Korea in Focus

In the past two decades, Korea has been one of the fastest developing nations in the world - both in economic and social terms. Rapid industrial and economic growth has seen the Republic nearly reach developed nation status in a remarkably short time. The Korean people also find themselves in the midst of a new era of democratic development following the birth of the civilian Administration of President Kim Young Sam on February 25,1993. This wiped out the negative legacy of decades of military-backed authoritarian rule. The country has since been implementing bold political and economic reforms to eradicate corruption and revitalise and restructure the economy with the goal of building a New Korea - a mature and vibrant industrial democracy.

This rapid economic and social development has brought Korea increased international exposure and recognition, as the Republic begins to expand its role on the international stage. Testifying to this was the successful hosting of the 1988 Seoul Olympics, the largest held in history up to that time. This was following by the 1993 hosting of an international exposition, the Taejon Expo �93. Both the Seoul Olympics and the Taejon Expo played an important role in deepening ties between Korea and countries all over the world and gave an impetus to the Korean economy.

This era of stability and expanding international ties represents the most exciting period in the country�s history - and yet, in retrospect, Korea has, in its 5,000-year history, quite an enviable record for governments of longevity and stability. The country�s last dynasty, the Yi Dynasty of the Choson Kingdom, lasted 500 years.

The Koreans of today, while enormously proud of their country�s past, look at Korea�s role and reputation from a more recent historical perspective; but, in order to understand today�s Korea - its land, people, culture, history, and recent economic and political transitions - it is necessary to look at both the past and the present. �Korea In Focus� aims to give you a brief overview to help in your general awareness of Korea today. More detailed information can be obtained from individual organisations or government offices.

The Korean Peninsula, located in Northeast Asia, is bordered on the north by China and Russia and juts towards Japan to the south-east. Since 1948, the 221,487 square kilometres which make up the entire Peninsula have been divided, roughly along the 38th parallel, into the Republic of Korea in the south and the Democratic People�s Republic of Korea in the north. The Republic of Korea covers 99,221 square kilometres, a land area a little more than twice the size of Switzerland.

Seoul is the capital of the country which is made up of nine provinces; other major cities include Pusan, Taegu, Inch�on, Kwangju, and Taejon.

The landscape is spectacular in its variations and about 70 percent of it is mountainous. The oceans around the Peninsula are a major source of livelihood and recreation for Koreans. The shoreline is dotted by more than 3,000 islands.

The Peninsula�s longest river is the Amnokkang (790 km) in the North. One of the South�s major waterways is the Han-gang River, which flows through Seoul to the West Sea (Yellow Sea) .

A look back at the 5,000 years of Korean history reveals triumphs and tragedies, successes and struggles which have been instrumental in shaping the Korea and Koreans of today. One remarkable fact that emerges from such a historical examination is that Korea has largely been ruled by long-term, stable governments. Korea�s kingdoms and dynasties generally lasted about 500 years or more.

Although Korea�s traceable history began considerably earlier that the seventh century, it was the Shilla Unification in 668 that Korea, as a historical entity with a cohesive culture and society, came to occupy most of the Peninsula as it exists today.

It was almost a decade after the end of the war before the Republic of Korea had recovered sufficiently to establish stability and start the momentum for its now remarkable recovery and development. The three decades since then have been a time of spectacular progress which has seen the creation of a modern, industrialised nation.

Korea is homogeneous society, although there have been historic and prehistoric migrations of Chinese, Mongols and Japanese. Koreans are very conscious of the ethnic differences and cultural distinctions which give them their unique identity.

The population of the Republic of Korea was estimated at 44.1 million in 1993. Its population density is among the world�s highest and Seoul, the capital, has more than 10 million inhabitants. The annual population growth in the Republic has dropped from an average of 2.7 percent in the 1960-66 period to only 0.90 percent in 1993. The slowdown is also partly the result of the increasing number of young working women.

The country�s rapid industrialisation is responsible for today�s concentration of population in urban centres. The proportion of Koreans living in cities has jumped from only 28 percent in 1960 to 74.4 percent as of 1990 - very similar to the 73 to 76 percent levels in the United States, Japan and France.

Language The Korean language is spoken by some 60 million people living on the Peninsula and its outlying islands as well as some 1.5 million Koreans living in other parts of the world.

Korean belongs to the Ural-Altaic language group, which is found in an narrow band from Korea and Japan across Mongolia and central Asia to Turkey. Korean is a non-tonal language, with agglutinative and polysynthetic elements.

Religion Religion in today�s Korea covers a broad spectrum of faiths and beliefs. Buddhism, Christianity, Confucianism, Islam and numerous other indigenous religions exist in Korea. Although none of them dominates, they all influence contemporary culture.

Education has been at the heart of Korea�s growth by training and supplying the manpower needed for rapid industrial and economic expansion.

A multi-tiered educational system is currently in use, encompassing elementary school (six years) , middle school (three years) , high school (three years) , and college (four years) , as well as various graduate and professional programs.

