Continent of Asia

East and Southeast Asia

 Newly industrialized countries – NICs
 Japan
 Asian tigers – South Korea, Hong
Kong, Singapore and Taiwan
 Little tigers – Thailand, Indonesia,
Malaysia, Vietnam and others

 China and India

 Economic
Development of
South Korea and
North Korea
Tomáš Dudáš
 History of the Korean
Peninsula
 China, Russia and Japan were fighting
over the power in Korea, the result
was a destruction of Korea and poor
conditions for development
 China was superior to Korea and
represented an important source for
culture, technology and knowledge.
Also China protected Korea and
claimed to be it's older brother
 History of the Korean

Peninsula
Periods of relative peace were filled by internal
conflicts between local noble families fighting for
more influence and greater power
 Poor conditions for farmers- high payments to the
government, corrupt administration
 Isolation
 Korea has been annexed by Japan in 1910 and it
regained its independence only in 1948
 Dark period of Korean history – strong suppression of
the national culture by the Japanese occupants
 History of the Korean
Peninsula
 In 1948 the northern part of the country
declared its independence under the
leadership of Kim Il-sung
 Subsequently - Peoples Democratic Republic
of Korea invaded the southern part of the
peninsula
 The war ended in standstill – the peninsula
is divided along the 38th parallel
 Thus begins the story of two Koreas
 the story of two economic and political
systems
 the story of prosperity and poverty

 the story of human development and

suffering
 Republic of
Korea (South
Korea)
 The Korean miracle:
60's Today

GDP p.c.: 85 USD GDP p.c.: 27,600 USD

Export: 30 mil. USD Export: 433.5 billion
Unemployment: 20% USD Unemployment:
Population below 3.3 %
poverty line: 40 % Population below
poverty line: 15%
huge inflation
social tensions
Slovakia’s GDP: 21,900
USD
Miracle on River Han
 Miracle on River Han
 South Korean development went through 6 phases:
 Classical import substitution (1963-1966)

 Labor-intensive export-led growth (1967-1972)

 Heavy industry promotion (1973-1978)

 Stabilization, liberalization and economic

maturity( 1979-1996)
 Financial crisis (1997–1999)

 Reform, restoration of growth (1999-present)

 Park Chung Hee – the man of the
change
 In 1961 an peaceful military coup led by Park Chung He was
carried out. At the beginning of his rule even Park could enjoy
the assistance and generosity of the USA - 70% of the military
spending was financed by USA
 Park managed the country through a group of military officers
 He removed the corrupt civil servants and military officers
 Soon the Parliament was dissolved and any political activity was
banned.
 Censorship and press constrains were introduced
Park Chung Hee - – the man of the
change
 apolitical technocrats were largely involved in
managing the country
 private businesses largely supported Park. These
were implementing Parks export-oriented policy
and were rewarded by tax forgiveness, cheap
credits, government guarantees on foreign credits,
investment incentives
 An important momentum in gaining support from
USA was the war in Vietnam
 South Korea was the main ally and biggest
supporter of USA (sending 300.000 soldiers)
 Chaebol – the Key of the
Korean Success
 Park nationalized all the Korean banks
 Reinforced the system of chaebol
 a few specially selected large companies
 encouraged to tailor their growth and
production targets to meet government
objectives
 dependent on those state-owned banks for
the credit they needed to operate and grow
Chaebols - the Key of the Korean
Success
 A conglomerate of many companies
 companies hold shares in each other
 concentration of national economy
 does not have own financial
institution
 spreads across industries
 has centralized structure and control
 tends to be family-based
Park’s Legacy - A Strong
State
 state controlled virtually all economic
activities in South Korea
 government approved all bank loans
 granted licenses for virtually all businesses

 controlled many prices

 copied much of the Japanese model

 with a heavier emphasis on political and
military influence in running the economy
 Export promotion
 The administration made exporting into
a national campaign, almost a patriotic
duty.
 export producers were given priority in
investment decisions, credit allocations,
and other benefits
 strategy of forcing domestic consumers
to subsidize exports
 Korea Traders Association (KOTRA)
 Regime change –
democracy and free market
economy
 Democratization
 Deregulation
 land use (1990)
 import liberalization (1992)

 open stock market to foreigners (1992)

 open domestic capital market (1994)

 deregulate loan financing in foreign

market (1994)
 Crisis in South Korea
1997
 chaebol crisis (bankruptcies)
 financial crisis
 credit rating downgraded
 exchange rate of won

 stock market

 economic crisis
 economic growth rate and GNP per capita
 unemployment rate
 GDP growth in South Korea between 1995-2008 (%)

12

10

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f
-2

-4

-6

-8
 Unemployment in South Korea 1995-2007

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
 Democratic
People's Republic
of Korea (North
Korea)
Dear Leader and Great
Leader
 Basic Facts
 One of the most secretive, paranoid
and isolated regimes in the world
 Data from North Korea are
inaccurate and suspicious
 Population – approx. 23 million
 GDP/C - 1,800 USD in 2008 (PPP)

 GDP growth - 3,7 % in 2007

 Population below the poverty line - ????

 Economic development
 At the end of World War II, the DPRK represented
the industrialized part of the Korean peninsula.
Under Japanese colonialism, heavy industry, water
power, and manufacturing were concentrated in
the North, contrasted with the more agrarian South

 The new country adopted a classic communist

economic regime
 After the Korean war the first three year plan was
adopted
 Economic development
 Similar to other communist countries due to
heavy industrialization the economy grew
rapidly in the 50s and the 60s
 Juche policy - "spirit of self-reliance"
 The growth rates began to decline in the
70s, but still in 1976 the GDP p.c. equaled
the GDP p.c. in South Korea
 but from that year South Korea gained ground
rapidly
Collapse of the communist bloc =
Collapse of the economy
 Main problem – Loss of Russian aid,
export markets and cheap oil
 Technologically outdated and inefficient
economy
 Collapse of central planning
 Natural disasters – continuing droughts
and floods
 Collapse of agriculture – hunger
 Songun - “Military First”
policy
 Was introduced by Kim-Jong-Il after the death of
his father in 1995
 “a revolutionary idea of attaching great importance to
the army”
 Songun emphasizes the military over all other
aspects of state and society
 In line with this policy North Korea spends $5
billion out of a gross domestic product (GDP) of
$20.9 billion on the military (estimate) and
maintains the 5th largest standing army in the
world
 „What good is this world without North Korea?“
 Kim Jong-Il
 Famines in the 90s
 Main factors
 unsuitable terrain (80 % of the land is not suitable for agriculture)
 economic mismanagement (bad crops selection – rice and maize
and over-fertilization)
 serious fertilizer shortages
 collapse of the eastern bloc
 series of natural disasters (due to deforestation and soil erosion)
 Results
 estimated 1-3 million deaths between 1995-1999
 in 2006 studies said that 7 percent of children were severely
malnourished and 37 percent were chronically malnourished
 recent study of the Peterson Institute for International Economics
shows that a new famine is highly probable
 Reforms announced in
2002
 Establishment of special economic
Establishment of special economic
zones (Kaesong - near the border with
China and close to South Korea)
 increases in prices and wages
 changes in foreign investment laws
 steep currency devaluation
 limited increases in flexibility and
responsibility for economic enterprises
 The Two Koreas -
Comparison
 South Korea  North Korea
 Index of economic freedom
 Index of economic
– 157th position (repressed)
freedom – 41st  Human development index
position (moderately – not included (no data)
free)  Global Competitiveness
 Human development Index – not included
index – 26th position

 Global
Competitiveness
Index – 13th
Night Image of the Two Koreas
After Five Decades