Korean Miracle Finish
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Dr. Jun Kyu Lee gave a lecture on South Korea's economic development and response to the global economic crisis. He explained that South Korea transformed from one of the world's poorest countries to the 13th largest economy through large investments in education, an export-focused industrialization strategy, long-term economic planning, and rapid technology adoption. South Korea is also working through international cooperation and the G20 to address the crisis and promote global economic stability. Dr. Lee highlighted how South Korea's past experiences with financial turmoil and decisive government policies have allowed it to recover faster from the current crisis compared to other nations.
Korean Miracle Finish
- 1. Kyung Hee University Graduated School of Pan-Pacific International Studies International Workshop Prof. Tae Hwan Yoo Isis Quiñones 2009535001 International Business 1
- 2. Table of Contents 1. Introduction 2. South Korean Economic Development 3. Factors of South Korean Economic Development -Human Capital Inversion: -Exports Strategy (Industrialized): -Economy Political Constance (Economy Plans): -Technology Revolution: 4. South Korea and the G20. 5. How is South Korea getting out faster of the Crisis? 6. Conclusion 2
- 3. 1. Introduction In the latest years students and professionals have experienced the need of been actively connected and involved into the international community. This is one of the strongest reasons why nowadays we see students leaving their native countries to study in other countries which could offer them the opportunity to be in contact with new ideas, concepts and visions of their field of studies. International Workshop class was one of the most significant classes that we have coursed this fall semester due to the content of the different lectures offered by distinguished South Korean professionals that allowed us to understand and appreciated the different topics of the international community mainly showing us the economic, business and socio-cultural issues. In this occasion we are going to remark one of the most extraordinary and impressive lecture that was given in our International Workshop Class, offering by the invited speaker Doctor Jun Kyu Lee, one of the most outstanding Economic Development Experts in South Korea. Dr. Lee is currently working for the Ministry of Strategy and Finance (MOSFT) which was established in March 2008 to supervise the day after day economics of the public, committed to the improvement of the domestic economy and establishment of growth dynamics through effective policy coordination, international cooperation, competent budget management, fair tax systems, and public enterprise reform. Dr. Lee at the moment is extremely immerse in the project “South Korea in the G20” playing a essential role in the different activities, workshops, conferences, etc. leading with the creation of different strategies and policies that will help the United States of America to recovery from the current economic difficulties. Dr. Lee in his lecture entitled “South Korea’s Resilient Economy & Decisive Measures: Taking a Stand Against the Global Turmoil” amazingly explained us the different factors and stages that the South Korea Economy achieved in order to pass from a poor country to a rich country, focusing in the “South Korean Miracle” most important aspects. In the other hand, Dr. Lee also explain us the reasons why South Korea is getting so faster out of global economic chaos and impressed us showing us the different facts that prove how South Korea is facing the crisis. 3
- 4. 2. South Korea Economic Development History has showed us how countries make an effort to develop policies, programs, strategies and mechanisms that allow them to achieve economic develop, with the main objective of increasing the welfare of humans in their society as education, health, human security, employment, etc, increasing the different economic indicators as Gross Domestic product (GDP), Gross National Income (GNI), Gross National Products (GNP), Exports Volume, and others. In the first section of the lecture, Dr. Lee explained us how South Korea has developed a number of policies and strategies that today allowed them to be integrated into the world economy after been one of the world’s poorest economies, achievement that is known as the “Miracle on the Han River” and has transformed South Korea into the 13th largest economy and commercial partner around the world. Dr. Lee insisted that South Korea’s economy development was possible thanks to the constant efforts that the government made promoting high interest rate for savers and investor, and the high incentive on education, what motives younger students to enroll the universities accomplishing one of the highest levels of enrollment in universities around the world. South Korea built up an outward-oriented economic development strategy, which used exports as the engine of growth, this issue of developing a model of exports contributed greatly to the radical economic transformation of South Korea. Based on such a strategy, many successful developments programs were implemented, one of the most important programs was the liberalization process that South Korea’s used as a strategy to expand exports due to the fact that South Korea was importing three hundred millions of dollars and was just exporting thirty millions of dollars. Between 1960’s and 1090’s South Korea have had to promote exports giving all kinds of resources as for example: incentives, exemptions, tax reductions, export credit, low interest rate, and others in other words South Korea practically suspended all controls to exports. During this time South Korea has drastically transformed its industrial structure, due to the issue that they wanted to control imports and the reason of this control on imports was because after liberalizing exports, imports continue increasing at the same level of exports and this was represented in the different economic indicators. 4
