Korea in Focus
of the people by reforming economic institutions including the improvement
or simplification of existing financial and tax systems and administrative
measures. Furthermore, the Government will continue to endeavor to fully
realized the nation’s economic growth potential, strengthen its
international competitiveness, and improve the economic conditions of the
public.
If the plan is implemented as intended, the Korean economy is
projected to change as follows:
First with increased efficiency and greater realization of growth
potential, the gross national product should rise at an average annual rate
of about 6.9 percent, raising per capita GNP to US$14,076 in 1998.
Second, greater price stability should prevail as balance is
maintained between the more steadily rising demand and the more briskly
expanding supply, while wage increases are linked to rises in productivity.
The stabilization of the value of the won currency should help stabilize
the prices of imported goods and services. The net effect should be to hold
down the rise in consumer prices to an annual average of 3.7 percent, the
increase in producer prices to an annual average of 1.6 percent and the
rise in the GNP deflator to an annual average of 4.6 percent.
Targets of the 5-Year Plan for the New Economy
| |‘91 |‘92 |‘93 |‘94 |‘95 |‘96 |‘97 |‘98 |‘93-’9|
| | | | | | | | | |8 |
|GNP growth, % |8.4 |4.7 |6.0 |7.1 |7.2 |7.1 |7.0 |7.0 |6.9 |
|Per capita GNP, |6,51|6,74|7,30|8,19|9,33|10,7|12,3|14,0|14,076|
|US$ |8 |9 |6 |6 |9 |16 |05 |76 |2) |
|Rise in producer |4.7 |2.2 |1.8 |1.8 |1.7 |1.6 |1.5 |1.4 |1.6 |
|prices, % | | | | | | | | | |
|Rise in consumer |9.3 |6.2 |4.9 |4.3 |3.7 |3.6 |3.2 |2.9 |3.7 |
|prices, % | | | | | | | | | |
|Rise in GNP |11.2|6.3 |5.3 |5.3 |4.8 |4.5 |4.1 |3.8 |4.6 |
|deflator, % | | | | | | | | | |
|Balance on curren |8.7 |4.6 |1.4 |0 |0.9 |2.1 |3.7 |5.3 |5.32) |
|account, | | | | | | | | | |
|US$ billion | | | | | | | | | |
|Exports 1) ,US$ |69.6|75.1|82.3|82.3|99.3|110.|122.|136.|136.32|
|billion | | | | | |1 |6 |3 |) |
| Rate of |(10.|(7.9|(9.5|(9.5|(10.|(10.|(11.|(11.|(10.4)|
|increase, % |2) |) |) |) |2) |9) |3) |2) | |
|Imports, US$ |76.6|77.3|81.3|81.3|95.8|105.|116.|128.|128.12|
|billion | | | | | |3 |1 |1 |) |
|Rate of increase, |(17.|(1.0|(5.1|(5.1|(9.3|(9.9|(10.|(10.|(8.8) |
|% |5) |) |) |) |) |) |2) |3) | |
Note: 1) On a balance-of-payments basis
2) In terms of 1998 current market prices
The Real name Financial Transaction System
On August 12, 1993, the President took a decisive step toward
revitalizing the economy and eliminating corruption by announcing the
inplementation of the long-anticipated real-name financial transaction
system. In the past, it had been possible to open accounts and conduct
business transactions under false names, directly and indirectly fostering
institutionalized-corruption and illegal financial dealings. Deeming this
reform as the most important in the creation of a New Korea, the President
announced this action in a Presidential Emergency Decree, stating that the
real-name system was essential for cutting the dark link between politics
and business.
With the introduction of the real-name financial transaction system,
it appears that financial dealings are becoming fully transparent and
underground economic dealings and nonproductive land speculation are
diminishing. It is hoped the funds that had been channeled into political
circles in the past as a result of government-business collusion are now
available for more productive activities.
Encouraging Signs
The implementation of a real-name financial transaction system, the
easing of administrative controls, expanded capital investment by major
enterprises, and increased financial and administrative support for small-
and medium-sized enterprises all combined to lay a solid foundation for
another economic take-off. Exports rose 7.6 percent in 1993 to US$82.4
billion, while imports grew just 2.5 percent. Korea was thus able to
register a US$600 million trade surplus last year for the first time in
four years. The current account also yielded a surplus of US$200-300
million. Industrial production has been growing at about a 10 percent rate
during the first half of 1994. Furthermore, labor disputes decreased
markedly last year, while the composite stock index of the Seoul Stock
Exchange climbed markedly. In view of these indications, the Korean economy
seems to be well on the way to revitalization.
External Policies for Greater International Cooperation
Import Liberalization
Korea is committed to fulfilling its international responsibilities.
It positively supports the trend toward openness and utilizes it as a
catalyst for further enhancing the international competitiveness of
industry and thus speeding the advancement of the economy, so that it can
join the group of advancedcountries.
Since 1980, Korea has made continuous efforts toward import
liberalization. The import liberalization rate increased from 68.6 percent
in 1980 to 98.1 percent in 1993. The average tariff rate decreased from
24.9 percent to 8.9 percent during the same period and is expected to be
only 7.9 percent by the end of 1994, the same average level of tariffs
found in OECD member countries.
In October 1989, Korea decided to relinquish GATT balance of payments
protection which mostly covers agricultural products. According to the
decision Korea will move to eliminate its remaining restrictions or
otherwise make them conform with GATT rules by July 1, 1997.
Liberalizing Foreign Exchange Transactions and Capital Markets
In June 1993, the Korean Government made public the third-phase of
the blueprint for financial liberalization and internationalization, which
was implemented from the second half of 1993. Under the plan, procedures
for various foreign exchange transactions are being gradually simplified.
Beginning in 1994, the ceiling on foreign investment in the stock market
will be gradually raised, and the bond market will also be gradually opened
to foreign investment. Initially, from 1994 foreign investors will be
allowed to purchase convertible bonds, even those issued by small-and
medium-sized domestic enterprises.
Foreign-invested firms engaged in the manufacture of high-tech
products or banking and other services are currenlty allowed to induce
foreign credit repayable within three years. Beginning in 1997, the
liberal inducement of foreign credit by both domestic and foreign-invested
enterprises will be allowed.
Increasing Opportunities for Foreign Investors
In June 1993, the Korean Government also announced a five-year plan
for liberalizing foreign investment. Under the plan, 132 of the 224
business lines currently being protected from foreign competition will be
opened to foreign investment in five phases, over a period of five years
starting from July 1993. With the implementation of this plan, of the total
1,148 business lines under the standard industrial classification of Korea,
1,056 will be open to foreign competition. This means that the foreign
investment liberalization rate will rise from 83 percent as of June 2, 1993
to 93.4 percent by 1997.
Included among the business lines to be opened to foreign competition
under the plan are most of the service industries including distribution
and transportation, hospital management, vocational training and “value-
added” communications.
The business conditions for foreign-invested firms will also be
greatly improved through various measures, including relaxed control on the
acquisition of land by foreign-invested firms, the augmented protection of
foreign intellectual rights, and other similar steps.
Cooperation with the Rest of the World, Including Developing Nations and
Socialist Countries
Expanding Trade and Economic Exchanges
The Republic of Korea has emerged as a major global trader by
steadily pursuing freer trade and greater openness, while promoting its
business presence around the world. In the past, Korea’s foreign trade
