Gateway to Korea: Economy & Business

Over the last three decades, the Republic of Korea has achieved what is widely acclaimed as "the economic miracle on the Hang-gang River." Since Korea embarked on economic development in earnest in 1962, its economy has grown at one of the fastest paces in the world. As a result, Korea, long one of the world's poorest agrarian societies, has emerged as an upper middle-income, fast-industrializing country.
In around three decades, from 1962 to 1995, Korea's gross national product increased from US $2.3 billion to us $457.7 billion, with per capita GNP soaring from US $87 to about US $10,076 at current price levels. The key to this success was the adoption of an outward-looking development strategy making exports the engine of growth-a strategy making exports the engine of growth- a strategy that reflected Korea's insufficient natural endowments, its limited domestic market, and its abundant, well-educated, industrious manpower.

The economic structure was radically transformed as a result of the successful development programs implemented during these years. The manufacturing sector increased its share of GDP from 14.4 percent to over 26.9 percent in 1995. The commodity trade volume reached more than US $260.2 billion in 1995 in contrast to US $ 477 million in 1962. The gross savings ratio rose to 36.2 percent from 11.0 percent during the same period.

Korea's development is even more remarkable in view of its situation until the early 1960s. Korea had been economically backward for most of its long history. There were few significant industries before liberation from Japan's 35-year colonial rule (1910-45), during which Korea's economic resources were ruthlessly exploited by the Japanese. The Korean economy was further devastated during the Communist-provoked Korean War (1950-1953), the damage from which took a long time to heal. As late as 1961, Korea was still suffering from the many difficulties commonly faced by less developed nations. On top of its extreme poverty, the population was growing by 3 Percent annually. Unemployment prevailed and savings were negligible. The nation had no notable exports, and it depended on imports for both raw materials and important manufactured goods. (Facts about Korea, 1995, Korean overseas Information Service) [ Modern Economic Growth]

South Korea has a predominantly market economy based largely on services and light and heavy industries. Economic growth has been heavily dependent on exports of manufactures. The gross national product (GNP) is growing much faster than the population. The GNP per capita is similar to those of the other rapidly developing East Asian countries.

Agriculture now accounts for only a small proportion of the gross domestic product (GDP) and employs about one-seventh of the workforce. Land reform was implemented after 1948 and has greatly reduced tenancy; small family farms predominate. Production of rice, which is the chief staple, constitutes about two-fifths of farm-production value. The government purchases most rice at subsidized prices. Barley, wheat, soybeans, potatoes, millet, and vegetables are other important crops. Pigs and cattle are the main livestock raised; the production of beef, however, has failed to keep pace with domestic demand. Fishing, which provides food and a surplus for export, has been promoted by the government, and South Korea has become a leading deep-sea-fishing nation.

Mineral industries are dominated by the production of graphite, kaolin, pyrophyllite, talc, tungsten, and low-grade anthracite, which is used domestically for heating. Petroleum and most metals must be imported.

Manufacturing industries account for more than one-fourth of the GDP and employ nearly one-fourth of the workforce. Most industries are owned and run by families, and relatively few firms are listed on the nation's stock exchange. Some 20 conglomerates account for up to one-third of South Korea's manufacturing output, and they subcontract with small firms for ancillary goods and services. South Korea's industrial output has shifted from such light manufacturing as textiles to petrochemicals, electronic goods, steel (of which the country is an important producer), motor vehicles, and ships. About three-fifths of the country's electricity is generated by fossil fuels, with most of the remainder by nuclear power.

Exports of goods and services represent more than one-third of the country's GNP. Overseas construction contracts, particularly in the Middle East, awarded to South Korean firms have been an important source of foreign exchange. Major exports include machinery, textiles, transport equipment, and clothing and footwear. Machinery, mineral fuels, and manufactured goods are the major imports. South Korea has had increasing success in exporting its manufactures to developed countries. Its principal trading partners include the United States, Japan, members of the European Union, and Southeast Asian countries. South Korea has engaged in trade with North Korea since 1990. (Source: Encyclopaedia Britannica)