- 5. In order to reduce imports, South Korea government began to promote heavy and chemical industry and rapidly South Korea was able to develop the car industry and more after electronics industry representing since 2004 the 30% of products exports. The intervention of the South Korean government in the macroeconomic politic was really significant. The majorities of all principal business organizations were formed by the South Korean government or were under the influence of the state. In the greater part of the cases, the government had employed the politic of “association” as the media through which they could “sell” their politics to the industry and obtain their support. As a result, from 1962 to 2008, South Korea's gross domestic product (GDP) increased from US$2.3 billion to US$969.9 billion, with its per capita GNI soaring from US$87 to about US$20,045. These impressive figures clearly indicate the magnitude of success the economic programs have brought about. 1 South Korea’s government is involving practices to international standards, enhancing national institutions efficiency, promoting human capital, and technology development. The government remains strongly committed to reform and will continue to implement financial and corporate restructuring while pursuing flexible macroeconomic policies that are beneficial to economic growth. Dr. Lee has grants that South Korea’s government objective is to solve problems and build a strong economic structure appropriated for an advanced economy to confront the new challenges. 1 See The World Bank Annual Report 2008. 5
- 6. 3. Factors of South Korea Economic Development Dr. Lee pointed out that the incredible economic development that South Korea’s has achieved was possible thanks to four critical factors. -Human Capital Inversion: This is one of the most central factors for South Korea’s Government and can be easily noticed if we look how South Korea invests in education, heritage from Confucius’s philosophy for whom was essential the promotion of education. -Exports Strategy (Industrialized): Since the year 60’s the economic development process of South Korea was basically focused in their policy of exportation, the goal of the South Korean Government was to obtain an economic growth of 7% (Galvan, 2008) for this they applied the substitution of imports strategy, which until that time had had a positive tendency to later converted it in negative. South Korea had made a campaign for the promotion of exportation with the motto “Nation Building by Exports” with the objective to teach the nation the significant importance of this export strategy, and there after South Korea became a country incredible industrialized. Dr. Lee mentions some points which we consider significant in order to the improve exports: Attractive Exchange rate for exports. The importance that gives South Korean Government to the Export Sector. All the facilities that the South Korean Government gives to exporters. Energy Cost. Financing facilities offered by the South Korean EXIMBANK -Economy Political Constance (Economy Plans): The impressionist economic development that South Korea has achieved in less than 50 years was supported by their quinquennial development programs and the realization of the “Monthly Exports Promotion Meeting” where entrepreneur, governmental officials, and other professionals took place to identify the different problems and look for the different possible solutions to solve the problems. -Technology Revolution: 6
- 7. At this moment South Korea is one of the countries that has accomplished more Information and Communication Technologies (ICTs) advancement around the entire world. South Korea has obtained economic growth and social transformation through the development of certain policies and programs promoting ICTs thanks to the South Korean government vision concerning the relevant impact that ICTs represents for economic growth, they saw ICTs as a potential motor to obtain economic development. Dr. Lee commented how South Korea had transformed from an analogy country to a digital one, transformation that today allows them to be the first country in information technology. According with Chadwick (n.d.) the effect of ICTs on national economies such as the South Korean economic is fourfold. ICTs and the digital revolution create: • New industries and economic sectors or sub-sectors (e.g. the software industry, cell phones, computers and peripherals) • New ways of doing business (e.g. e-commerce, globally distributed organizations, integrated supply chains) • New tasks and opportunities for government (e.g. e-government, privacy policy legislation, ICT industrial policy) • New issues in economic and political development (e.g. availability of information access, computer literacy, the digital divide) 4. South Korea and the G20. 7
