Introduction
South Korea is one of the Asian economic giants. The country’s economy is structured around a market economy. Currently, the country is ranked 15th in the world by its nominal GDP and occupies a slot among the G-20 major world economies. By many standards, South Korea qualifies as a high-income economy. The country’s journey to economic success began in the early 1960s favored by several factors.
The two decades that followed saw a steady growth in the country’s economy that earned it a slot amongst the fastest growing nations in the world. The country’s growth was against all odds as it suffers from overpopulation and mineral deficiency, a combination of which is detrimental to economic prosperity. It is no surprise that the country’s growth has been attributed to “the Miracle on the Han River.”
Though the country’s economic growth slowed in the late 1990s, it has continued on the path of recovery and economic success to date. In 1997 when the Asian Financial Crisis hit, for instance, the country was not affected as much as the other Asian nations were. Nonetheless, it had to receive a bailout from the International Monetary Fund to restructure and jump-start its economy.
Current position
According to the World Bank, South Korea’s GDP stood at $1.12 Trillion in 2011. This places the country among the highly developed nations in the world like the Australia and Spain, which had a GDP of $ 1.49 Trillion and $ 1.48 respectively in 2011(World Bank 21). During the 2008/2009 economic crisis that brought many economies crumbling, South Korea’s economy was hardly scathed.
In fact, the country only registered reduced economic growth of 0.2%. This resilience has been attributed to its low public debt and huge reserves. Immediately after the financial crisis, when other nations were being bailed out, South Korea registered an impressive 6.1% economic growth.
Whereas huge economies such as the United States of America and Britain are yet to recover from the economic crisis, South Korea recovered almost immediately thereby re-affirming its financial might.
The country’s capita income is equally impressive. In December 2011, the country’s capita income was $ 30205.60 (Tradingeconomics). This was a significant increase from the 1980 capita income, which was $ 2,300. In just 30 years, the country’s capita income has grown manifold.
The country also boasts of being among the donor nations in the world today, advancing aid to other nations to offset their budget deficit. According to Bliss, “In the past few decades, South Korea has become an active member of the international development donor community” (51).
During the 2008/2009 economic crisis, for instance, the country advanced economic aid to many countries estimated to be $ 1.7 billion. This figure excludes all amounts advanced to North Korea, which the country has traditionally given a huge portion of its donor funds.
The country’s rate of unemployment is one of the lowest in the world. By September 2011, the country’s unemployment rate was 2.90%. In October 2012, however, the rate dropped to 2.8% (Korea National Statistical Office, 2). This is impressive as compared to other mighty nations such as the United States, which is currently fighting 8% unemployment rate, its worst ever (U.S. Bureau of Labor Statistics).
Economic propellers
Trade
Over the last few years, South Korea’s reputation as a global business hotspot has greatly increased. Large and medium businesses have expanded their capital involvement in the country to have a share of its lucrative market. This rush for South Korea’s market can be attributed to steady economic growth, favorable business environment, relatively low production costs, and sound economic policies.
Today, the country earns billions of dollars annually from trading with other nations. In fact, “In an effort to confirm its status as one of the world’s premier trading nations, the country has proactively entered into free trade pacts with several of the world’s leading economies” (Heritage.org). This has strengthened the country’s trade ties, thereby increasing its earnings from trade.
Rule of Law
The legal requirements of doing business in a country are the regulations set by the country’s government for investors to abide by to avoid arrest or business fines arising from noncompliance (Jolly 179).
Investors want certainty in their operations and are therefore, more concerned about transparency, efficiency, and reliability of the legal system within which they conduct their businesses. South Korea’s legal system is well developed and its laws protect property, which encourages business growth. The country is also calm politically.
Automobile
The automobile industry was the main income generating activity for the nation in the mid 1980s. By 1988, the country capped its production to over 1 million units of cars.
The government then increased its investment in the industry to $ 3 billion, which further propelled the industry to greater heights. Today, the country’s automobile industry led by the Hyundai Kia brand, has remained a major income earner and among the leading in the world.
Shipbuilding
The country’s established ship building sector has also propelled it to economic success. In the mid 1970s, South Korea dominated ship building in the world. Its two major firms, Hyundai and Daewoo built landmark facilities in various parts of the world. Today, the country commands a share of 50.6% of the world’s ship building projects.
Foreign Direct Investment
South Korea’s economic reform process has concentrated on promotion of Foreign Direct Investment. The process has changed the way many countries and investors view South Korea as an investment destination.
In fact, in the recent years, the country has become the main destination for Foreign Direct Investment. As aresult, the coutry has been able to earn more in taxes to build its infrastructure and to stimulate economic growth.
Low Inflation Rates
According to Morrison, inflation is a“sustained increase in the prices of goods and services” (244). Increase in inflation results to a correspondent increase in wage of employees.
This affects businesses as it cuts into their earnings, which may force investors to shy away from a region. South Korean rate of inflation has been consistently low, thereby creating favorable environment for businesses to thrive. These businesses have driven the country to greater heights.
Education and Training Policy
The role of education and training in a nation’s success cannot be ignored. Employers want well-trained and skilled workers. In fact, some people lack employment because of poor training or lack of it at all. By investing in educational programs, the government increases its citizen’s knowledge, thereby increasing their chances of securing employment.
South Korean government has been dedicated to the process of providing quality education for its citizens to raise their chances of landing jobs. In 2011, for instance, the government spent $ 129.8 billion on education programs for its citizens.
By spending in education programs, the government not only provides its citizens with necessary skills for acquiring jobs but also pumps funds into the national circulation system, which promotes growth and job creation.
In conclusion, it is evident that South Korea’s economy has growth tremendously. In fact, there are areas in which the country’s performance surpasses that of economic giants like the United States of America. If the country’s performance remains on track, it could become Asian powerhouse like China.
Works Cited
Bliss, Katherine E. Key players in global health: how Brazil, Russia, India, China, and South Africa are influencing the game. Washington, DC: Center for Strategic and International Studies, 2010. Print.
Heritage.org. “South Korea Economy: Facts, Data, & Analysis on Economic Freedom.” Conservative Policy Research and Analysis. N.p., n.d. Web.
Jolly, Adam. Business insights, Europe a practical guide to company formation, employment law and taxation across the EU. London: Kogan Page, 2009. Print.
Korea National Statistical Office. Korean Economic Report 2012. Seoul: Korea National Statistical Office, 2012. Print.
Morrison, Wayne M.. China’s Currency: An Analysis of the Economic Issues. New York: DIANE Publishing, 2010. Print.
Tradingeconomics. “South Korea GDP per capita PPP.” TRADING ECONOMICS | 300.000 INDICATORS FROM 196 COUNTRIES. N.p., n.d. Web.
U.S. Bureau of Labor Statistics. “U.S. Bureau of Labor Statistics.” U.S. Bureau of Labor Statistics. N.p., n.d. Web.
World Bank. Global Economic Prospects 2011. Washington, DC: World Bank, 2011. Print.