When the Korean Peninsula was divided, South Korea was
mainly an agricultural country. In the early 1960s, it began
to be transformed into a so-called new industrial country
and became one of Asia's four ※tigers§ (along with Hong
Kong, Singapore and Taiwan). The change took place with the
help of foreign (mainly US and Japanese) capital, with an
export-oriented development strategy and with strong state
indirect influence and control of the market economy.
A number of successful five-year plans since 1962 led to
rapid growth in the economy, for example close to 10 per
cent per year 1982-91. South Korea became a major exporter
of ships, cars and telecommunications products and is now a
world-leading IT nation. After that, however, growth slowed.
With its export-oriented economy, South Korea faced growing
competition from other Asian states that were industrialized
and had lower wages.
COUNTRYAAH, business was dominated by some 30 very large corporate
groups, chaebol, such as Hyundai, Samsung and Daewoo, and
there were very close contacts between them, the government
and the largest banks. Substantial wage increases during the
1990s led to a strong middle class growing up, but
bankruptcies, unhealthy bank lending and government rescue
operations increased. The budget deficit and external debt
grew sharply. The Southeast and East Asian financial crisis
of 1997-98 therefore hit South Korea very hard. The country
was offered a US $ 57 billion loan and aid package by the
International Monetary Fund (IMF), the fund's largest rescue
operation to date. This was linked to demands for, among
other things, decontamination in the banking system,
liberalization of the capital market, tax increases and
Already in 1999, a strong recovery came when both foreign
and domestic demand started again. South Korea did not have
to use the entire IMF loan and was able to repay it as early
as 2001. During the 1990s, the manufacturing industry has
shown steady growth while agriculture has had only a minor
impact on the country's economy. South Korea can now be said
to have a mature, post-industrial, service-dominated
The number of chaebol has been halved, but they still
play a central role in business and are more open about
their operations. The largest are the Samsung Group, which
is the world's largest corporate conglomerate and accounts
for 20 percent of South Korea's exports, as well as the
Hyundai Group and the LG Group. South Korean construction
companies have a very strong position in the world market
and the country also exports more and more advanced business
services. Business growth is concentrated to Seoul and to
the Busan-Ulsan region in the southeast. The state is now
less active in business, but control has increased to
prosecute and punish mismanagement and corruption.
Competition in the world market has become even tougher and
protectionism is clearer with South Korea's major trading
partners USA, EU and Japan. Therefore, it is important for
South Korea to negotiate bilateral free trade agreements.
Such came into force in 2011 with the EU, 2012 with the US
and the same year also with China and Japan.
The global financial crisis of 2008-09 hit
export-oriented South Korea hard, but the recovery went fast
and South Korea was the only one of the 20 OECD countries to
have a positive GDP growth in 2009. The reason for this was
government stimulus measures, a targeted fiscal policy and
probably also the an increasing connection to the growing
Chinese market. The South Korean companies proved to be
effective competitiveness and in 2013 the country was the
world's seventh largest exporting country. However, if this
position is to be maintained, South Korean companies need to
invest more in innovation and their own research.
For information on GDP and other business statistics, see
Only 1/5 of the land area is cultivable. Agriculture is
concentrated to the river valleys and lowlands in the west
and south, where you can take two harvests a year.
Agricultural productivity increases significantly more
slowly than in industry.
Fields for cultivation of wet rice occupy about 60
percent of the arable land. In addition, grains, beans,
potatoes and wheat and fruit are mainly grown. The farmers
are self-sufficient but the farms are very small; only 14
per cent is larger than 2 ha. Less than 40 percent of farmer
household income comes from agriculture. It is common to
have another job as well.
In order to cope with the self-sufficiency of foodstuffs,
the state previously gave the farmers great support, among
other things in the form of low prices of artificial
fertilizers and pesticides. State purchases and restrictions
on food imports have also been supported in agriculture.
Membership of the WTO global trade organization has forced
South Korea to change this, even though special import
quotas for rice have been negotiated.
Production of the most important foods has steadily
declined in recent years and grain imports have increased.
In addition, the rising standard of living has meant that
South Koreans want a more varied diet, with much more animal
products, vegetables and fruits. Therefore, much more of
such goods are also imported. Animal breeding has decreased
and cattle are mainly used as draft animals.
The original forest was severely depleted due to prey
harvest until 1945, and the situation worsened during the
war in the early 1950s. Since then, successful forestry and
soil conservation campaigns have been carried out, and now
2/3 of the land is forested. 2/3 of the forest area is
privately owned. Harvesting (mainly of pine, larch and oak)
is limited to the two provinces in the northeast and east.
Production covers only a small part of the domestic timber
requirement. Much timber and timber products are imported
from Russian Far East and Siberia and from countries in
South Korea has a long coast and is surrounded by
fish-rich waters. Fish plays an important role in the diet
and has also contributed to exports. With state aid, the
fishing fleet has been modernized and expanded, and South
Korea became one of the major fishing nations in the 1990s.
The cultivation of oysters and aquatic plants increased
sharply in the early 1990s, as did their exports to Japan.
Fishing catches were the largest in 1996, but they have
subsequently declined and now fish are imported. In 2014,
sea fishing yielded approximately 1.7 million tonnes of
seafood, while just under 500,000 million tonnes came from
fish and seafood farms. In addition, just over 1 ton of
cultivated aquatic plants was harvested.
