Slide 1Slide 2OverviewSlide 4Development ModelSlide 6Trade PoliciesAsian Financial CrisisCurrent ProblemsKorean CultureCountry Study:South KoreaOverview•Until 20th century, Korea existed as an independent country. In 1910, it became a colony of Japan•After WWII, Republic of Korea was set up in Southern Peninsula•Current President Lee Myung-bak was elected in February 2008•Population: 48.5 million•Working age population (15-60 years): 72%•Urban population: 81%•Rate of urbanization: 0.6%•Infant mortality rate: 4.26/1000•Literacy: 97.9%•Education expenditures as % of GDP: 4.6%Overview•GDP(PPP) per capita income: $26,000•Inflation: 4.7%•Population below poverty: 15%•Gini coefficient: 0.31%OverviewDevelopment Model•1960’s was marked by land reforms, literacy and import substitution•Government played a critical role in developing private sector•A deliberate policy to encourage big businesses (Chaebols) with government direct credit, import restrictions, and incentives•Government sponsored semiconductor industry to make it competitive globallyDevelopment Model•Another example is South Korea’s shipbuilding industry•Strong labor unions•Inflation prone economy and recent labor shortages•Only South Korea (in Asia) financed its development with foreign debt•South Korea combined a policy of import substitution and export promotion by sponsoring strategic industries•In mid-1970’s exports increased by 45% per year, export-led growth took off in 1960’sTrade Policies•Heavy emphasis on the imports of capital goods, restrictions on consumer goods•High savings and investment rates, yet borrowed heavily (external debt - $380 billion)•Exports of semiconductors, ships, steel computers & motor vehicles•Trade with U.S. accounts for 12.4% of total trade•Protection for big businessesAsian Financial Crisis•GDP went down by 6%•South Korea Won was down by 33%•Heavy debt, unregulated financial sectors and government policy of encouraging big businesses were among some of the causes of the crisis•IMF bail-out with $60 billion•Recovered in 2000Current Problems•Strained relations with North Korea•Inflation•Unequal distribution of income•Global recession affecting exports•Labor shortages•Financial markets hit hard in 2008oStock prices fell by 40%oWon depreciated by 26%•Government is taking steps to stimulate the economy ($11 trillion economy plan)Korean Culture•Hardest working people in the world•Some pain and hurt from the split between North Korea and South Korea•Love to sing•Emphasize education of children from early age•Male-dominated society, strict