The government has eased regulations on overseas study. This new policy also encourages those in the teaching profession to take advantage of opportunities for training abroad.

Transportation The tremendous pace of domestic economic growth in the past two decades has been reflected in the expansion of transportation facilities and the increases in Korea�s annual passenger and cargo volumes. The annual volume of passenger transportation rose from 1.6 billion persons in 1996 to 14.24 billion in 1993.

Seoul has a well-developed mass transit system of subways, buses, and taxis. Airport shuttles or city buses are conveniently available and operate throughout the city. The subway system is the eighth longest in the world, carrying 1,388 million people in 1993. Its four lines reach most major locations in the city.

Korea has three international airports in Seoul (Kimpo) , Pusan (Kimhae) and Cheju (Cheju) , all of which are equipped with modern air traffic control facilities and support systems. Korean Air�s world-wide network serves 43 cities in 24 nations, including recently inaugurated flights to Rome. The newly launched Asiana Airlines recently started international flights with regular service to fourteen cities in Japan, the U. S., Singapore, Hong Kong, Taipei and Bangkok.

All expressway system also connects Seoul with provincial cities and towns, putting any place in mainland South Korea within a one-day round trip of the capital. Express buses transport passengers to and from all principal cities and resorts in the country.

The railway also serve the entire country through an efficient and extensive network. The super-express train, Saemaul, runs 444.5 kilometres from Seoul to Pusan in four hours and 10 minutes. There are also ordinary express and local trains.

Ocean liners, cruise ships, and passenger-carrying freighters visit Korean ports. A ferry service links Pusan with Chejudo Island and the Japanese ports of Shimonoseki, Kobe and Hakada. Another ferry service recently started between Inch�on and Tianjin China.

Telecommunications Telephone services have rapidly expanded during the last decade, particularly during the last 5 Years (1988-� 92) . During these years, with the investment of US$2.64 billion in communications annually, 1.76 million new telephone circuits were installed each year, increasing the total 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.

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 industrialised countries. Today, however, the Korean economy faces the new challenges of internationalisation and globalisation in an increasingly complex global economic environment.

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.

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.

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.

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 labour: Thus the country was forced to search for a new driving force sufficient for sustained economic growth.

To revitalise the economy, the Kim Young Sam Administration, which was inaugurated in February 1993 as the first civilian democratic government in over three decades, is endeavouring 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, labour 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 maximise 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 revitalising 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 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 endeavour to fully realised 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 realisation 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 stabilisation of the value of the won currency should help stabilise 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.

Note: ¹⁾ On a balance-of-payments basis ²⁾ In terms of 1998 current market prices  

On August 12,1993, the President took a decisive step toward revitalising the economy and eliminating corruption by announcing the implementation 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 institutionalised-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 non-productive land speculation are diminishing. It is hoped the funds that had been channelled into political circles in the past as a result of government-business collusion are now available for more productive activities.

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, labour 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 revitalisation.

Korea is committed to fulfilling its international responsibilities. It positively supports the trend toward openness and utilises 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 advanced countries.

Since 1980, Korea has made continuous efforts toward import liberalisation. The import liberalisation 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.

In June 1993, the Korean Government made public the third-phase of the blueprint for financial liberalisation and internationalisation, 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 currently 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.

In June 1993, the Korean Government also announced a five-year plan for liberalising 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 liberalisation 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.

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 concentrated on the developed world - mainly the United States, Japan and the EU. In more recent years, however, it has rapidly expanded trade and capital co-operation with Southeast Asia, former and present socialist countries and Third World nations as well.

Especially since the 1988 Seoul Olympics, economic interactions with the former Soviet republics have been brisk. The Republic of Korea is also increasing its support of economic development efforts in the Third World on the basis of its more than three decades� experience with successful domestic development.

The nation will continue to pursue expanded and more diversified trade and to promote economic co-operation on a long-term basis with the rest of the world, taking into consideration the individual economic characteristics of each country.

With the United States, the Republic of Korea will pursue not only expanded bilateral trade and increased mutual private investment and technological co-operation but also government-to-government co-operation in industrial technologies. As for Japan, the Republic will pursue Forward-looking practical economic relations and will, in particular, strive to attract Japanese investment more effectively. Since Korea does not have serious trade issues with the EU it will focus on promoting overall economic co-operation, including mutual investment and industrial and technological co-operation.

With the dynamically growing Asian economies, such as China and Southeast Asian Nations, the Republic of Korea will endeavour to continue to expand two-way trade, especially by helping to meet their expanding needs for capital goods and intermediate products to support their continuing rapid development, while increasing imports from them as much as possible. The nation will also encourage Korean business investment in these countries and make efforts to build an industrial structure complementary with theirs.

