Economic structure of South Korea. Economic growth of south korea

A dictatorial president, 350 working days a year and a planned economy - no, we are not talking about the DPRK, but about South Korea. Thanks to supernatural efforts, the Koreans of the South made an economic breakthrough, turning the agricultural country into an industrial one. We will tell you how it happened and what it led to.

There is little money in the budget, there is not even enough electricity, the country is corrupt, and in the place of the main industrial region a well-armed “people's republic” has appeared - a situation that is familiar to us once in South Korea. But thanks to reforms, the country has become a world economic leader. In Ukraine, they often talk about the Korean experience, but often reduce it to deregulation and the fight against corruption. In fact, there were more changes, but not all of them can be repeated in our conditions.

1. South Korea became the 11th largest economy in the world

Korea has few natural resources, but its GDP is higher than that of oil and gas producing countries like Norway and Iran. And the Koreans left most of Europe behind. South Korea was once a poor agricultural country, but has managed to modernize its economy.

1. Its GDP grew 179 times thanks to... a planned economy

Over the past 54 years, Korea's per capita GDP has grown from $156 to $27,000 per person. However, during the first decade of reforms - from 1961 to 1970 - gross domestic product grew by only $136. Modernization did not have an immediate effect, but the Koreans did not change the country’s course. More precisely, President Park Chung-hee did not change him - from 1961 to 1979 he virtually ruled the country single-handedly. Korea introduced five-year plans and built an economy under government control. The president ruled like a dictator, and this provided the stability necessary for reforms.

1. Exports helped Korea become a developed country

If you compare this graph with the previous one, you will see that the export of Korean goods grew even faster than GDP - in 54 years it increased 7,000 times! Korea ranks eighth in the world in product exports. The government helped exporters with subsidies. Every year, Koreans received more and more foreign currency, and this money helped develop the country's economy. In 2014, international trade revenues amounted to 714 billion - half of South Korea's GDP

1. The country turned from an agricultural one to an industrial one

After the division of Korea, the south was predominantly agricultural, but industry now accounts for 39% of the country's GDP. And agriculture accounts for only 2% of income. The secret of this transformation is, again, government support. Manufacturers of finished products received subsidies and orders from the state, and business taxes were reduced. Preferences were given only to the most successful enterprises - this is how competition was stimulated in Korea. As a result of this policy, chaebols emerged - groups of industrial companies, like Samsung or LG.

Now the Korean economy is becoming post-industrial: the share of services in the country's GDP is growing and has already overtaken income from industry. Last year, Korean businesses earned $814 billion in the services market.

1. Korea is one of the top 5 high technology suppliers...

In 2014, the sale of technological products brought Korean companies $133 billion - for comparison, income from all Ukrainian exports that year amounted to 53 billion. And the global revenue of the Korean Samsung group of companies is estimated by the World Bank at 150 billion - almost the same amount earned by all those located in the United States companies.

1. ...and invests in science more than anyone else in the world

The millions spent on science allow the country to earn billions from high-tech exports. In 2014, the country allocated 4.3% of GDP to science - more than Japan or the United States. Koreans not only allocate a lot of money for research and development work, but also use it effectively.

1. To achieve the "economic miracle", Koreans worked 350 days a year

Even in the 90s, the average Korean rested 4-5 days a month. But this was also a relief: a decade earlier, the average number of working days reached 363! No country in the world could compare with Korea in terms of labor productivity; even the Japanese, whom we consider to be workaholics, were left behind. However, now Koreans work much less: on average they have 8 days off per month - a schedule quite familiar to us.

Every year the number of working days is decreasing, but do not think that Koreans work 10-12 hours - they simply began to work less. However, this has not yet affected the country’s economy, because the result of work depends not only on the number of working days, but also on the organization of labor and the use of technology, and on the productivity of work. For example, Germans have much fewer working hours, but this does not hinder the country's development.

8. Every third ship in the world comes from Korea

If a country produces a lot of steel, it can be sold abroad and make an easy profit, as they do in Ukraine. Or build ships from metal, sell them at a much higher price and not depend on the prices of raw materials - this is what they did in Korea. The development of shipbuilding also did not happen without government support, but now the country produces 35% of all ships in the world - almost on par with China.

The decline in purchases of Korean ships is the first sign of the global financial crisis. The country produces supertankers - these ships are so large that they cannot pass through the Panama and Suez Canals. They are priced to match the size, and if ship operators suddenly stopped ordering supertankers, it means that there will soon be an economic recession and customers are afraid to take risks.

1. The country leads in the number of Internet connections

Korea has the highest number of cable Internet connections per 100 people. In addition, local users are increasingly connecting to high-speed Internet - according to this indicator, South Korea ranks sixth in the world. While Europe is moving from 3G to 4G, the Koreans are preparing to launch a more advanced communication standard - 5G, although they already have the fastest Internet access in the world.

The “internetization” of the country makes life easier for businesses, allowing them to save on stores and sell goods via the Internet, since most of the population accesses the Internet. Even small enterprises that usually do not have money for “promotion” and renting retail space can sell their goods and services in this way. In addition, the Internet allows businesses to use new services such as Internet banking, and it is easier to find partners via the Internet.

But the accessible Internet also has a side effect: it causes addiction among Korean teenagers, for which they have to be treated in special centers.

1. Korean schools are third in the world in terms of quality of education

South Korea ranks second in the world in terms of average resident IQ, and it's not a matter of genes or heredity. According to estimates by the Organization for Economic Cooperation and Development, the local schools are third in the world in terms of quality of education. And the educational company Pearson recognized the Korean education system as the best in the world, although it noted that students often “memorize” dozens of pages rather than analyze the material.

1. But a high standard of living does not make the country's residents happy

According to the UN, in 2015 South Korea ranked 58th in the world on the Happiness Index, and over the past 10 years the country's position in the ranking has changed little. According to the Organization's data, Koreans lack freedom of choice, and they also consider themselves insufficiently protected. However, the answers depend not only on the standard of living, but also on the optimism of citizens. For example, Korea is ahead of crisis-ridden Venezuela and Mexico, where drug lords are at war with the government.

1. Korea drops in competitiveness ranking, although it is in the top 30

According to the World Economic Forum, in 2015, Korea ranked 26th in the world on the competitiveness index. This rating shows the state's ability to ensure the development of the country and good living conditions for citizens. The Koreans are ahead of the economically powerful Turkey, Brazil and China, but this is not the highest figure for them: in 2007, South Korea ranked 11th.

1. But the country failed to defeat corruption

We tend to think of developed countries as being free of corruption, but South Korea ranks 37th on the Corruption Perceptions Index. However, Korean corruption does not prevent entrepreneurs from working: the country ranks 4th in the Doing Business ranking.

1. Unification of Korea will cost the South a trillion dollars

The DPRK's gross national income is 43 times lower than that of South Korea, and the North's industry is outdated, and the South Koreans will not benefit from unification. But they will have to feed 25 million North Koreans, provide them with modern medicine and education, and help 120 thousand prisoners of northern concentration camps. The southerners will also have to reduce the million-strong army of the DPRK and dispose of nuclear warheads.

Yes, South Korea will receive millions of new workers - but they will have to be retrained, because the technical level of the DPRK is much lower. And if not all North Koreans agree with unification, the new state will face an “urban war”, like the one that happened in Northern Ireland. Either way, the threat of change will cause capital flight and spook investors.

The eventual reunification of the country will be very costly for the more developed South. Therefore, the normalization of relations between the DPRK and South Korea is possible, but the South Koreans are unlikely to agree to pay out of their own pockets for the restoration of the north.

While Korea is working hard, Ukraine is resting

Once upon a time, South Korea was similar to today's Ukraine: a poor agricultural country that survived the war. Now Korea has managed to become a world leader in almost all indicators. Koreans worked, and worked, and worked... They invested in science and industry. They realized that the fate of the country depended on what they did for its future.

In Ukraine, it is not yet possible to work as zealously as in Korea: in June the government planned 11 days off, 2 days off more than in rich South Korea.

South Korea is a highly developed industrial-agrarian country that occupies one of the leading places in the world. Over the past decades, Korean industry has developed at a rapid pace and shown good growth dynamics. The state is a major manufacturer and exporter of ships (container ships, tankers), electronics (TVs, computers and components, information systems, optical instruments, electronic equipment), and vehicles.

Key Economic Trends

Modern industry in South Korea is developing relatively steadily. This ensured GDP growth in the Korean economy in 2015. According to the Ministry of Strategy and Finance (MOSF), the GDP was 1585.51 trillion. Korean won ($1.38 trillion) and compared to 2014 it increased by 2.6%. The GDP growth rate in quarterly dynamics was: in the first quarter - 2.5%, in the second - 2.2%, in the third - 2.7%, in the fourth quarter - 3.0%.

