Republic of Korea: The Lamp Bearer (original) (raw)

2012

Abstract

1960s poverty-stricken agricultural economy, which was considered as one of the poorest countries, Republic of Korea had proved with the changed orientation from 1960s traditional labour-intensive products manufacturing such as textiles and apparel, footwear, and foodstuffs, later on shifted to ‘heavy industries’. During the 1970s and presently moving towards a knowledge based operations, i.e., IT and communications industry which had emerged as the main pillar of the economy, accounting for 13 per cent of the gross domestic product (GDP) and 25 per cent of exports. It had proved that it’s the ‘Lamp bearer” as it was considered in 1929. Korea had attained an annual GDP growth rate of 6.3 (2002), gross capital formation (% of GDP) 26.0 and it was a journey from US$80 income level of 1963 to US$9,930 in 2002, Korea is now ranked as Upper-middle-income country. Economic growth percentage has been moving in the positive direction in the past decade at 8.8% (except for the year 1997 when there was the Balance of Payment crisis). South Korea had industrialised its economy and achieved a good ranks of OECD (Organization for Economic Cooperation & Development) which it joined in 1996 while considering its lack of good relations with neighbouring countries, Korean War (1950-53), natural resources and limited domestic market. Presently many economists think Korea had developed into the world’s 11th largest economy today by following the model of the world’s second largest economy just next door to Japan. Its almost true due to the two major concepts from the Japanese, which has given the boost to, the Korean economy has contributed in the following way: I. Orienting the economy towards aggressive exporting rather than trying, as many poorer countries did, to cope with the superiority of Western economies by ‘Import Substitution’ or creating domestic industries that replaced foreign imports. II. System joining companies together in large interlocking corporations or conglomerates (Keiretsu in Japan) and Chaebols in Korea. Other Korean Strategy which had made the dream come true was “Do what the Japanese have done, but do it cheaper and faster”. This study is a minuscule effort to show that how a country considered as a Labour intensive had turned itself into a capital intensive country (an evidence for the Heckscher-Ohlin or Factor-Production Model) without constraining the growth of traditional industries as an important export sector and economy still growing with a good pace. For this Korea had actively participated with WTO and had shown its commitment towards Multilateral Trading System. With this it had achieved secured market access while promoting global economic growth and development. South Korea is now working as a role model to work on, who as a nation for stability and growth internationally had not relied on foreign-aid but emphasized on domestic savings and foreign borrowings. And with the three radical directional changes in the Korean Economy had made it to change from Labour-Intensive to Export-Oriented manufacturing, to moving the Economy up the value chain, and lastly, turning the focus sharply to Infrastructure, Human Capital and High Technology.

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