The Republic of Korea is increasing its official development assistance to developing countries proportionate to its economic strength. In this, efforts are being made to combine such assistance with private Korean investment, with the aim of maximising its effect, while developing two-way trade and other economic ties on a long-term basis.

Economic ties with the Commonwealth of Independent States and East European countries will continue to focus on commercial applications of their high technologies and other forms of technological co-operation and joint development of natural resources.

Note: Figures in parenthesis represent percentage of the total.

Korea has actively participated in virtually all major multilateral forums. During the Uruguay Round of trade talks, finally concluded in December 1993, Korea tried to make contributions commensurate with its capabilities as a major world trading power, and play a mediating role between the developed and developing countries. Korea introduced various proposals in the Uruguay Round negotiations to reduce tariffs, eliminate non-tariff barriers, liberalise the textile trade, improve safeguards and reduce subsidies and countervailing duties.

The Republic of Korea is actively participating in global efforts to protect the environment, a crucial task facing all of humanity. In recent years it has joined the Convention on Climate Change, the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, also called the London Dumping Convention, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, and the Convention on Biological Diversity.

Korea has also begun an informal dialogue with the Organisation for Economic Co-operation and Development (OECD) and has expanded participation in its various committees. Korea hopes and intends to improve its economic systems to the level of advanced countries so as to join the OECD in 1996.

One organisation in which the Republic of Korea has played a particularly critical role has been the Asia-Pacific Economic Co-operation (APEC) forum, a forum for multilateral discussions on economic issues concerning the Asia-Pacific region. Two examples of Korea�s valuable efforts have been the �Seoul Declaration� adopted at the third APEC Ministerial Meeting hosted by the Republic which laid the foundation for the institutionalisation of APEC, and its diplomatic role in bringing China, Taiwan and Hong Kong, three key regional economic powers, into the APEC fold, giving the forum a new impetus. Subsequently, the Republic played a leading role at the first APEC Leaders Economic Meeting in Seattle in November 1993, which coincided with the fifth APEC Ministerial Meeting, and was elected the chair member of the Committee on Trade and Investment (CTI) .

The rise of the Korean economy over the past several decades, often called the �Miracle of the Han� , has been an inspiring model of modern economic development. The rapid pace with which the Koeran economy rose from the ashes of war and expanded stunned the outside world. However, this rapid growth was not unaccompanied by growing pains which began to manifest themselves in all sectors of society particularly during the late 1980s. Excessive wage hikes, high capital costs and an overly bureaucratic administration, not to mention institutionalised corruption, served to weaken Korea�s international competitiveness, and this was aggravated by unfavourable external circumstances. In the past year, though, strenuous efforts have been made to overcome these impediments and through this, as well as improving international economic climate, it appears that the Korean economy is regaining its former vigour. The upcoming years pose severe challenges for the Republic in light of the December 1993 conclusion of the Uruguay Round and the rise of the Asia-Pacific region as the new global economic centre, but with the increasing emphasis in both the public and private sector on globalisation and internalisation, the Republic seems braced to meet these challenges.

What are the vision and goals of the Administration of Kim Young Sam, inaugurated on February 25,1993. In a nutshell, the answer is the �creation of a New Korea� through �Reform Admist Stability.� This concept was the keynote of the President�s inaugural address as well as the main slogan of his presidential election campaign in December 1992.

�I have a dream. It is the creation of a New Korea in which a new politics, a new economy and a new culture will bloom. This is my dream and vision; it is the dream and vision of all our people.� This quotation appears in the book, �Kim Young Sam: New Korea 2000,� published in Korea in October 1992 prior to the presidential election.

In his inaugural speech on February 25,1993, President Kim Young Sam defined the three major priorities of his policies to create a New Korea: the eradication of social injustice and corruption, the revitalisation of the national economy and the establishment of official discipline and public order.

The President declared that the eradication of corruption was a vital foundation for reforms in every sector of the country, and that there would be no sanctuary from the investigation of misconduct. The movement to establish official discipline and public order, which began with high-ranking government officials, is intended to ensure integrity and high ethical standards by �purifying the upper reaches of the stream,� i. e., the upper levels of government and society.

The main purpose of these reforms is to revitalise the nation and elevate the overall standard of living. President Kim Young Sam has thus pushed ahead with firm determination since his inauguration, bringing about enormous changes in this country.

From the very start of his Administration, President Kim Young Sam concentrated on eliminating corrupt practices and behaviour, which arose from decades of authoritarian rule. This kind of housecleaning was unheard of in the past. President Kim believes, and popular opinion supports him on this, that such reform must be carried on without letting up in the interest of the long-term stability and economic development of Korea.

The creation of a New Korea means the building of unified, fully mature democratic state. To that end, drastic changes and reforms are being pursued to raise the quality of life for all those who were sacrificed in the blind quest for rapid growth over the past 30-odd years.

What will the future New Korea be like? Korea�s first non-military President since 1961, President Kim in his inaugural address said the New Korea will be:

1. A freer and more mature democratic society.