The recent crisis years have affected the Republic of Kazakhstan, as well as other countries of the world. The GDP indicator per capita in dollar equivalent is equal to 27340.8 US dollars compared to 27963.6 US dollars in 2014 (-2.2%). According to the Bank of Korea (BOK), in 2015 and 2014, GDP growth was:

Economic sphere	2015 (%)	2014 (%)
Agricultural	1,5	3
Forestry and fisheries	1,5	3
Processing industry	1,3	4
Mining industry	1,2	3,9
Construction	3	1,2
Services	2,8	0,4

As statistics show, production and processing have decreased, while the construction and services sectors have increased. The gross national income was 1565.82 trillion. Korean won ($1.41 trillion), showing an increase of 4.6%. The volume of exports was equal to 526.9 billion US dollars and decreased by 8% compared to 2014. And the volume of imports fell by 16.9% to 436.5 billion US dollars. The foreign trade balance surplus amounted to $90.4 billion. For the first time in 5 years, foreign trade turnover did not exceed 1 trillion. US dollars, decreasing to 963.4 billion US dollars. In 2016, GDP increased by 2.8%, instead of the planned 3%, so we can summarize that the crisis has not passed.

Government programs aimed at stimulating exports, domestic consumption, as well as investment in construction and production had a positive impact on the economy of the Korean peninsula. The Government of the Republic of Kazakhstan took a number of incentive measures, the total amount of which amounted to $17 billion. Most of these funds were allocated to increase jobs; 300 thousand were created, while in 2015 – 340 thousand.

The Korean industry in 2015-2016 was negatively impacted by the decline in consumption in countries that are its main trading partners. A significant decline in demand from China and other Asian countries led to a reduction in production.

Level of industrial development

The industry of South Korea shows ambiguous dynamics - growth in some industries and decline in other areas. According to the Bank of Korea, in 2015 the industrial production index was 107.8 points, showing a decline of 0.5 points compared to 2014.

In 2015, the best growth result was in the IT industry. This was facilitated by the measures taken by the Korean government to invest in this direction and create a system of cooperation with non-governmental organizations. Specialized institutes have also been created, the purpose of which is to orient scientific research in the IT industry into the format of close interaction between private and public institutions, and to train highly qualified personnel.

As a result, the country in 2015 ranked third in the world in terms of exports of information and communication technologies and products; it amounted to 170 billion US dollars (107.2% of the 2014 level). Electronics represents the lion's share of budget revenues. This product category provides significant support during economic downturns. Koreans in the world market have strengthened their position in the production of the following goods:

• Mobile devices (sales increased by 1.4%),
• Semiconductor memory (by 7.9%),
• Liquid crystal displays (0.7%).

Despite the incident with Samsung products (Galaxy Note 7), which caused record financial damage to both the company itself and overall economic growth indicators, the dynamics are mostly positive

It is necessary to note the increase in production capacity in the aerospace industry (an increase of 13.1%), in the petrochemical industry (by 3.3%), despite the fall in world oil prices in 2015, and in the automotive industry (by 0.7%).

Growth rates in certain industries showed negative dynamics. Thus, in the field of metallurgy, 2.6% less steel was produced than in 2014, which was caused by a reduction in production in shipbuilding (-7.1%) and mechanical engineering (-2.0%).

State of Agriculture

In general, the situation in agriculture is difficult. There is still a tendency for the population employed in the industry to decline by 0.6%. According to the Ministry of Agriculture, Food and Rural Affairs (MAFRA), the area under rice, which is the most important crop, decreased by 0.7% in 2015.

However, the effective implementation of information and biotechnologies, the active use of solar energy and robotics in the agricultural sector made it possible to harvest a rice harvest of more than 4.33 million tons, which in turn is 2.0% more than in 2014.

There is a general trend of reduction in the sown area of ​​vegetable crops: potatoes, the sown area of ​​which in the country is 37.3 thousand hectares (-11.2%), Chinese cabbage 12.7 thousand hectares (-60.3%), radish 5, 8 thousand hectares (-72.6%), red pepper 34.5 thousand hectares (-15.3%), apples 31.6 thousand hectares (+3.0%), pears 12.7 thousand hectares (-3.5%). As a result, the country's harvest in 2015 decreased by an average of 15%.

According to the relevant Ministry, in 2015 the number of cattle decreased by 3.1% and equaled 3.09 million heads, of which 2.68 million heads of meat breeds (97.0% of the 2014 level) and 0. 41 million dairy breeds (95.5%). Rising prices for pork contributed to an increase in the number of these animals to 10.19 million (101.0% since 2014).

The number of ducks in the country has increased significantly - to 9.77 million (29.8%). The number of chickens amounted to 164.13 million heads (104.9% of the 2014 level). According to the Korea International Trade Association (KITA), the amount of pork imports in 2015 was 1.3 billion dollars (114.0% of the 2014 level), cattle meat - 1.8 billion. US dollars.

In 2016, Korea was in fifth place among all countries in the world in agricultural development, behind only the USA, Japan, EU and Canada. In the category of “Quality agricultural product” the level of the Republic of Kazakhstan was more than 90% of the US level. In the field of innovation in agriculture, South Koreans are in 4th place in the world. In 2015, 534 patents were registered (+12% from 2014). By 2020, technology in this area will be 88.5% of the level of the United States.

Retail trade turnover

According to the information portal KOSIS (Korean Statistical Information Service), the volume of services and retail trade in 2015 was equal to 335.15 billion US dollars, which is 2.2% more than the previous year. Road service facilities accounted for 24.6% of all retail sales, and specialized stores that sell goods of a specific range accounted for 27.6%.

A major role in trading activity is played by convenience stores (increase in sales turnover by 29.0% compared to 2014) and the reorientation of retail sales to online stores (increase by 10.5%). This is due to the desire of buyers to purchase all the necessary goods without leaving home in one place, and the lower prices of such stores.

Indicators of the volume of commodity production

According to the Korean information resource KOSIS, in 2015, out of 266 types of products manufactured in the Republic of Korea, 119 had a positive upward trend compared to 2014. Among the goods, the production of which in 2015 increased significantly compared to the previous period, it is worth highlighting :

• gravel: 26.4 million sq. m. (126.0% shipped at the 2014 level);
• reinforced concrete supports: 7.7 million tons (121.6%);
• herbicides: 52.1 thousand tons (120.2%);
• epoxy resins: 436.0 thousand tons (117.7%);
• quarry sand: 30.6 million cubic meters. m. (117.3%);
• sesame oil: 13.7 million l. (115.8%);
• asphalt: 6.1 billion liters (115.4%);
• elevators: 36.6 thousand units. (115.0%);
• whiskey: 4.2 million liters (114.8%);
• soybean oil: 503.1 million l. (114.3%);
• solid oil: 35.6 thousand tons (113.6%);
• aviation kerosene: 24.7 billion liters (113.3%);
• salt: 342.8 thousand tons (113.0%);
• concrete formwork: 883.3 thousand cubic meters. m. (112.2%).

Products whose output has decreased significantly include:

• kraft paper: 161.9 thousand tons (87.3% of the 2014 level);
• zippers: 124.8 thousand km. (84.6%);
• CDs: 91.9 thousand pcs. (82.7%);
• quartzite: 1.3 million tons (79.8%);
• vending machines: 58.3 thousand units. (77.7%);
• loading cranes: 620.2 thousand tons (77.4%);
• tarpaulin: 137.7 thousand tons (76.4%);
• ferrite cores: 3234.5 million pcs. (75.9%);
• steel pipes: 4.6 million tons (74.4%);
• vacuum cleaners for the home: 2.5 million units. (62.4%).

However, despite great achievements, modern industry in South Korea is experiencing a crisis. On the path to economic development, there were strict economic planning, government support for chaebols (large financial and industrial groups) with damage to medium and small businesses, strict control over all areas of business, and foreign trade protectionism.

The Republic has an urgent need for structural restructuring of all spheres of the economy. The priority direction for the further prosperity of the state is the creation of an economic model that will be focused on supporting the interests of medium and small businesses, as well as carrying out reforms in the industrial and financial spheres, and agriculture.

A small country in Northeast Asia with the most innovative economy continues to develop successfully. Despite their geographical size, in terms of GDP, South Korea and Russia are neighbors in the world rankings. Moreover, a smaller country has a stronger economy.

Economic overview

A country with a developed capitalist economy occupies leading positions in the world in many indicators, including ease of doing business (5th place) and innovation (1st place). In 2017, South Korea ranked 11th in the world in terms of GDP with an indicator of 1.53 trillion US dollars. In terms of GDP per capita ($27,023.24), the country is in 31st place in the world ranking.

The country's leading industries are automotive, petrochemicals, semiconductor and steel. The country has long entered the post-industrial phase, with the predominance of the non-material sector of the economy. In the structure of South Korea's GDP, 59% comes from the service sector, 39% from manufacturing and 2% from agriculture. The government is encouraging businesses to develop and implement Fourth Industrial Revolution technologies, especially in terms of artificial intelligence, robots and telecommunications equipment.

International trade

The country owes its economic success primarily to international trade. The country's enterprises are aimed at producing products that have good export potential in recent years, especially with high added value. South Korea is one of the top 5 countries exporting high-tech products. In terms of total export volume, the country is also in 5th place; in 2017, its volume amounted to $577.4 billion.

