Download 슬라이드 1 - World Bank

Korea’s Economic Development
Experiences
Taeho Bark
The Graduate School of International Studies (GSIS)
Seoul National University
March 30, 2005
Contents
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Korea in the Late 1950s
The Korean Economy 40 Years Later
Overview of Korea’s Economic Development
Evaluation of Korea’s Economic Development
Factors Contributing to the Success
Lessons from the Korean Experiences
Is the Korean Model Replicable?
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1. Korea in the Late 1950s
• Largely rural peasant economy, wholly lacking
natural resources
• Has the highest density of people on arable land
in the world
• Exports were 3% of GDP (88% of which were
primary products)
• Crucially dependent on foreign aid-transfers
(More than 10% of GDP)
• The third poorest country in Asia with no hope
for growth
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2. The Korean Economy 40 Years Later
• Real GDP per capita grew 10-fold
- Almost 3 times that of Brazil and almost 3.5 times
that of Mexico in 2000
• Exports grew on average by more than 30% a
year over three decades and more
- Exports grew to 37% of GDP in 2000
- $ 253 bil (Manufacturing: 97%) in 2004
• Dramatic improvements in the quality of life
- Infant mortality dropped, life expectancy rose, real
wage rose, unemployment fell
• The 13th largest economy in the world
- FX reserves (4th), shipbuilding (2nd), steel (6th),
automobile (6th), DRAM semiconductors (1st)
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3. Overview of Korea’s Economic Development
< Export-led growth: 1962-1972>
• Policies
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Currency devaluation
Interest rate reform for high savings
Nationalization of commercial banks
Establishment of specialized banks
Limited import liberalization
• Export incentives: Industry Neutral
- Tax deduction, wastage allowances
- Export credit subsidies
- Based on export performance
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3. Overview of Korea’s Economic Development
< H & C industrial promotion: 1973-1979>
• Policies
- Designate the industries (steel, machinery, petrochemical, shipbuilding, electronics)
- Long-term subsidized loans: National Investment
Fund (Credit rationing)
- Tax holidays and investment tax credits
- Accelerated depreciation
- Reduced export incentives
- Expansionary monetary policy
- Government guarantee of foreign loans
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3. Overview of Korea’s Economic Development
< Stabilization, liberalization and renewed
growth: 1980-1996>
• Policies
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Anti-inflationary policy measures
The HCI drive was toned down
Abolished preferential lending rates
Privatized the commercial banks
Deregulation
Market opening (goods and services, FDI, financial
markets)
- Financial support for small and medium firms
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4. Evaluation of Korea’s Economic Development
< Successful Aspects >
• Rapid Growth
- GDP, Capital formation (Investment)
• Strong export performance
• Upgrading the economic structure
- Larger share of manufacturing industry
• Establishing competitive heavy industrial sector
• Establishing infrastructure for industrial
development
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4. Evaluation of Korea’s Economic Development
< Negative Side Effects >
• Price distortions
• Distortions in financial sectors
- Non-performing loans
• Excess capacity in some H&C sectors
- Overlapping investment
• Increased economic power of Chaebols and
resource- wasting competition out of dynastic pride
- Sales of the top five business groups: 50% of GDP (1991)
- SMEs were crowded out: handicap for competitiveness
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4. Evaluation of Korea’s Economic Development
< Negative Side Effects (Cont’d)>
• Excessively high debt/equity ratios for Chaebols
- Moral hazard from government loan guarantees
• Lack of foreign competition in the domestic market
- Producer protection policy: restrictive trade and FDI
policy
• Nationalistic sentiments in the general public
• Less focus on social welfare and environment
protection programs
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5. Factors Contributing to the Success
• Strong Political leadership and institutional building
- Early reform, well-prepared planning, administrative
support (export target, monthly export meeting presided
by the President, HCI Committee)
• Consistent growth-oriented economic policy
- Outward-looking and industry-oriented development
strategy
- Stable macroeconomic policy
• Interventionist policy based on technical and
economic criteria
• Risk-sharing among government, financial
institution and business enterprises
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5. Factors Contributing to the Success
• Emphasis on education and human capital
- Establishment of R&D centers, recruiting Korean scientists
and engineers from abroad
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Dynamic entrepreneurship
Well-trained labor force
Successful borrowing from abroad
Relatively clean government officials
Eagerness to catch-up
Liberal world trading environment
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6. Lessons from the Korean Experiences
• No secrete recipe, an outward orientation with
strong incentives for exports and a commitment to
growth through trade are the key
• Address fundamental problems
- Remove bottlenecks and Tackle problems of poor
infrastructure
- Stick with reforms
- Sound macroeconomic policies
- Economic liberalization and importance of foreign trade
recognized
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6. Lessons from the Korean Experiences
• Remove any bias against exports
- Realistic exchange rate – incentives for exporters
- Inputs for exports at world prices
- Incentives are uniformly applied across all exporters
• Leaderships
- Strong commitment from President
- Large conglomerates
• Political stability
- Consistent policy implementation
- Long-term goals can be set
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6. Lessons from the Korean Experiences
• Policies need be closely monitored and
modified if necessary
- Monthly export performance meeting chaired by
President
- H&C Committee
• Investment in human capital and R&D
• The competition in the domestic market
- Liberalization of trade and FDI must be continued
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7. Is the Korean Model Replicable?
• Is export promotion policy possible?
- WTO prohibits trade distorting subsidies: export
subsidies, import substitution subsidies
- Allowed subsidies: R&D, environment, regional
development
• Is specific sector targeting industrial policy possible?
(especially for H&C sectors)
- Too much risks: financing, excess capacity in the
world, foresight and ability of government, able
entrepreneurs
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