Korea in Focus
number of telephone lines to 10.14 million as of 1993. Virtually every home
in the country now has its own telephone and all the telephone circuits are
connected by automatic switching systems.
Also, through the launch of KOREASAT scheduled in 1995, Korea will be
able to provide satellite communication services by using its own satellite
from October 1995.
THE ECONOMY
Looking Ahead to the 21st Century
In the last quarter century, Korea’s economic growth has been among
the fastest in the world. The country has overcome obstacles and challenges
to transform itself from a subsistence-level economy into one of the
world’s leading newly industrialized countries. Today, however, the Korean
economy faces the new challenges of internationalization and globalization
in an increasingly complex global economic environment.
Past Performance and Policies
Since Korea launched its First Five-Year Economic Development Plan in
1962, the country’s real GNP has expanded by an average of more than 8
percent per year. As a result, Korea’s GNP has grown from US$2.3 billion in
1962 to US$328.7 billion in 1993; per capita GNP has increased from a
meager US$82 in 1962 to US$7,466 in 1993 at current price levels.
The industrial structure of the Korean economy has also been
completely transformed. The agricultural sector’s share of GNP declined
from 37.0 percent in 1962 to 7.1 percent in 1993. The manufacturing
sector’s share has increased from 14.4 percent to 27.1 percent in the same
period. The service sector accounted for only 24.1 percent of GNP in 1962
but grew to 40.0 percent in 1993.
Korea’s merchandise trade volume increased from US$500 million in
1962 to US$166 billion in 1993. The nation continuously posted trade
deficits until 1985 when its foreign debt reached US$46.8 billion, the
fourth largest in the world. From 1986 to 1989, Korea recorded current
account surpluses and its debt declined.
Trends of Major Economic Indicators
| |Unit |‘62 |‘70 |‘80 |‘85 |‘90 |‘92 |‘93 |
|GNP |US$ |2.3 |8.1 |60.5 |91.1 |251.8|305.7|328.7|
| |bil. | | | | | | | |
|Per Capita GNP |US$ |8.2 |242 |2,194|2,242|5,883|7,007|7,466|
|GNP Growth Rate |% |2.2 |7.6 |7.0 |7.0 |9.6 |5.0 |5.6 |
|Domestic Savings |% |3.3 |17.9 |29.1 |29.8 |35.9 |34.9 |34.9 |
|Ratio | | | | | | | | |
|Trade Volume |US$ |0.5 |2.8 |39.8 |61.4 |134.9|158.4|166.0|
| |bil. | | | | | | | |
|Producer Price |% |9.4 |9.2 |38.9 |0.9 |4.2 |2.2 |1.5 |
|Consumer Price |% |8.3 |15.9 |28.8 |2.4 |8.6 |6.2 |4.8 |
Inflation in Korea was one of the major economic problems in the 70s
and early 80s, during which consumer prices rose at annual rates of 10-20
percent. Since 1982, Korea has managed to keep inflation down to a single
digit. The ratio of domestic savings to GNP grew from 3.3 percent in 1962
to 34.9 percent in 1993.
Recent Challenges
Beginning in 1989, the Korean economy began experiencing slower
growth, high inflation and a deterioration in the balance of payments. The
GNP growth rate fell to 6.7 percent in 1989 from the 12 percent level of
previous years. A slump in the growth of the manufacturing sector, from
18.8 percent in 1987 and 13.4 percent in 1988 to 13.7 percent in 1989,
contributed largely to this decline in GNP growth rate. The export growth
rate on a customs clearance basis, which was 36.2 percent in 1987 and 28.4
percent in 1988, fell to just 2.8 percent in 1989. Reflecting this fall in
the export growth rate, the current account surplus lowered to around
US$5.1 billion, a significant drop from the 1988 surplus of US$14.2
billion.
In 1991, the economic growth rate showed signs of recovery. The GNP
grew during the year 9.1 percent. However, most of this growth was
attributed to an increase in domestic demand, particularly domestic
consumption. Exports increased 10.3 percent compared to 1990, while the
growth rate of imports increased 17.7 percent. The trade balance
deteriorate rapidly to a US$7.0 billion deficit in 1991 from the US$4.6
billion surplus in 1989. In addition, price stability, which had served to
boost Korea’s competitiveness, weakened. Consumer prices, which had risen
on an annual average of 2-3 percent between 1984 and 1987, rose 9.3 percent
in 1991.
Recent Economic Trends
| | |‘91 |‘92 |‘93 |‘94. 1 |
| | | | | |( 6 |
|GNP | | | | | |
| GNP |Growth Rate in |9.1 |5.0 |5.6 |8.5 |
| |% | | | | |
| Manufacturing |Growth Rate in |9.1 |5.1 |5.0 | |
|Sector |% | | | |10.0 |
| Private |Growth Rate in |9.5 |6.6 |5.7 |7.2 |
|Consumption |% | | | | |
| Investment |Growth Rate in | |0.8 |3.6 | |
| |% |12.6 | | |10.3 |
| Equipment |Growth Rate in | |1.1 |0.2 | |
| |% |12.1 | | |17.7 |
|Prices | | | | | |
| Producer Price |% |4.7 |2.2 |1.5 |2.2 |
| Consumer Price |% |9.3 |6.2 |4.8 |6.2 |
|Balance of Payments| |7.0 |2.2 |1.9 |1.6 |
| Export |US$ bil. | | | | |
| | |69.6 |75.1 |81.0 |43.1 |
| Imports |US$ bil. | | | | |
| | |76.6 |77.3 |79.1 |44.7 |
|Current Account | | | | | |
| Balance |US$ bil. |8.7 |4.5 |0.4 |2.7 |
In 1992, the Korean economy rapidly cooled off, with the GNP growth
rate dipping to 5.0 percent, influenced chiefly by blunted investment in
capital goods. The consumer price index rose just 6.2 percent, and the
deficit in the balance of payments also dropped to US$4.5 billion.
At that time, the Korean economy faced many challenges on both the
internal and external fronts. Part of the economic slowdown may be
explained by the cyclical adjustment of the economy after three consecutive
years of rapid growth. However, the stagnation was more likely the result
of a structural deterioration in competitiveness, due to a combination of
the lingering legacies of the past government-led economic management
system, which had now become inefficient, and the disappearance of the
advantages derived from the once ample availability of low-cost labor: Thus
the country was forced to search for a new driving force sufficient for
sustained economic growth.
Major Tasks and Policy Directions
To revitalize the economy, the Kim Young Sam Administration, which
was inaugurated in February 1993 as the first civilian democratic
government in over three decades, is endeavoring to construct a new
developmental paradigm called “the New Economy”. This signals a clean
departure from the past, when the government directed and controlled the
concentrated investment of capital, labor and other resources in selected
“strategic” industrial sectors to achieve rapid economic growth. Instead,
the New Economy will promote the autonomy and creativity of all economic
actors in order to maximize efficiency, while ensuring the equitable
distribution of income. In that way, it seeks to enable the nation to leap
into the ranks of the developed nations within the next five years.
As an initial step, the new Administration implemented a short-term
100-Day Plan for the New Economy in March 1993, designed to promptly create
conditions conductive to revitalizing the economy. This was followed by the
development of a new five-year economic development plan. Formally
announced in July 1993, the Five-Year Plan for the New Economy was
conceived primarily to lay the basis for joining the ranks of advanced
countries and thus to effectively prepare for the eventual unification of
the Korean Peninsula.
The Government will continue its efforts to ensure the effective
implementation of the five-year plan through the spontaneous participation