The top Korean products produced for sale in the foreign market are: integrated circuits ($68.3 billion), automobiles ($38.4 billion), petroleum products ($24.8 billion) and passenger and cargo ships ($20.1 billion). Top export destinations: China, USA and Vietnam. Import volumes in 2017 amounted to $457.5 billion. The country purchases the most crude oil ($40.9 billion), followed by integrated circuits ($29.3 billion) and natural gas ($14.4 billion). Most goods are purchased from China, Japan and the USA.

Economic volumes

In the 50s, the main share of South Korea's GDP came from agriculture and light industry, in the 70s and 80s - from light industry and consumer goods, and in the 90s - from the service sector. During the period from 1970 to 2016, the volume of services produced in the country increased by $516.5 billion (297 times).

South Korea's GDP exceeded US$1 trillion for the first time in 2010. Over the next seven years, the figure grew by more than 50%, reaching $1,530 billion in 2017.

Below is a table showing the GDP South Korea by year.

Year	Value, billion dollars
2007	1049.2
2008	931.4
2009	834.1
2010	1014.5
2011	1164.0
2012	1151.0
2013	1198.0
2014	1449.0
2015	1393.0
2016	1404.0
2017	1530.0

These statistics perfectly show how successfully the country is developing in the economic sphere.

Economic growth rate

Following the global economic crisis of 2008, South Korea's GDP growth rate fell to 0.3% in 2009. In 2011, the country had already reached a good level of 3.7%, which is a fairly high figure for a developed economy. This was facilitated by good market conditions for the country's main export goods, including shipbuilding, automotive manufacturing, engineering products and household appliances. From 2012 to 2016, South Korea's GDP growth rate slowed due to problems in the foreign market. Increasing competition in the electronics and automobile markets and falling incomes in the markets for metallurgical products and shipbuilding had a negative impact on the country's economy.

In 2017, for the first time since 2014, the country's economy managed to overcome the 3 percent barrier, reaching a level of 3.1%. Over a three-year period, the South Korean government intends to achieve a GDP growth rate of 4%. The breakthrough occurred primarily due to excellent conditions in the market for semiconductor elements and memory cards.

South Korea has a thriving economy that has had a chance to recover quickly after World War II and the end of the Korean War. Successful government reforms and well-thought-out modern economic policies contribute to constant GDP growth and an improvement in the quality of life of the state's residents.

Prerequisites for reform

After the end of World War II, the country split into two parts - North and South. Thus, traditional ties in the agricultural sector, industry and production were broken. The main farmland was in the South, which had been agrarian for centuries. Industrial and production resources were located in the North. Due to the division, South Korea lost important industries such as cement, chemicals and metallurgy. It was possible to save plants and factories that specialized in the production of food and light industry products.

In 1945, the USA, France and Britain provided financial and material assistance to the national economy, but this did not completely help overcome the devastation and poverty.

The Allies developed a special plan for the gradual restoration of the economy. The following events were carried out:

• USA from 1954 to 1959 provided South Korea with loans and subsidies worth $1.5 billion.
• A gradual increase in GNP began.
• There was a doubling of production.
• The number of unemployed and partially unemployed by 1958 was almost 37%.

Despite some successes, the economic situation in South Korea remained very bad. Firstly, there were practically no mineral resources in the state. Secondly, the country has hilly terrain and relief, which hindered the active development of agriculture. Thirdly, there were no qualified workers and engineers to develop industry.

Perestroika the South Korean way

In the early 1960s. General Park Chung-hee came to power, who understood the need for urgent changes in all spheres of life, but priority was given to the economy. His policies were based on state capitalism and a free economy. The basis of the reforms was the introduction of centralized management, which made it possible to very quickly get rid of the agrarian past and break into the industrial world. The main reforms carried out by Park Chung Hee include:

• Creation of chaebols - large private conglomerates with various areas of activity.
• Transfer of transport, energy, and port communications under the authority of the state. The water supply was also controlled by the government.
• The banking system, the agricultural sector, the national economy and agriculture were nationalized.
• Peasants were freed from paying debts to moneylenders.
• Prices for agricultural products have been supported.
• Banks began to attract investments and loans.
• They borrowed money from other states, creating special tax benefits for them. The main investors were the United States and Japan.

The government of Park Chung Hee sought to reduce unemployment, create an effective economic management system, promote industrial development, increase exports and labor efficiency.

The main sectors of the economy were:

• Automotive industry.
• Shipbuilding.
• Electronics.

It was in these areas that the opening of enterprises and the provision of government loans were supported. The reconstruction was carried out in the export sector, the military-industrial complex, and construction.

The creation of chaebols, which were engaged in the service sector, trade, production, export, communications, and electronics, had a beneficial effect on development. Large sums were given from investors and the state for the development of chaebols. The largest conglomerates were Samsung, Daewoo, Hyundai, and Goldstar.

Successful Five-Year Plans

The government's reform program was based on 5-year plans, developed taking into account the situation in the country. The first five-year plans were especially important:

• 1962-1966 – restoration of the production of mineral fertilizers and electricity, petrochemical and cement industries.
• 1967-1971 – modernization of steel production, development of the mechanical engineering and chemical industries.
• 1972-1976 – the emphasis was on turning the economy into an export-oriented one. At this stage, investments were mainly made in the heavy, oil refining, chemical industries, mechanical engineering, and electronics.
• 1977-1981 – products began to be produced that were competitive in other countries and in other markets. Knowledge-intensive industries played the main role, which made it possible to significantly increase exports to 45%.

Further five-year plans continued the policy begun by the general’s government in the 1960s. Park Chung Hee's focus on exports allowed the gap between the agricultural and industrial sectors to quickly widen. Reform through five-year plans was not without problems. At first, only cheap goods and products were produced, which resulted in a policy of protectionism and the ability of South Korean products to compete with goods from other countries.

Exports in the late 1970s was limited by the global crisis and increased oil prices. After several years of constant inflation and negative GDP figures, the government in the 1980s. moved to large-scale structural restructuring of the economy.

By the end of the decade, the first signs of economic recovery began to appear. In particular, GDP growth increased, by an average of 9% per year, prices for consumer goods rose, and the domestic market stabilized, which became the basis for economic development. The government began to gradually move from exporting goods to self-sufficiency of the population. This measure was necessary in order to reduce dependence on investments from other states.

The economy of South Korea at the end of the 20th – beginning of the 21st centuries.

Since the 1990s The country began to gradually integrate into the world system of economic relations, gaining membership in regional and international organizations. If in the first half of the 1990s. There was a certain decline in exports and economic growth, but in subsequent years the situation gradually improved. Although the 1997 crisis, which hit the whole world, caused a depletion of gold and foreign exchange reserves, a fall in the value of the won, and an increase in unemployment.

The leadership of South Korea responded quite quickly to the deterioration in the economy and carried out a number of anti-crisis measures. As a result, the economy began to grow again, reaching 9-10% every year. World economy at the beginning of the 21st century. showed a drop in production and export volumes, and then the financial crisis broke out, which began in the United States.

A set of measures, including:

• Large-scale restructuring of chaebols.
• Privatization of banking structures.
• Liberalization of the economy.
• Intensifying foreign trade, including with China.
• Combating the depreciation of the won, which has attracted foreign exporters.

The main export items in 2004-2018 are consumer goods, ships, steel, rice. The gradual weakening of the policy of protectionism over agriculture made it possible to reduce rice prices within the country and on world markets.

Foreign countries are willing to buy electronics, agricultural products, and industrial goods. The economy began to demonstrate positive trends of a stable nature since 2009, which allowed South Korea to enter the TOP 20 in terms of GDP, per capita income, rates of economic growth and development.

Structure of the financial and banking system

It began to take shape after the end of the war and the emergence of two Koreas on the peninsula. There are several groups of financial organizations:

• Central bank.
• Non-banking organizations – venture funds, insurance companies.
• Banking institutions.

Non-banking institutions appeared in the country immediately after the diversification of financial resources and stimulation of cash flows. This happened in the 1970s, which attracted investors from abroad. Within a decade, such structures, like commercial banks, became objects of accelerated liberalization and their introduction into the international market system.

In the 1960s Specialized banks were formed, the activities of which were aimed at supporting those industrial sectors defined by the five-year plans. Now such structures are engaged in agriculture, foreign trade, fishing, and industrial production.

The Central Bank is the main financial institution in South Korea, which was established in 1950 to issue the national currency. Also, the responsibilities of the Central Bank included carrying out credit, monetarist and foreign exchange policies, and regulating the activities of non-state banks. Central Bank employees collected data and information about the South Korean financial system, determined which areas to lend to, which banks to support.

Leading industries

Production in the South Korean state began to develop steadily starting from the mid-1970s. Since then, the gross national product has been constantly growing, varying between 9-10%, and falling during periods of crisis to 2-3%.