Less than 15 percent of the Korean Peninsula's known
mineral resources are found in South Korea. Primarily,
tungsten, graphite and talc are extracted, as well as
limestone, which is the basis for a very large cement
industry. On a small scale, kaolin, molybdenum, feldspar and
salt, as well as iron, lead and zinc ores and gold are
mined. South Korea is almost entirely dependent on imports
of most important minerals such as iron, copper and
aluminum. Virtually all iron ore is imported into the steel
mills, mainly from Australia and Brazil. In South Korea,
there are also uranium ore reserves.
South Korean mining companies have been involved in
operations mainly in Australia, Canada, Indonesia and the US
and in recent years also in North Korea. They also negotiate
with several states in Africa.
Energy consumption has increased significantly every
year, as a result of industry expansion and rising living
standards with increased car ownership. In 2008, oil
accounted for 43 per cent of energy demand, coal for 28 per
cent, natural gas for 15 per cent and nuclear energy for 14
per cent. The remainder came mainly from water energy and
South Korea has a large shortage of its own energy
resources and 97 percent of the demand is covered by
imports. Coal is needed in the steel industry and in the
thermal power plants and is extracted both near the west and
south coasts and on the east coast. Coal mining has been
extensive, but the quality is low and now more than 95
percent of the coal used is imported. South Korea is the
world's second-largest coal importer in the world. The
country lacks domestic oil resources and almost 1/4 of the
country's entire imports are oil. About 75 percent of that
comes from states on the Persian Gulf. South Korea has very
large refinery capacity and 1/4 of the oil is exported in
the form of refined products. In recent years, oil
dependency has been reduced and widened the raw material
base, among other things by investing in natural gas. It is
imported in liquid form (LNG) from Indonesia, Qatar,
Malaysia and Oman, and South Korea is the world's second
largest importer of LNG. It is transported in large tankers
to gas terminals in several port cities. Some percent of the
natural gas used comes from domestic deposits.
The first nuclear power plant was started in 1978. In
2005, nuclear power accounted for 38 percent of the
electricity produced, placing South Korea in fourth place in
the world in that regard. In 2009, 20 reactors were in
operation and another five under construction. South Korea
builds its own nuclear power plants and also exports them.
To reduce the risk of importing oil from only a few
countries, South Korea has engaged in oil exploration and
extraction in some 15 states. They are also interested in
North Korea's large coal deposits.
South Korea has a shortage of minerals and energy
resources, but has had good access to skilled labor. When
wages were low, South Korea was able to produce textiles and
other simple consumer goods for export to an increasing
extent from the beginning of the 1960s. In recent decades,
competition has increased primarily from China, and textile
products now account for only a few percent of exports.
South Korea's textile industry is increasingly focused on
manufacturing special textile products, e.g. based on
biotechnology. In the early 1970s, the emphasis was shifted
to more capital-intensive industries that produced
machinery, transport equipment, factory equipment and
petrochemicals. In the 1980s, the electronics industry
developed, the industry that is now the most important in
South Korean exports. The recovery following the financial
crisis in 1998 was driven by the shipyards and by
semiconductor and automotive production and the
manufacturing industry showed steady growth during the
period 2001-07. During the global financial crisis of
2008-09, the automotive industry's production, and thus the
entire manufacturing industry, declined, but it has
recovered in the 2010s.
Since 2004, South Korea has been the world's leading
shipbuilding nation and particularly prominent in terms of
the largest container and tanker vessels. In 2010, there are
seven of the world's ten largest laps. The largest is
included in the Hyundai group and the second largest in the
Samsung group. Subsidies have meant that production costs
have been lower than in competitor countries, but
competition from China is intensifying.
The automotive industry was initially focused on exports,
but gradually domestic demand has also grown. South Korea is
one of the world's largest car manufacturers.
With capital and technology from abroad and considerable
government support, the electronics industry, the most
important export industry since 1988 (ties other video and
television sets, digital cameras and home electronics as
well as computers and peripherals) was developed. As early
as 1992, South Korea was one of the five largest
manufacturers of electronics in the world. After the
financial crisis, a new strong upturn came until 2005.
Subsequently, growth in this industry has slowed sharply, as
competition is fiercer from China, mainly in terms of
simpler electronics products. At the same time, growth was
very fast in semiconductor manufacturing. Samsung
Electronics is the world's largest electronics company in
2010 and the largest manufacturer of mobile phones.
Despite the lack of domestic raw materials, South Korea
in 2007 was the world's sixth largest steel producer. The
steel company POSCO has one of the world's most advanced
steel mills in Gwangyang on the south coast. In addition
there is a large chemical industry that manufactures i.a.
artificial fertilizers, artificial fibers and pesticides and
a number of very large oil refineries. Since 2004, South
Korean companies have been able to transfer operations to
the Kaesong industrial zone just north of the border with
Constantly growing exports have been the driving force
for South Korea's economic development for several decades.
Deficits in the trade balance were common, among other
things. as a result of ever-rising oil prices and a highly
valued Japanese currency which resulted in high costs for
technology imports. Textiles and other light industry
products dominated exports until the 1980s. Subsequently,
the importance of these products gradually decreased, while
cars, ships and other workshop products became increasingly
prominent, as did electrical and electronic products. During
the 2000s, the current account showed a small surplus
annually with the exception of 2008.
Traditionally, trade has been extensive with the United
States and Japan. In 2003, however, the United States was
passed by China as the most important country for South
Korean exports. The most important export goods are
semiconductors, cars and communication equipment. Oil and
gas make up a large part of imports, which also include
electronic equipment. The most important individual
importing countries are China, Japan and the United States.