Miracle on the Han River And Behind

1. Miracle on the Han River And Behind Abbey & Jizhao 1 1

2. General Overview of South Korea • Official Name: the Republic of Korea;대한민국(Korean) ;大韓民國 (Hanja) • Area: 38,691sq mi; population: more than 50 million • GDP (2014 estimate): 1.27 trillion usd • GDP per capita: 25189 usd • Gini index: 31.1(2011) 2 2

3. History of South Korea • Korea’s division 1948: North Korea and South Korea • Korean War 1950-1953 • 1960s, Park Chung-hee’s coup and export-oriented economic growth • 1979, Chun Doo-hwan coup and nation-wide martial law • 1980, Gwangju Democratization Movement 3 3

4. Political and Economic Development • 1987: Direct election of the president. • 1988: Seoul Summer Olympics. • 1996: Korea Became a member of the OECD(Organization for Economic Co-operation and Development) • 1997: Asian Financial Crisis • 2000: Sunshine Policy, North-South Joint Declaration 4 4

5. Economy Performance after the 2008 Global Financial Crisis Doing well, but not as good as its performance before the crisis 5

6. Korean Economy and Policies • High tech manufacturing sector geared toward advance economies was hit especially hard • “Hyundai Motor said on Thursday that its sales in Europe had risen 15 percent in the first half as cost-conscious consumers favored its vehicles' perceived value for money – but sales fell 5 per cent in a shrinking domestic market, where it is by far the biggest operator.” - July 26, 2012 • Economy at risk of shift of US Fed Reserve’s monetary policy stance, the weakening of growth in some emerging market countries, and geopolitical risks in Eastern Europe 6 6

7. Fiscal and Monetary Policies 7

8. Korean Economy and Policies • Domestic demand as main driver of growth in 2013 • Employment gain of 386,000 jobs • Private consumption was the most dynamic component of demand, expanding by 1.7% on a consistently rising trend throughout the year • Robust government spending, investment turnaround, positive net exports, • Expects short term inflation stability due to stability of agricultural product prices but eventual increase • Fiscal deficit rose in 2013 to 1.8% of GDP from 1.4% in 2012, including a $16 billion supplementary budget http://www.dcmccornac.com/asiaSFSQ/articles/ado-2014.pdf 8 8

9. Korean Economy and Policies • Solutions: Expansionary Fiscal and Monetary Policies; increasing government spending & reducing tax; lowering interest rate; decreasing the value of won… • Results: Lower interest rate and exchange rate; increasing government deficit; but expanding exports strengthen won. • Another issue: market confidence • e.g. Sinking of the Sewol 9

10. Case Studies: Korean Chaebol 10

11. History • Since 1960s, Korean government, under Park Chung-hee, supported the development of industrial and financial conglomerates, in order to promote the economy growth. • Chaebols contributed to the fast growth of Korean economy from 1960s to 1980s. • But, there were weaknesses, which led to the problems of Korean economy in 97 crisis. 11

12. Problems • Create monopoly and oligopoly, discouraging small businesses and entrepreneurs to prosper • The combination of industrial sector and financial sector hurts the health of financial system (e.g. Lending money to people you like instead of people likely to make profits) • Problems of nepotism within enterprises 12

13. Solutions • Law for separate finance from industry • Law for limit of investment • Chaebols were pressured to focus more on core business and cut off unrelated businesses • Hire professional managers • Accounting regulations • Inheritance taxes But, too big to fail 13

14. The Labor Dilemma • Fertility rates were very high in 1950s after Korean War • Improvements in public hygiene and shift of the socio-economic system from a rural agrarian to an urban industrialized society lowered death rate significantly in the 1960s • Desirable to invest in children’s education with Korea’s growing economy and modernizing society • Fertility dropped in the mid 1980s from 5.0-6.0 children in the 1950s and 1960s to 1.7 in the 1980s • By 2019 Korea is expected to have over 14% of its population aged 65 and over • Dependent age to working age is expected to raise from below 40% in 2000 to 82% in 2050 14 14 http://www.un.org/esa/population/meetings/Proceedings_EGM_Mex_2005/phang.pdf

15. The Female Labor Dilemma 15 15

16. The Female Labor Dilemma • 55% of working-age women are economically active, compared to an average of 65% in advance economies • Female workforce participation is lowest of 24 OECD member countries • Low number of quality hourly jobs 16 16

17. The Female Labor Dilemma • Women drop out in their 30s due to pregnancy, childbirth, and child-raising. • Such fixes might include transition to hourly pay rather than salary to allow for more flexible work schedules, and more flexible work arrangements, like working from home • President Park Geun-hye’s three year plan for economic innovation seeks to raise female employment rate to 62% by 2017 • Includes affordable, high-quality childcare facilities and expanded paid parental leave 17 17

18. The Female Labor Dilemma • Korea has the highest female high school graduation rate, with 73.4% of women going to the university, higher than the 68.6% for males. • Underdevelopment of high-productivity services like communications, health, financial intermediation, and business services • The services sector accounts for nearly 60% but its growth rate remains much lower than that of the manufacturing sector http://www.dcmccornac.com/asiaSFSQ/articles/ado-2014.pdf 18 18

19. The Education Dilemma of the Young • “For young people, the employment rate in Korea is only 24 percent, versus an OECD average of 40 percent. This outcome reflects high enrollment in tertiary education, but also jobseekers not having the skills needed by employers. One answer is to invest more in active labor market policies and vocational education.” - Christine Lagarde, Managing Director, International Monetary Fund. Dec 2013 http://www.imf.org/external/np/speeches/2013/120513b.htm 19 19

20. The Education Dilemma of the Young • 50,000 college graduates in excess of labor market’s demand, deficit of 30,000 high school workers • “There are many positions that high school graduates can fill and we don’t want to hire university graduates for such positions, because those overqualified people would likely leave the company soon ”- Lee Young-kwan, human resources manager, KT • Only 15 % of university students use loans to pay for tuition, constraining domestic consumption and delaying childbearing • Government is offering tax incentives to corporations that hire more high school graduates • In 2012 Samsung opened 700 white-collar jobs to high school students • “It remains questionable how far those high-school graduates can advance in the workplace,” says Kwon Tae-hee, researcher at Korea Employment Information Service.“The social bias in favor of academic credentials is so strong that it will take a long time for merit-based hiring to become a mainstream practice.” 20 20 http://www.ft.com/intl/cms/s/0/8254ec70-2efe-11e3-9e14-00144feab7de.html#axzz32piz3lOF