For centuries, agriculture and the agricultural sector developed in the southern part of the Korean Peninsula, which were in a state of complete decline with the creation of North and South Korea. In this regard, a reorientation of industry and a decrease in the share of agricultural land began to occur. Reforms of the 1960s – 1970s contributed to the emergence of such industries as:

• Textile.
• Construction.
• Automotive.
• Shipbuilding.
• Electronics.

The leader of the automotive industry is the Hyundai company, and the entire sector accounts for about 9.5% of added value, more than 8% of exports, providing work for almost 7.5% of the country's population. In the global part of automobile production, South Korean automobile production reaches 5-6%. Together with the Hyundai company, Kia Motor, Daewoo, SsangYong Motor Company, and Renault Samsung Motors send their products to the world market. About 3-4 million cars are exported every year, and about 1.6 million cars are sold within the state.

Shipbuilding began to develop rapidly in the 1970s, turning into the 21st century. in one of the main industries. In South Korea, they build, repair and convert various types of ships and vessels. This contributed to the development of related industries, which include electronics, chemical, and metallurgical industries. The shipyards are owned by three companies:

• Hyundai Heavy Industries.
• Daewoo Shipbuilding and Marine Engineering.
• Samsung Heavy Industries.

There are also smaller companies that own docks and shipyards, but the bulk of ships are built by these corporations.

The state not only creates new ships, but also develops the production of complex and so-called expensive ships - tankers, gas carriers, large cargo containers. During construction, new technologies and advances in the field of electronics are used.

The mechanical engineering sector is the largest and strongest in the country, and constantly suffers from global economic and financial crises. Many enterprises open and close, but this does not prevent them from steadily producing turbines, tools for metal processing, rock mining, refrigeration equipment, and agricultural machinery.

Also leading sectors of the South Korean economy are metallurgy and the petrochemical industry. Metallurgical products from this Asian country are constantly in demand in foreign markets. As for the oil and chemical sectors, the demand for goods produced at the enterprises of the industries is expanding both within the state itself and beyond its borders. The main directions of the petrochemical industry are:

• Resins.
• Fibers.
• Rubbers.

Textile production is developing in relation to exports and market demands, sending 2/3 of the products produced to other countries. The main competitors in the textile market are the United States, Germany, Italy, and China. Interestingly, the South Korean government is investing more in the Chinese textile industry than in neighboring countries. After China, infusions are being made to the USA, Philippines, Sri Lanka, Indonesia, Guatemala, etc.

Along with the industries formed in the early 1950s, more modern areas of production are also actively developing. We are talking about the energy sector, the high-tech sector, telecommunications, and semiconductors. The main feature of these areas is that they have become widespread not only in Asia, but throughout the world, thanks to consumer demand and support.

Agriculture

It has a long tradition of development, which is facilitated by the monsoon climate, which is characterized by wet summers and cold, dry winters. In such conditions, the ancient Koreans, like modern ones, grew rice, which was the main agricultural product. Almost 80% of farms are engaged in growing rice, then giving it to domestic needs, since they are reluctant to buy it on foreign markets due to its high cost. In this regard, the government promotes the cultivation of other cereal crops - barley, wheat, millet.

Climatic and natural conditions made it possible to grow many types of vegetables and fruits, raise animals, and engage in forestry in the south of the Korean Peninsula. In particular, they grow apples and peaches, which are readily purchased by Sri Lanka, Indonesia, and China.

The development of agriculture contributed to the emergence of related industries and the creation of new jobs. This is how the food industry arose, they began to produce mineral fertilizers, and develop farming and fishing.

Who provides the services?

South Korea is a young country in many respects, but its economy has already become one of the best in the world. And not the least role in this is played by the service sector, which is provided by various companies, structures, and firms. This is all due to the fact that tourism and its various directions are actively developing in the state, retail trade, sports, culinary are taking the lead, and modern resorts are being built. The list of the most popular South Korean services includes:

• Insurance.
• Catering sector.
• Laundries.
• Medicine.
• Entertainment and leisure.
• Retail.

The latter sector began to develop dynamically since the mid-1980s, when Koreans opened shops, shops, and kiosks en masse. The assortment in such retail outlets was quite limited, and most often, it was made by members of the same family. Gradually, other service-oriented enterprises began to emerge. This is how cafes, restaurants, small hotels and hostels appeared.

Economic miracle: results

For more than twenty years, the South Korean economy has shown positive dynamics. In particular, GDP grows every year by 9-10%, in some years it reached 14%. Other results include:

• The export of Korean goods is actively growing, which has allowed South Korea to take 8th place in the world in product exports.
• Investment of currency into the state economy.
• Expansion of international trade, from which incomes are growing, reaching 700-800 billion US dollars per year.
• South Korea ranks fifth in exports of technology and technological products, behind only China, Germany, the USA, and Singapore.
• The country has taken a leading position in the world in shipbuilding. New companies are being built all the time, which control 40% of the world's orders received for the construction of sea vessels.
• The productivity of workers has increased sharply, surpassing even the Japanese in terms of workaholism.

Why South Korea succeeded: the hard road to success

The country has limited natural resources, which did not prevent its government from carrying out successful economic reforms. The following factors contributed to the implementation of a successful startup:

• Economic development has become a priority and central focus of government reforms. The leadership decided to reduce import tariffs and stimulate export growth by attracting exporting entrepreneurs. Business received various quotas, subsidies, and loans. The consequence of this was a constant and stable increase in exports and annual GDP. Average per capita income since the mid-1960s. until 2018 increased from $65 to almost $28 thousand.
• South Koreans are highly productive. It is people and human resources that have become the basis for economic growth in the country. Koreans worked very intensively, setting aside 1-2 days a month for rest. Highly qualified specialists, including engineers and workers, were especially valued. The government made sure to increase the level of education and literacy of workers, their qualifications and skills.
• The fight against corruption was carried out effectively. For this purpose, dictator Ban Chung-hee in the early 1960s. dismissed almost 17 thousand officials, and banned 4 thousand from engaging in politics and similar activities. As a result, international investors began to more actively invest money in the country’s economy and financially support it in post-war reconstruction. Now any citizen of South Korea can contact a special service, complaining about bribery and corruption. For this, the person receives a reward, which is calculated as a percentage of the bribe amount.
• Changes in the tax system, which reduced tax rates and improved investment conditions. Investors saw the attractiveness and potential in the South Korean economy, industry and manufacturing.
• Dictator Ban Chung-hee forced the country's wealthy citizens to invest in the country's industry, in its shipbuilding. This policy caused disapproval among supporters of the South Korean president, but the end justified the means.
• The stable development of the economy largely depended on heredity in the transfer of power, on family control of large firms and enterprises that are formally independent.
• Government support for businessmen who entered international markets.
• A ban was introduced on the withdrawal of capital abroad; all private investments and government resources were directed to exports and industry.

So, in order for the economic development of South Korea to become stable, active and progressive, the government and population of the country had to go through the breakdown of the traditional system. As a result, the state’s economy is now included in the TOP 20 of the best and most promising economies in the world. South Korea has become a highly developed Asian country that is attractive to investors from all over the world. Experts, analysts, entrepreneurs and businessmen note that in South Korea it is easy and simple to do business, open new jobs and implement various financial projects.

Some reforms, including import substitution, turned out to be failures and were not fully thought through; corruption and family clans prevented the introduction of new technologies and the transfer of production areas under state control. At this time, the financial assistance provided by the United States turned out to be very useful and timely. In particular, 50% of the country's state budget was covered by American creditors, more than 70% of defense costs were paid by the United States. The same applied to the sphere of imports and capital investments; the level of investment from the States during economic reform reached 70-80%.

Since the 1960s, South Korea has undergone years of incredible economic growth and global integration to become an industrialized, high-tech economy. Four decades ago, GDP per capita was comparable to that of the poorest countries in Africa and Asia. In 2004, South Korea became a member of the club of countries with a GDP of more than one trillion dollars, and is currently among the 20 largest economies in the world. Initially, this success was made possible by a system of close government-business communication, including directed credit and import restrictions. The government encouraged the import of raw materials and technology for the production of consumer goods and encouraged savings and investment in consumption.

With the onset of the Asian financial crisis of 1997-98. weaknesses in South Korea's development model emerged, including a high share of debt in GDP and massive short-term foreign borrowing. As a result, South Korea's GDP decreased by 6.9% in 1998, however, thanks to the successful actions of the country's government in 1999-2000. GDP grew by 9% annually. South Korea implemented numerous economic reforms after the crisis, which included creating greater openness to foreign investment and imports. In 2003-2007 South Korea's GDP growth rate has slowed to approximately 4-5% annually. Due to the global economic crisis that began in late 2008, South Korean GDP growth slowed to 0.2% in 2009. In the third quarter of 2009, the country's economy began to recover largely due to rising exports, low interest rates and expansionary tax policies, and economic growth in 2010 has already exceeded 6%.

Long-term problems for the South Korean economy include a rapidly aging population, an inflexible labor market and over-reliance on exports for manufacturing.

History and current state of the South Korean economy

Korea approached World War II as one of the poorest countries in the world with a predominantly agricultural economy. The post-war devastation and the Korean War did not contribute to the sustainable development of the country's economy. The government of Syngman Rhee relied on economic assistance from foreign countries, in particular the United States. The country's national economy was in decline, and the population's income was very low.

