.

A relatively new export sector for South Korea, and one which

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Efforts to Grow as a Global Power

is growing strongly, is cultural products, including publishing,

At present, South Korea is striving to transform itself into a global

music, video games, and TV and film production. In 2008-12 the

economic system. Although the country accomplished rapid

value of this sector grew from US$ 23.38 to 46.12 billion, partly

growth within a short period of time, this led to the problem of

on the back of “Hallyu� (the current vogue for South Korean pop

an imbalance in the development of large businesses and SMEs

culture). The country is pouring considerable efforts into video

due to the implementation of an economic policy that was

game contents, which are viewed as a promising sector that

heavily dependent on the export of large enterprises. As such, the

combines film and computer technology with creative ideas.

need for shared growth was singled out as a potential solution to

South Korea is perhaps the only country in the world with so

the problem. The issue emerged as a problem that would have to

many PC cafes across the country and where so many young

be resolved at the international level amid the global economic 257

crisis in 2008.

the foreign exchange war between major countries and to reform

In 2010, the Presidential Commission for Shared Growth

the IMF, which used to be centered on industrialized countries.

for Large and Small Companies was launched with a view to

Its contents were focused on the pressing need to stabilize global

settling conflicts between large-sized businesses and SMEs.

financial markets and provide support for impoverished countries

The commission is assigned with the duties of fostering an

striving for economic development. The declaration went a long

atmosphere conducive to shared growth in industries, monitoring

way towards enhancing the status of South Korea in global

and announcing large businesses’ shared growth indices,

economic and financial markets.

designating sectors and items suitable for SMEs, and settling conflicts between large businesses and SMEs based on a social consensus.

The G20 Summit in Seoul in 2010 was held under a similar theme. The G20 Summit came into being following the global economic crisis in 2008, based on the view that it was necessary to have major emerging countries take part in international economic discussions, as the G7 Summit inevitably had certain limitations in this respect. It was pointed out that the international financial system had failed to reflect the fact that the share and role of emerging countries had expanded to a considerable extent over the previous three decades.

At the G20 Summit held in Seoul in 2010, South Korea assumed the position of the Chair, indicating that the country had assumed a positive role in the international economic order.

The G20 Summit Seoul adopted the 20-item Seoul Summit Leaders’ Declaration and came up with an agreement containing 74 items. Other results of the summit included the announcement of the Seoul Development Consensus for Shared Growth, the Multiyear Action Plan, and the Anti-Corruption Action Plan.

The Seoul Summit Leaders’ Declaration stressed the role of developing and emerging countries in a move to put an end to 258

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