South Korea is a highly developed economy, with the 11th largest GDP in the world. It is a member of the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty (G20). The economy has seen tremendous growth over the past few decades, with an average annual growth rate of about 5.5%. South Korea is among the most technologically advanced countries in the world, and it is one of only four countries in the world to have achieved a “developed country” status by the World Bank. The country has also achieved remarkable success in terms of poverty reduction, with poverty rates dropping from almost 50% in 1960 to just 1% by 2017.
According to cheeroutdoor, the economy is heavily dependent on exports, mainly to China and other East Asian nations. South Korea’s major exports include electronics, automobiles, steel products, machinery and chemical products. In addition to this, South Korea’s service sector has been growing rapidly over recent years and now accounts for more than half of its GDP. This includes services such as finance, telecommunications, transportation and tourism which are all important components of economic growth in South Korea. The government has implemented various reforms to increase foreign investment into South Korea as well as encouraging domestic innovation. This has led to significant job creation throughout various sectors of industry leading to further economic growth in recent years.
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.
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 corporate restructuring.
Note: the capital city of South Korea is Seoul with a population of 10,200,000 (2012). Other major cities include Busan with a population of 3.5 million, Incheon with a population of 2.8 million, Daegu with a population of 2.5 million, Daejon with a population of 1.5 million, Gwangju with a population of 1.5 million (2012).
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 economy.
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.
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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 percent 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 Southeast Asia.
Abbreviated as SKR by abbreviationfinder.org, 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 percent of energy demand, coal for 28 per cent, natural gas for 15 percent and nuclear energy for 14 percent. The remainder came mainly from water energy and wood.
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.e. 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 North Korea.
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.
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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.