Download SOUTH KOREA

SOUTH KOREA
Economic Freedom Score
25
World Rank:
27
Regional Rank:
7
Least
free 0
ver the past five years, South Korea’s economy has
O
charted steady, uninterrupted progress in economic
freedom. Recent reforms have put greater emphasis on
50
75
Most
100 free
71.7
Freedom Trend
73
enhancing regulatory efficiency and ensuring a larger role
for small and medium-size enterprises in the economy.
South Korea’s dynamic private sector, bolstered by a welleducated, hard-working labor force, continues to capitalize
on the country’s openness to global trade and investment.
ECONOMIC FREEDOM SNAPSHOT
• 2016 Economic Freedom Score: 71.7 (up 0.2 point)
• Economic Freedom Status: Mostly Free
• Global Ranking: 27th
• Regional Ranking: 7th in the Asia–Pacific Region
• Notable Successes: Open Markets and Monetary Stability
• Concerns: Corruption and Labor Freedom
• Overall Score Change Since 2012: +1.8
Despite the challenging international economic environment, the overall soundness of South Korea’s public
finance has been well maintained. The independent judicial system upholds the rule of law effectively, but corruption continues to undermine confidence and trust in
political institutions. Reforming the rigid labor market
remains critical to ensuring long-term competitiveness.
BACKGROUND: Conservative President Park Geun-hye
assumed office in February 2013 promising a new policy
toward North Korea. Her “trustpolitik” strategy balances
enhancing South Korea’s ability to deter North Korean attacks
with a willingness to engage Pyongyang in conditional, reciprocal diplomacy. Pyongyang rejected Park’s “Dresden Declaration,” a vision for Korean reconciliation articulated during
a 2014 visit to Germany, as an attempt at “unification through
absorption.” In early 2015, there were hopes for improved
relations, but Pyongyang subsequently rejected all attempts
at dialogue. Park’s tenure has been plagued by a series of scandals involving senior administration officials. South Korea
remains a world leader in electronics, telecommunications,
automobile production, and shipbuilding.
How Do We Measure Economic Freedom?
See page 467 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
72
71
70
69
68
2012
2013
2014
2015
2016
Country Comparisons
71.7
Country
World
Average
60.7
Regional
Average
59.0
Free
Economies
83.9
0
20
40
60
80
100
Quick Facts
Population: 50.4 million
GDP (PPP): $1.8 trillion
3.3% growth in 2014
5-year compound annual growth 3.8%
$35,277 per capita
Unemployment: 3.5%
Inflation (CPI): 1.3%
FDI Inflow: $9.9 billion
Public Debt: 35.7% of GDP
2014 data unless otherwise noted.
Data compiled as of September 2015.
263
SOUTH KOREA (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Property Rights
Freedom from Corruption
Country
World Average
70.0
55.0
0
20
40
60
80
Rank
1–Year
Change
28th
44th
–5.0
0
100
Bribery and influence peddling persist in politics, business, and everyday life despite government anti-corruption efforts. Large family-run conglomerates known as chaebols enjoy outsized influence and continue to dominate the economy. Nevertheless, the rule of law is effective,
the judicial system is independent and efficient, and private property rights are protected.
Fiscal Freedom 73.8
GOVERNMENT
Government Spending 69.7
SIZE
122nd
90th
0
20
40
60
80
+1.3
+1.8
100
The top personal income tax rate is 35 percent, and the top corporate tax rate is 22 percent.
A 10 percent surtax on individual and corporate rates and a value-added tax bring the overall
tax burden to 24.3 percent of GDP. Government spending amounts to 31.8 percent of total
domestic output. The budget has generated a small surplus, and public debt equals about 35
percent of GDP.
REGULATORY
EFFICIENCY
Business Freedom
Labor Freedom
Monetary Freedom
91.1
50.6
82.6
7th
134th
39th
0
20
40
60
80
+1.4
–0.5
+1.0
100
The regulatory framework is relatively competitive. With no minimum capital required, starting a business is not overly burdensome. The labor market remains dynamic, but there are lingering regulatory rigidities, and powerful trade unions add to the cost of conducting business.
Monetary stability has been well maintained, but government subsidies of numerous renewable energy projects as well as child care and medical care affect prices.
OPEN
MARKETS
Trade Freedom
Investment Freedom
Financial Freedom
74.6
70.0
80.0
100th
50th
3rd
0
20
40
60
80
+2.0
0
0
100
South Korea’s average tariff rate is 7.7 percent. Foreign investment levels in many sectors of the
economy are capped. Several state-owned enterprises are active in the economy. The government may not expropriate property without providing compensation. The financial sector has
become more competitive, although business start-ups still struggle to obtain financing. The
banking sector remains largely stable.
Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption
264
–20.0
–15.0
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
+10.5
–15.9
REGULATORY
EFFICIENCY
OPEN MARKETS
Business Freedom +21.1
Labor Freedom
–6.0
Monetary Freedom +2.5
Trade Freedom
+5.4
Investment Freedom +20.0
Financial Freedom +10.0
2016 Index of Economic Freedom