On the basis of Korea’s recovery from the global financial crisis, the government has been continuously making efforts to strengthen the groundwork for long-term growth and boost the real economy.
The government is managing macroeconomic policies in a flexible manner so that the economic recovery can be maintained. It is also taking steps to prevent the recurrence of a crisis through monitoring of domestic and foreign causes of anxiety, while strengthening its effort to prepare for possible risks from households, businesses, the financial market and the foreign exchange market, so that the economy will not be affected by external shocks.
With employment below the pre-crisis level, the government has pushed for job creation with fiscal projects and its own employment assistance programs, and by launching a service sector development plan, in order to generate long-term as well as short-term jobs. The government has also stepped up efforts to support lower income classes with policies designed to stabilize prices, provide affordable housing, vitalize microcredit loans, and secure the livelihood of vulnerable groups.
Thanks to the government’s successful policies, the Korean economy posted a growth rate of 6.2 percent in 2010, its highest mark in eight years, and per capita income returned to the US$20,000 level. Domestic demand has led the growth while private consumption and facility investment have posted excellent figures. Exports have increased in line with a rise in overseas demand amid the global economic recovery and backed by increased competitiveness of Korean products. Korea has leapt ahead to become world’s No. 7 exporting nation, and achieved a trade surplus of over US$40 billion for the second year in a row.
GDP Growth / Per Capita GNI
Source: The Bank of Korea
As a result of government efforts to create jobs, 323,000 jobs have been created, led by the private sector, with a rise in the portion of full-time jobs and subsequent improvement in the quality of jobs.
In addition, Korea successfully hosted the G20 summit in 2010, boosting the country’s image. The summit marked the first time for a non-G8 or Asian country to host the conference, and Korea played a key role as the chair of the summit, proposing the “Korea Initiative” and contributing to the substantial agreements. The summit showed Korea’s diplomatic ability and leadership as it served as a bridge between advanced and developing countries, and played a leading role in the creation of a new international order.
As the world’s 15th largest economy, South Korea has emerged as a success story in many ways. In 2010, Korea’s trade volume amounted to US$892 billion, ranking the country the 7th largest exporter in the world. Korea ranks the world’s sixth in terms of foreign reserves. Much like other countries, the Korean economy has also been affected by the global economic downturn. Although the won lost nearly one-third of its value in 2008, the Director of the IMF’s Regional Office for Asia and the Pacific has predicted that Korea would recover quickly due to its ‘improved economic fundamentals.’ Sustaining Korea’s economic growth are key industries that have garnered recognition in the global arena. Korea is the world’s leading producer of displays and memory semiconductors. Also, it is the second-largest shipbuilding nation in the world. Meanwhile, it ranks second in terms of mobile phones, and fifth and sixth in automobiles and steel, respectively.
Leading Traders, 2009
Unit: US$ billion
Source: World Trade Organization
Korea’s shipbuilding sector continues to be the industry leader, ranking second globally in terms of vessel tonnage built, new orders and order backlogs. Korea’s shipbuilding sector currently accounts for about 34% of the world’s total shipbuilding orders.
As a major auto manufacturer, Korea produces over 4.2 million vehicles annually. Since Korea first started exporting cars in 1976, the nation’s auto industry has developed at a remarkable speed.
Vehicles lined up for export in Incheon, the largest port on the west coast. (Photo courtesy of Hyundai Motor Company)
Riding on the increased popularity of Korean automobiles all over the world, leading Korean car companies have begun extending manufacturing bases to overseas locations.
With almost 13% of the global market share, Korea’s semiconductor sector is at the forefront of the industry, particularly in terms of flash memory and DRAM (Dynamic Random Access Memory). Korea’s two leading semiconductor manufacturers, Samsung Electronics and Hynix, ranked 1st and 2nd in the world in the memory semiconductor sector in 2010. All told, the two giants accounted for almost 50% of the global market.
Looking back, the direction of Korea’s industrial policy changed significantly every decade or so, helping to drive the economy toward a brighter and more prosperous future. From the early 1960s, Korea started to promote exports by enacting relevant laws and regulations and establishing export-oriented development plans. The heavy chemical industry was the center of the nation’s industrial policy in the 1970s and there was industrial restructuring in the 1980s. The restructuring was aimed at promoting small and medium-sized enterprises (SMEs).
Korea’s Principal Manufacturing Products
Source: Ministry of Knowledge Economy
Market opening and liberalization marked the 1990s. When the Asian financial crisis hit in 1997, Korea took on bold reforms to bring about a speedy recovery. Korean businesses took the initiative to increase transparency and meet global standards while policies to facilitate startups were put into place.
Since 2000, innovation has topped the national agenda. To bring about more innovation, Korea is promoting business-friendly policies as well as policies enhancing cooperation between large companies and SMEs.
Korea’s main emphasis is concentrated on stimulating the nation’s growth engines and upgrading its industrial structure. To do so, Korea aims to further develop its component sector and knowledge-based service sector.
Having reached successful free trade agreements with the U.S., and the EU, Korea now hopes to explore other mutually beneficial pacts with other trading partners.