After the division of Korea into two parts - the DPRK and South Korea - long-standing ties between the agricultural South and the industrial North were destroyed. South Korea lost such industries as metallurgical, chemical, and cement. Light and food industry enterprises were mainly concentrated in the south.

The Korean War completely undermined the country's economy. After the end of the war, the South's allies, with the assistance of the government, developed a plan to promote the South Korean economy. The United States provided about $1.5 billion in subsidies and “development loans” between 1954 and 1959 (loans amounted to $12.4 million). This money was mainly spent on the purchase of American food and consumer goods, only a small part went to restore the production infrastructure of industry and agriculture. However, in the early post-war years, American aid contributed to a relatively rapid economic recovery. The average annual growth rate of the gross national product in 1954-1958 was 5.2%, and the manufacturing industry doubled its production over these years.

By the beginning of 1958, the number of unemployed and semi-unemployed people was about 4.3 million people (36.6% of the total working population of South Korea).

Since the early 60s of the 20th century, the Korean economy has developed rapidly. Over three decades (1962 to 1989), gross national product increased at an average annual rate of 8%, rising from $2.3 billion in 1962 to $204 billion in 1989. Average annual income rose from $87 per person in 1962 to $4,830 in 1989. The share of the industrial sector in 1962 was 14.3% of GNP, and in 1987 it was 30.3%. Trade in consumer goods grew from $480 million in 1962 to $127.9 billion in 1990.

The most significant factor in accelerating the development of the country's economy was the economic policy of the new President Park Chung-hee, who directed the government's efforts to attract foreign investment, increase exports and industrialize the economy. The state began to play a more prominent role in the economic life of society. Elements of a planned economy - five-year economic plans - began to be introduced.

During the development of light industry from 1962 to 1971, foreign investment amounted to $2.6 billion, mainly in the form of loans provided to the government and the private sector. By relying on the industrial sector of the economy and the country's export-oriented development strategy, the country's government artificially widened the gap between the industrial and agricultural sectors in the economy.

By the early 1970s, however, the country's industrial sector was facing problems. Prior to this, the national industry produced cheap products using cheap labor, which increased the competitiveness of South Korean goods and stimulated protectionist policies on the part of other developing countries. The government responded to this by increasing funding for the heavy and chemical industries and investing in capital-intensive and high-tech sectors of the economy.

The structural transition to capital-intensive industry was difficult. The situation was complicated by the fact that in the late 1970s there was a global energy crisis, which led to an increase in oil prices and limited the volume of South Korean exports. In 1980, the South Korean economy experienced a temporary crisis: for the first time since 1962, the national economy showed negative growth and inflation increased.

In the early 1980s, the country's government began large-scale economic reforms. In order to curb inflation, conservative monetarist policies and tough fiscal measures were adopted. Money supply growth has been limited from 30% in the 1970s to 15%. The budget was briefly frozen. Government intervention in the economy was greatly reduced, and freer conditions were created for foreign investors. To bridge the gap between urban and rural areas, the government has increased investment in projects such as road construction, communication networks, and mechanization of village labor.

These measures, along with the general recovery of the world economy, helped the South Korean economy reach its previous level of growth in the second half of the 1980s. The economy grew at an average annual rate of 9.2% between 1982 and 1987, and 12.5% ​​between 1986 and 1988. Inflation, which had been a double-digit percentage in the 1970s, was brought under control, with consumer goods prices increasing by an average of 4.7% per year. Seoul achieved a significant increase in its balance of payments in 1986, and the balance of payments in 1987 and 1988 amounted to $7.7 billion and $11.4 billion, respectively. This rapid development helped South Korea reduce its external debt.

In the late 1980s, the domestic market became the basis of economic growth. The growth in demand for cars and other expensive goods has increased significantly due to the general increase in the solvency of the population. As a result, the government's economic policy, previously aimed at exporting Korean goods, changed towards self-sufficiency, which led to a decrease in dependence on other countries. Especially in those years, the service sector developed rapidly.

The 1990s were marked by South Korea's close integration into the world economy (it became a member of several international economic organizations in the mid-1990s) and rapid growth in household incomes. However, by 1990 it became clear that the high growth rates of the 1980s would slow down. Economic growth in 1989 was only 6.5%. In the first half of the 1990s, the pace did not slow down; on the contrary, there was a slight recovery - with an increase in investment and exports, economic growth increased from 3% in 1992 to 8.6% in 1994 and 8.9% in 1995. Gross national product per capita rose to $10,000 in 1995, and unemployment reached an unprecedented 2% in 1996. Inflation remained relatively stable at 4% per year.

The stable economic development of the South Korean economy was interrupted in 1997 along with the global economic crisis. In October 1997, the won began to depreciate sharply against the dollar. By November 21, 1997, the country's gold and foreign exchange reserves were almost completely depleted, and in order to prevent a complete collapse of the economy, the government was forced to make large loans from the International Monetary Fund.

A series of measures taken by the government, including a number of economic reforms, allowed South Korea to emerge from the crisis quite quickly. Already in 1999, economic growth was 10%, and in 2000 - 9%.

The slowdown in global economic growth and falling exports in 2001 took their toll on the South Korean economy: growth in 2001 was only 3.3%. However, already in the next year, 2002, the economy reached a growth level of 6%. The restructuring of large companies (chaebols), privatization of banks and general liberalization of the economy are the main directions of the government's work. In 2004, economic prospects did not look as good as they had a few years earlier. Active trade with China, however, has been a good factor for the development of South Korea.

At the moment, the South Korean economy is based primarily on the production of consumer goods such as electronics, textiles, automobiles, as well as the heavy industrial sector such as shipbuilding and steel production. The products of these industries are the main export items. Although the import market has become freer in recent years, the agricultural sector is still subject to protectionist policies due to serious discrepancies in domestic and global price levels for agricultural products such as rice. As of 2005, the price of rice in South Korea was five times higher than in the international market. At the end of 2004, however, an agreement was reached with the World Trade Organization to gradually increase the share of imports in the country's rice market - by 2014, imported rice should account for 8% of the total quantity consumed. In addition, up to 30% of imported rice must reach end consumers (prior to this, imported rice was mainly used to produce various food and beverage products such as soju). By 2014, the rice market in South Korea should be completely open.

The economic crisis of 2008-2010 greatly affected the South Korean economy. In 2008, the decline in industrial production in the country amounted to 26%, unemployment increased, and the won's exchange rate against the dollar dropped significantly. The country's economy gradually recovered during 2009, aided by the government's anti-crisis program and the depreciation of the won in 2008, which created favorable conditions for Korean exporters. Growth accelerated in 2010 as world markets consuming South Korean goods began to recover, with annual GDP growth projected at 5.2% in the first quarter of 2010 and unemployment falling from 4.4% to 3.8%.

South Korea's economy as of 2009 was the 14th largest in the world by gross domestic product (based on purchasing power parity) and the 15th largest in the world by nominal GDP. Gross national product per capita rose from US$100 in 1963 to over US$28,000 in 2009.

Economic policy of South Korea

In 1961, General Park Chung Hee overthrew the regime of Prime Minister Chang Myung. The main direction of his actions in the economic sphere was the transformation of the country from a backward agricultural one to a modern industrial one. Since his reign, the South Korean economy has experienced rapid growth.

The Park Chung Hee administration decided that centralized management should play a key role in economic development. The economic structure that emerged as a result of government measures included elements of both state capitalism and free trade. It was during the reign of General Park that chaebols appeared in the country - large private conglomerates engaged in various activities. Thus, the government retained ownership of railways, electricity sources, water supplies, roads and ports.

Large-scale nationalization was carried out. The entire banking system came under state control. A number of measures were taken to improve the situation in the agricultural sector (in 1961, the peasantry made up 58% of the population). Thus, the ruling group freed peasants from paying debts at usurious interest rates, adopted a program to stabilize prices for agricultural products, increased the percentage of payments on bank deposits, which also stimulated the influx of available funds into banks and made it easier to obtain loans, and other similar measures were taken.

The main economic goals of the Park Chung Hee government were to strengthen key industries, reduce unemployment, and develop more efficient management techniques. Measures were aimed at increasing the level of exports, which meant increasing the competitiveness of South Korean goods and labor productivity. Electronics, shipbuilding and automotive industries were identified as key industries. The government strongly encouraged the opening of new industries in these industries. As a result of these measures, industrial production grew by 25% per year, with the rate increasing to 45% per year in the mid-1970s.

The main problem facing Park Chung Hee's government in the early 1960s was widespread poverty. It was also necessary to increase government reserves in order to stimulate industrial growth. The state's domestic savings were very small. As a result, the government began to actively borrow money from other states, as well as create tax incentives to attract foreign capital to the country. Of all the fast-growing countries in the Asia-Pacific region - Taiwan, Hong Kong, Singapore and South Korea - only the latter financed its economy mainly through external borrowing. In 1985, the country's external debt amounted to $46.8 billion. Foreign investment came mainly from Japan and the United States.