- 8. In the second section of Dr. Lee’s lecture, he commented how The Ministry of Strategy and Finance (MOSFT) is working through international cooperation policies, together with the United States of America and The Group of Twenty (G20) looking for strategies to solve the financial turmoil that exploded last September 15th, 2008 with the bankruptcy of the Lehman Brothers. South Korea has learned in a short time a lot of experiences due to its precedent economic problems and the most recently 1997- 1998 Asia Financial Crisis which allow South Korea to demonstrate the entire world that they have learned important lessons as is the systematic planning and determination strategy during the financial crisis and also during their development process. Lessons that today are opening many doors to South Korea in the international community. Dr. Lee explained how South Korea see the problem of the Global Financial Crisis, and argued that “International Cooperation is the key for the solution of the new economic order”, he also illustrated how South Korea is collaborating with the G20 by offering their experience and also developing supportive policies, finance regulations, reforms and programs which could return to the United States their economic stability. He explained us how the United States became a problem maker due to the wrong policies that were taken not just in the year 2008 moreover those in past years where the stock market was already having serious problem, but companies as Standard and Poor’s and Moody’s were evaluating with false securities and policies. The bankruptcy of Lehman Brothers marked a line before and after the fall of Lehman Brothers for the United States’ economic was then when the United States recognized that they could not solve this problem alone and when the G20 a group of twenty developed and developing countries which represent the 85% of the biggest economies and the 90% of trade activity came into the center and started to play and important role in this turmoil, been the premier forum where 20 economic leaders are working together to take the world out of this crisis. 5. How is Korea getting out faster of the Crisis? 8
- 9. Dr. Lee explained us how Korea is getting out of the crisis by telling us that Korean Government is constantly monitoring the situation and is giving to the market the policies and procedures that they need to follow, arguing that “Government set the rules, market follow them”. Korea is overcoming this crisis by promoting and supporting exports policies and inverting by injecting money in the private sector in order to develop new technological products and services with the main objective of increment exports of Korean Products around the world. He also mention the emphasis that Korea is giving to the investment sector by offering investor significant attractions and giving priority to the construction area what he identified as “hardest hit in Korea” after the financial crisis. To finish his speech he insisted that Korea is a country without natural resources but Korean performance is thanks to three factors: Human Capital, International Cooperation and Export Model. 9
- 10. 6. Conclusion It was such a great opportunity to listen to Dr. Jun Kyu Lee’s speech about “South Korea’s resilient economy & decisive measures: Taking a stand against the global turmoil”, where he in a magnificent and enthusiastic manner try to explain us how South Korea accomplished economic development and how South Korea is managing the actual situation in order to continue its growth and maintain apart of the chaos. Came to South Korea to study a Master in International Business has been one of the most wonderful experience of my life, that today give me the opportunity to see how “economic miracles” are projects of nations that are taken with a great passion. It was marvelous to see how this official of the Korean government Dr. Lee expressed in his face the emotion of telling us the history of how Korea become what it is today. This speech certainly convince me that if every single nation assume the promotion of exports as a national priority, accompanied with the development of long and short term program, and always giving constantly monitoring to if implementation in few years is possible to accomplish a country with economic and social development. Korea is a country that has impacted me with their strong organization and work force and after participating in this international workshop class and have the opportunity to be in contact with different authorities from various governmental institutions, I could see the coordination through the different governmental institutions with the view to achieve the objectives that are proposed as a nation. Korea economic development was possible thanks to the prudent and systematic management with long-term strategies and a different conduct of the government and with well organized institutions in order to generate different results. Korea has demonstrated that in order to help the market of any country is needed to study the more convenient manners to intervene with a definitive strategy. 10
- 11. References Galván, Héctor. 2008. El Rostro de la Esperanza. Santo Domingo, República Dominicana: Editora Centenario. Korea. Ministry of Culture, Sports and Tourism. 2008. Korea Impossible to Possible. Seoul, Korea: Korean Culture and Information Service. The Organization for Economic Co-operation and Development (OECD). 2009. Annual Report 2009. Paris: OECD. The World Bank. 2008. Annual Report 2008. Washington: The World Bank. Seongta, Lee. 2007. Annual Report 2007. Seoul, Korea: The Bank of Korea. ISSN 0067-3706. 11