The government was able to mobilize the country's domestic capital through a flexible investment incentive system that differs for different industries and their export potential. The government was also able to restructure many industries, such as the military-industrial complex and construction, often stimulating or reducing competition.

After the formal end of the Korean War, foreign aid became the most significant source of resources for economic recovery. Most of what remained of the factories built by the Japanese during colonial rule was either destroyed by the war or severely outdated by the mid-1950s. The rest went into private hands. It was during that period that large industrial conglomerates began to emerge in South Korea, later called chaebols. These groups of companies engaged in trade, production, and services still dominate the South Korean economy.

The emergence of chaebols had a beneficial effect on the increase in export volumes from the country. In 1987, the four largest chaebols had revenues of $80.7 billion, accounting for two-thirds of the gross national product. In the same year, the Samsung group generated revenues of $24 billion, Hyundai $22.7 billion, Daewoo $16 billion, and Lucky-Goldstar (now known as LG) $18 billion. The next largest chaebol, Sunkyong, had revenues of $7 .3 billion. The ten largest chaebols that year accounted for 40% of all bank loans, 30% of the country's total industrial value added, and 66% of all South Korean exports. The five largest chaebols employed 8.5% of the country's total labor force and generated 22.3% of all industrial production.

Beginning in the 1960s, the country's economic program began to be based on five-year economic plans. The first five-year economic plan (1962-1966) included initial steps towards building an efficient industry. Emphasis was placed on the development of such industries as the production of electricity, mineral fertilizers, the petrochemical industry, and the cement industry. The second five-year plan (1967-71) envisaged the modernization of industry and the development, first of all, of industries capable of producing products that had previously been imported: steel production, mechanical engineering, and the chemical industry. The Third Five-Year Plan (1972-76) was marked by the rapid development of an export-oriented economy, primarily the heavy and chemical industries, including mechanical engineering, electronics, shipbuilding and oil refining.

During the fourth five-year plan (1977-81), the country began to produce products that were competitive in world markets. Strategic directions included knowledge-intensive high-tech industries: mechanical engineering, electronics and shipbuilding, and the chemical industry. As a result, the heavy and chemical industries grew by 51.8% in 1981, and the share of exports in manufacturing increased to 45.3%. The fifth and sixth five-year plans reduced the emphasis on heavy and chemical industries and transferred it to high-tech production: electronics, semiconductor industry, information technology. The Seventh Five-Year Plan (1992-96) and subsequent five-year plans continued this direction.

Financial and banking system of South Korea

Financial institutions in South Korea can be divided into three main categories: the central bank, individual banking organizations, and non-banking organizations such as insurance companies, venture capital funds, etc. The foundations of the modern financial system in South Korea were laid in the early 1950s, when a number of regulatory documents regulating the activities of the banking system were adopted.

Most of the non-bank financial institutions emerged during the 1970s with the aim of diversifying financial resources and stimulating money circulation in the country, as well as attracting investment. Since the 1980s, several commercial banks and non-bank financial institutions have been involved in a program to accelerate the liberalization and internationalization of the economy. The total number of branches of commercial banks in June 2004 was 4,448. Sole ownership of bank securities was limited in 1982. The limit was 8% in 1982 and was tightened to 4% in 1994. However, in 2002 this was raised again to 10%.

Specialized banks began to be created in the 60s of the 20th century. They were mainly formed to support key sectors of the economy (according to the five-year economic plans). Now specialized banks work mainly with agriculture (National Agricultural Cooperative Federation), fishing (National Federation of Fisheries Cooperatives), foreign trade (Export-Import Bank of Korea), industry (Industrial Bank of Korea), etc.

The Central Bank of South Korea was founded on June 12, 1950. Its main function is to issue the national currency, determine monetarist and credit policies, control foreign exchange rates, research and collect statistics on the country’s financial system, and regulate the activities of private banks. The Bank of Korea provides loans to the government and is the conductor of the government's activities in relation to the country's banks. All South Korean banks maintain their creditworthiness through the Central Bank of Korea.

Investments in South Korea

In South Korea, foreign trade accounted for 70% of GDP in 2005, and the income of companies that invested from abroad accounted for almost 14% of industry sales. The South Korean government is making efforts to attract foreign investment into the country. The most recent example is the opening of the world's largest LCD complex in Paju, just a few kilometers from the Demilitarized Zone. The largest investors in the South Korean economy are the USA, Japan and the UK.

In order to make the country's economy more attractive to foreign investment, the government has taken a number of measures, including the adoption of a new regulatory document - the Foreign Exchange Transaction Act. These measures were divided into two stages with a duration of two years. The main goals are capital liberalization and modernization of the foreign exchange market. In May 1998, the ceiling on foreign investment in South Korean stocks without a fixed dividend was abolished. Since May 25 of the same year, foreigners can buy shares in any South Korean company without the permission of the board of directors (with the exception of companies in the military-industrial complex and public associations). Foreigners can purchase up to 50% of the value of public associations.

In April 2002, the government unveiled plans to develop the foreign exchange market with the goal of creating a more attractive investment climate in South Korea. The certification procedure by the Central Bank of the country was abolished and the document flow when making financial transactions was simplified. The movement of capital has become freer.

Industry of South Korea

During the period from 1976 to 2006, the average growth of gross national product was 9%. The share of industrial production in the country's economy rose from 21.5% in 1970 to 28.9% in 1997. The largest industries are electronics manufacturing, shipbuilding, automotive, construction and textiles.

Automotive industry. Hyundai concept car. In South Korea, the automotive industry accounts for 9.4% of total value added, 8.3% of total exports and employs 7.4% of the country's workforce.

Production began in the early 1960s, when the first five-year economic plan was adopted. Since then, the South Korean automobile industry has become one of the most important sectors of the economy, showing high growth rates. Now South Korea is the world's fifth largest automobile manufacturer (its share is 5.4% of global production). The country has five major automobile manufacturing companies - Hyundai Motor, Kia Motors, GM Daewoo Auto & Technology, SsangYong Motor Company and Renault Samsung Motors.

In 2002, the country produced more than 3.1 million cars, and in the same year, sales in the local market amounted to 1.62 million cars, which is 11.8% more than in 2001. Exports remained at the same level (1.5 million vehicles). In 2010, the South Korean government planned to increase production to 4.25 million vehicles per year and export volume to 2.1 million vehicles per year.

Shipbuilding. Shipbuilding includes the design, repair and conversion of all types of ships and vessels. South Korean shipbuilding is currently one of the key industries and a basic factor in its development, as it pushes forward related industries - metallurgy, chemical industry, electronics, etc.

Shipyard construction began to grow in the 1970s. In 1973, Hyundai Heavy Industries completed construction of its first shipyard. Daewoo Shipbuilding and Marine Engineering commissioned its first dock in 1978, followed by Samsung Heavy Industries in 1979. Now these three companies are the largest in the country in this sector of the economy. Moreover, Hyundai Heavy Industries is the largest manufacturer of ships in the world.

In the 1980s, shipbuilding continued its rapid growth. South Korea has become the world's second largest manufacturer of boats and ships. Only in the second half of the 1980s did South Korea's global market share rise from 10% to 25%. In the 1990s, the industry experienced qualitative growth. Labor productivity increased and new technologies accumulated. As a result, in 2002, the country's Korean shipbuilding capacity was estimated at 6.8 million CGT. The share of complex and expensive vessels - large-capacity container ships and oil tankers, as well as gas carriers - has increased significantly. Purposeful specialization has led to Korea getting closer to gaining the status of a monopoly manufacturer of expensive ships - in 2005, its share in this segment of the world shipbuilding market reached 59.3% (for comparison: Japanese companies in this niche have 25.3% - almost double less). Thus, in 2005, Korea increased its share in the market of large-capacity oil tankers by 6% - to 42.4%, and its share of participation in the manufacture of vessels for transporting liquefied natural gas increased by 0.1% and amounted to 71.35%.

In 2005, South Korea received orders for the construction of 339 ships with a total tonnage of 14.5 million CGT, or 38% of the global portfolio. In 2004, Korea's share of new orders was 36% - 441 ships (16.9 million CGT).

Mechanical engineering. Mechanical engineering, in addition to shipbuilding and automobile manufacturing, can include the production of engines and turbines, metalworking tools, mining and agricultural equipment, refrigeration and chemical equipment, etc.

The mechanical engineering industry was hit harder by the 1997 crisis than other sectors of the economy. Production and domestic consumption of the industry's products fell by almost half in 1998, mainly due to a sharp outflow of investment and the bankruptcy of many enterprises. Currently, the industry has not yet fully recovered from the consequences of the crisis, but in 1999 production volume amounted to $24.7 million, which is 25.3% higher than in the previous year. Imports also decreased - in the first post-crisis year they fell by 53.4%. In 2002, production stood at $38 billion (pre-crisis 1996 - $43 billion), with growth rates averaging 10% between 2000 and 2002. The volume of imports in 2002 amounted to $21 billion (an annual increase of 18.2%). Most of the imports came from Japan - 40%. Export volume in 2002 amounted to $13 billion (an annual increase of 8.3%).

Metallurgy. The South Korean steel industry survived the 1997 crisis relatively easily, reaching pre-crisis production levels already in 1999.

Crude steel production rose from 38.9 million tons in 1996 to 41 million tons in 1999, making South Korea the world's sixth-largest steel producer. The share of metallurgy in the overall structure of the economy also increased, reaching 7% in 1998. The share in added value increased to 5.9%. Total demand for metallurgical products grew by 11.7% per year between 1996 and 1999 and by 6.9% between 2000 and 2002, reaching 53.8 million tons in 2002. Domestic demand grew at an even faster rate - 12.4% per year from 1998 to 2002. In 2002, steel production reached 51.1 million tons.

Petrochemical industry. Despite the fact that the South Korean petrochemical industry is quite young (its development began in the 70s of the 20th century), it is one of the most important sectors of the country's economy. Demand for petrochemical products has grown one and a half times faster than the country's gross national product since the late 1980s.

Three large industrial complexes are located in Ulsan, Yecheon and Daesan. The Ulsan complex has three crude oil crackers capable of producing 1,130 thousand tons of ethylene annually. There are five cracking units in Yecheon, producing 2,890 thousand tons of ethylene annually, and three units are located in Daesan, they produce 1,680 thousand tons of ethylene annually.

In 2002, production of the industry's three main types of products - synthetic resins, synthetic fibers and synthetic rubbers - amounted to 16,902 thousand tons, which is 6.0% more than in 2001. Of these, 8,947 thousand tons, or 57.7%, were consumed in the domestic market (an annual increase of 7.6%) and 7,145 thousand tons, or 42.3%, were exported (an increase of 4.1%). The total volume of exports in monetary terms amounted to $9,265 million, which is 10.4% more than in 2001.

Textile industry. The South Korean textile industry is export-oriented - although the country covers about a third of its domestic demand with imports, about two-thirds of its production is exported. In total exports, textile products account for 9.7%, and the trade balance in 2001 amounted to $11.2 billion.

The industry recovered relatively easily from the consequences of the 1997 crisis, reaching pre-crisis production levels already in 1999. However, starting from 2001, the volume of exports began to gradually decline. Experts see the main reason for this in lower prices - it has become difficult for South Korean manufacturers to compete with local companies. Exports between January and June 2003 totaled $7.3 billion, down 2% from the year before. Production volume also decreased by 3.5%. Imports of clothing over the same period, on the contrary, increased by 21%. Total imports of textile products amounted to $2.26 billion, up 9.1% from the previous year.

South Korea ranks fifth in the world in textile exports after China, Italy, Germany and the United States. The country is in seventh place in terms of production volume.

Most of South Korea's textile investments go to China, with investments also made in the US, Vietnam, Philippines, Indonesia, Guatemala, Honduras, Bangladesh and Sri Lanka. Direct investment in the textile industry of other countries increased 110-fold between 1987 and 2002. The number of employees in the industry decreased by 38.7% from 1990 to 2001, from 605 thousand to 371 thousand. The value added of the textile industry fell from 8.6 trillion won in 1989 to 5.5 trillion won in 2001.

Energy. South Korea is a relatively mineral-poor country. Its energy resources include small reserves of coal, uranium and hydro resources. Electricity production in 2001 amounted to 5,212 thousand tons of oil equivalent (TOE), which corresponds to only 2.7% of the energy consumed in the country. Coal production fell from 2,228 thousand TOE in 1995 to 1,718 thousand TOE in 2001. Hydroelectric power plants and renewable energy sources in 2001 provided energy of 1,038 thousand TOE and 2,456 thousand TOE, respectively. There is no development of uranium deposits in South Korea.

Over the past three decades, energy consumption in the country has increased significantly - from 43.9 million TOE in 1980 to 198.4 million TOE in 2001. The main source of energy is oil (51% of all energy in 2001). South Korea is the world's sixth largest consumer and fourth largest importer of oil. About 1.1 billion barrels were imported in 2001, mostly from the Middle East. The country is also the world's second-largest importer of liquefied natural gas and the world's seventh-largest importer of natural gas overall. Coal is also imported, mainly from China and Australia.

In 1978, the country launched its first nuclear reactor, after which nuclear energy in the country began to develop rapidly. There are currently 16 nuclear power plants in the country. In 2001, these power plants generated 39% of all electrical energy.

The country's electricity production increased from 37 TWh in 1980 to 285 TWh in 2001. Over the years, the share of individual types of fuel for the production of electrical energy has also changed significantly. The country's government pays great attention to the development of renewable energy sources. In 2001, 2.45 million TOE of energy was produced from this (1.2% of the total). Most of it comes from energy production from industrial and household waste. In 2001, there were 442 waste-to-energy plants in the country. The southern coast of the country is suitable for the needs of solar energy, with the help of which 37.2 thousand TOE of energy was produced in 2001. That same year, the country had 40 wind farms with a total capacity of 6.6 MW, producing electricity at a cost of $0.1 per kW.

High-tech production. Consumer Electronics and Telecommunications Equipment Consumer electronics products are divided into three categories: audio devices, video devices and household appliances. Video devices include video playback and recording devices (TVs, VCRs, video, cameras, etc.), audio devices include devices for recording and playing audio information, and household appliances include home appliances such as microwave ovens, refrigerators, washing machines, etc. P. Telecommunications equipment is primarily devices for wired and wireless communications - routers, phones, etc.

Currently, South Korea ranks among the world's leading producers of consumer electronics. Now in the country, as well as throughout the world, there is a tendency to switch to digital technologies, which increases the demand for products such as digital TVs, DVDs, MP3 players, etc. The largest companies in the industry are LG, Samsung and Daewoo Electronics. They produce almost the entire range of consumer electronics, most of which are exported. Consumer electronics production was $17.6 billion in 2002, with exports totaling $11 billion.

Telecommunications equipment produced by South Korean companies is primarily cell phones, although other segments are also well developed. This is due to both the large volume of the domestic market (which amounted to $27.9 billion in 2002) and the high demand for South Korean products abroad (export volume in 2002 amounted to $22.3 billion). According to Gartner, in July - September 2004, Samsung Electronis, having sold 22.9 million mobile phones, for the first time overtook the American company Motorola in the number of units sold, winning second place (after Finnish Nokia), or 13.8% of the total global terminal market.

Semiconductor industry. The semiconductor industry produces integrated circuits and semiconductor devices such as diodes and transistors. In South Korea, this industry is one of the most important in the economic structure. Its rapid development began in the mid-1980s. As a result, since 1992, semiconductors have been the largest item in South Korean exports, accounting for 10% (as of 2002).

The semiconductor industry, especially the production of memory chips, played a key role in the country's economic recovery after the 1997 crisis. Until now, South Korea is the main manufacturer of memory chips in the world. Most of the exports go to developed countries: the USA, Japan, the European Union and the countries of Southeast Asia. Between 2000 and 2002, the South Korean semiconductor industry experienced stagnation due to a worldwide decline in demand for semiconductor products. Thus, the overall decrease in production volume during this period amounted to about 10 billion dollars (from 28.5 billion to 18.2 billion), but already in 2002 an increase of 8.2% was recorded due to an increase in demand for certain types of microcircuits , in particular on DRAM memory chips. Exports that year rose to $16.6 billion, 16% higher than the previous year, 2001. Domestic demand for semiconductor industry products increased from 9 billion in 2001 to 9.7 billion in 2002 (an increase of 7.7%). The volume of imports also increased from 4.2 billion to 8.6 billion dollars.

A special feature of the South Korean semiconductor industry is that it is highly dependent on the demand for memory chips, the share of which in total production is 80-90% (in other developed countries this share ranges from 10% to 30%). The South Korean semiconductor equipment market was worth $1.9 billion in 2002, but only 15% of this figure is domestic production, the rest is imported. Materials for the semiconductor industry include photolithography masks, silicon chip substrates, photoresistors, etc. The domestic market for materials in 2002 was $1.7 billion, half of which was imported from the United States and Japan. South Korea's dependence on imports of semiconductor materials is lower than Japan, but higher than the United States.

Agriculture of South Korea

The climate of South Korea is monsoon type with warm and humid summers and relatively cold and dry winters. Until the 20th century, the country's main agricultural product was rice, but now the range of products has expanded significantly and includes many types of fruits, vegetables, livestock products and forestry products.

The share of agriculture and forestry in 2001 was 4% of the country's Gross National Income, the peasant population was 4 million people (8.3% of the total population). Although the share of agriculture in the country's economy is small, the share of related industries, such as the production of mineral fertilizers, food processing, etc., accounts for 14% of the gross national income. The country's entry into the World Trade Organization in 1995 accelerated the transformation and liberalization of the agricultural market, which led to a fall in product prices. The government had to pursue a policy of protectionism towards national producers.

The main agricultural product of South Korea is rice: about 80% of South Korean farms cultivate this cereal. Rice is consumed mainly within the country, as it is unable to compete in the foreign market due to its high price. In 2001, rice was grown on 1.08 million hectares of land. The harvest was 5.16 tons per hectare. Production of other cereals (primarily barley and wheat) amounted to 271 thousand tons in 2001. In the same year, 140 thousand tons of soybeans and potatoes were produced. In 2001, 11.46 thousand tons of peaches were exported (mainly to the USA, Canada, Taiwan and Indonesia), 3.73 thousand tons of apples (mainly to Taiwan, Singapore and Japan) and 4.66 thousand. tons of tangerines.

Livestock is the second most profitable agricultural sector after rice. In 2001, the number of cattle was 1,954 thousand heads, the number of pigs reached 8.7 million heads, and the number of chickens was 102 million. Consumption of livestock products at the end of the 20th - beginning of the 21st century was constantly growing. Consumption of beef in 2001 reached 384.06 thousand tons, pork - 807.42 thousand tons, poultry - 350.3 thousand tons.

The timber industry began to develop in the country in the 1960s. Forests cover 6.4 million hectares of the country. The total market volume in the country in 2001 was 428 million cubic meters, in the same year 7.1 million cubic meters of logs were imported, the volume of imports of all types of forestry products in monetary terms amounted to 1.7 billion dollars. Some products, however, are exported - these are, first of all, mushrooms and chestnut fruits. In 2001, export volume amounted to $210 million.

Fisheries are an important part of the South Korean economy. About 140 thousand people work in this sector. There are about 96 thousand fishing vessels in the country. The volume of production in monetary terms amounted to $3.6 billion in 2000. In coastal waters, the most active fishing is for pollock, sardines, mackerel, anchovies, flounder, cuttlefish and squid. Marine products are also grown in nurseries - primarily shellfish. In 2000, such nurseries produced produce worth $560 million. Exports in 2000 amounted to $1.5 billion of fish and fishery products, and imports amounted to $1.4 billion. The main consumers of the South Korean fishing industry are Russia, China, Japan and the United States - these countries account for 70% of all South Korean exports. Mainly shrimp, squid and sardines are imported into the country. On July 1, 1997, South Korea passed a law lifting restrictions on the import of fish products. Thus, a market was opened for 390 types of fish products listed in a special list compiled by the government. At the same time, export regulations were relaxed and measures were taken to increase exports of fresh and frozen flounder, eel and some other types of fish.

South Korean service industry

The service sector primarily includes insurance companies, catering establishments serving Korean cuisine, hotels, laundries, saunas, medical and sports facilities, enterprises operating in the entertainment, retail, etc. sectors.

In the mid-1980s, the largest number of workers in this sector of the economy were employed in retail sales. The vast majority of stores were small shops with a limited assortment, most often owned by one family. In 1986, the country had about 26 thousand wholesale and 542 thousand retail sales points, as well as 233 thousand hotels and catering establishments, which employed a total of 1.7 million people.

Now the service sector has become dominant in the country's economy, accounting for two-thirds of the total gross domestic product. In 2006, the Capital Market Consolidation Act was passed to liberalize the services sector and transform the country into a major financial hub in East Asia.

Today, South Korea has one of the most developed telecommunications systems in the world. In 2000, as part of the 15-year electronic development program CyberKorea-21, an expanded broadband Internet access network was built, covering almost the entire country. Among the member countries of the Organization for Economic Cooperation and Development, South Korea leads in terms of broadband Internet penetration: according to the country's Ministry of Trade, Industry and Energy, it is 24.08 per 100 people.

Transport in South Korea

Transport in South Korea is the country's transport communications system, such as railways, roads, airways and sea routes.

The total length of railways is 6,240 kilometers (of which 525 kilometers are electrified). The six largest cities in South Korea - Seoul, Busan, Daegu, Incheon, Gwangju and Daejeon - have subways. The Seoul Subway is the oldest in the country, with the first line from Seoul Station to Cheongnyangni opened in 1974. The total length of roads is 97,252 km, of which 74,641 km are asphalted. The main ports of the country: Jinhae, Incheon, Gunsan, Masan, Mokpo, Pohang, Busan, Donghae, Ulsan, Yeosu, Sokcho. The main air carriers of South Korea are Korean Air and Asiana Airlines. Both provide air transportation services both domestically and internationally. Seoul is served by two airports: Incheon Airport and Gimpo Airport. International flights are received mainly by Incheon Airport, while Gimpo receives mainly domestic flights. Other major airports are located in Busan and Jeju. There are 108 airports in the country.

Foreign economic relations of South Korea

Trade relations with Western countries include economic partnerships primarily with the United States and the European Union.

The United States is South Korea's main economic partner. In addition, South Korea ranks seventh on the list of US trading partners, ahead of many developed European countries such as Italy and France, and sixth on the list of US importing countries. In addition, South Korea is an attractive country for investment by American companies - from 1996 to 2003, the United States invested $20 billion in the South Korean economy. In 2003, the United States was South Korea's largest trading partner and seventh largest export market. The strengthening economic ties between the two countries, however, were accompanied by numerous differences in trade policy. The intensity of these disputes has decreased significantly since the late 80s - early 90s of the XX century, including due to the fact that South Korea carried out a number of market reforms as compensation for receiving a 58 billion loan from the International Monetary Fund after the 1997 crisis of the year. At the beginning of the 21st century, both countries are trying to resolve conflict situations more gently. Bilateral trade agreements made in early 2001 played a significant role in this.

Around the same time, a series of trade agreements were signed between South Korea and EU countries, spurring increased trade between the two regions. Trade volume amounted to 46 billion euros, doubling in ten years. However, some issues of mutual trade still remain unresolved. At the beginning of the 21st century, the greatest progress was made in accelerating the processes of mutually beneficial exchange in the field of science and high technology (as you know, South Korea spends 3% of its gross domestic product on scientific research). In 2005, bilateral negotiations took place on exchanges in the scientific and technical fields. South Korea also participates in some global projects initiated by the European Union, in particular the Galileo and ITER projects. The countries of the East, primarily East Asia, are the main trading partners of South Korea. In the overall trade turnover with these countries, three countries stand out - China, Japan and Saudi Arabia, which is the main supplier of oil to South Korea.

Trade in the East Asian region has grown greatly in the early years of the 21st century. The leading countries in the region (South Korea, Japan and China) have become more open than at the end of the 20th century. If in 1991 the trade turnover between these three countries amounted to 56 billion dollars, then in 2004 it exceeded 324 billion. The growth of South Korea's trade turnover with China and Japan in the period from 2000 to 2004 was twice as high as the growth of trade turnover with all other countries. Currently, the concentration of trade in the region is higher than in the European Union, although the countries in the region do not have a legislative framework as favorable for mutual relations as in Europe. China and Japan are South Korea's first and third trading partners.

The main items of South Korean export to East Asian countries are products of the engineering industry, cars, electronics, textiles, products of the metallurgical and petrochemical industries. These destinations account for three quarters of South Korea's total exports to the East. Trade with China is developing especially actively, as heavy and chemical industries are intensively developing in this country.

Trade and economic relations between the USSR and South Korea began to be carried out from the end of 1988 (before that, trade was carried out through intermediary companies from third countries). Now the share of Russia in the total trade turnover of South Korea does not exceed 1.5%. The main goods imported from Russia are minerals such as natural gas, crude oil and coal, as well as metallurgical products. Mainly consumer electronics and products from the textile and engineering industries are exported to Russia.

At the beginning of the 21st century, trade and economic ties between the two countries developed rapidly. Interaction in the fuel and energy complex seems to be a promising area of ​​cooperation. The Irkutsk gas project is being worked on (the estimated investment volume is up to $12 billion). Cooperation in this area seems particularly beneficial for both parties (this should include the possible development of energy deposits in Siberia and the Far East together with Korean companies, including, in addition to gas in the Irkutsk region, the development of coal in Yakutia and Buryatia, oil and gas resources of Sakhalin Island).

DPRK. Since 1988, the volume of bilateral trade between the two Korean states has increased several times (in 1989 it was $18.8 million, and in 2002 - already $647 million). In 2006, this figure decreased slightly due to the deterioration of relations between countries. In 2002, South Korea imported $271.57 million worth of products from North Korea, mostly agricultural and metallurgical products, and exported $371.55 million worth of goods, mostly humanitarian aid, including mineral fertilizers and clothing. South Korea is now North Korea's third-largest trading partner in terms of trade volume, after China and Japan. The South Korean company Hyundai Group has launched several investment projects related to North Korea, including the development of tourism in Kumgangsan (Diamond Mountains). In 2001 alone, 84,347 people visited North Korea as part of this project. About a thousand North Korean citizens entered South Korea from North Korea, mainly to participate in sports competitions. Another South Korean company actively investing in the North Korean economy is Hyundai Asan, which has plans to build an industrial complex on an area of ​​3.2 km2 in Kaesong, near the Demilitarized Zone. 2002 was also marked by serious progress in the construction of the Seoul-Sinuiju railway (at the beginning of 2004 this project was frozen).

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