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Economic Miracle in South Korea

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The economy of south Korea is fifth after China, Japan, India and Russia in Asia and 15 in the world according to the World Bank 2017 annual report. Government of South Korea policies resulted in real GDP growth averaging 10 percent annually between
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  1 ن در ک   نوتهوپ  Kardan University MBA Department Managerial Economics Research Paper Assignment Economic Miracle in South Korea Lecturer: Mr Mahmood Ajmari Submitted by Barat Ali, Alimadad Rasoli Registration No: 902  – 1704042, 902-1704041 Course: MBA  –  Business, Term G Date of Submission:23/01/2018  2 Table of Content 1. Introduction to South Korean Economy .................................................................................. 3 2. Pre  –  economic Miracle Condition in South Korea .................................................................. 4 3. Key Policy Reform..................................................................................................................... 4 4. Role of Institution ..................................................................................................................... 6 5. Statistics ................................................................................................................................... 6 6. Key Analysis .............................................................................................................................. 6 6.1 GDP and Per Capita Analysis ............................................................................................. 6 6.2 Trade Analysis ................................................................................................................... 7 6.3 Sectorial Origins of GNP ................................................................................................... 8 6.4 Export Analysis .................................................................................................................. 8 7 Can We Replicate in Afghanistan? ........................................................................................... 9 8 Lesson Learned ....................................................................................................................... 10 9 References .............................................................................................................................. 11  3 1.   Introduction to South Korean Economy The economy of south Korea is fifth after China, Japan, India and Russia in Asia and 15 in the world according to the World Bank 2017 annual report. Government of South Korea policies resulted in real GDP growth averaging 10 percent annually between 1962 and 1994. South Korea is a great example of aid recipient country which turned to high income developed country with Gross National Income per capita increasing from US$ 67 in the early 1950s to US$ 22,670 in 2012. South Korea is the first country which become member of Organization for Economic Cooperation and Development while receiving aid. Korea also took the chairmanship of the G-20 summit in 2010. South Korea is famous in the world for economic miracle from poorest nation to a developed nation only in one generation. South Korea economic miracle is known as Han River   which is happening after Korean war. Education system and establishment of educated and highly motivated population is the main force of South Korea economic development. Based on World Bank 2016 report, South Korea with 51 million population has $1.4 Trillion GDP, 2.6 % economic growth rate, $ 27,600 per capita, 3.7 % unemployment rate and 0.7 % inflation rate which is a real of a developed economy. In past big part of the Korean labour force was working on agriculture and in 1987 12.3% of GDP comes from this sector and 21% of labour force was employed in this sector. But today South Korean economy is industrialized, and agriculture only constitute the 2.3% of their GDP. South Korea’s industries have become a major source of income. They have pushed the economy towards growth since the 1980s. Today, they contribute 38.3% to the GDP. South Korea’s largest industries are electronics, automobiles, telecommunication equipment, and shipbuilding. In addition, South Korea is one of the biggest manufacturers in the world. Electronic goods and memory chips are all produced here. South Korea is a major automobile producer, with more than 4 million cars manufactured each year. In 2008, South Korea covered more than 50% of the global shipbuilding market. Four of t he world’s largest shipbuilding companies are located here as well. The biggest employer throughout the country, however, is the services sector, which provides more than 70% of people working in South Korea with an occupation. As the services sector makes up almost 60% of the nation’s GDP, experts predict that it may become the driving force of the economy in the future.  4 2.   Pre  –  economic Miracle Condition in South Korea During the colonization of Japan between 1910  –  1945, social and economic situation of Korean was worse, and after independent from Japan, Korean war and division of country in north and south caused huge damage of economic infrastructures and pillars. Some of the economic factors around 1960 and 1961 mentioned as follow: 1.   GDP $ 3.9 billion 2.   Per capita income of 82 $, approximately same as to Ghana and Sudan per capita 3.   Scare natural resources and infrastructures damaged in Korean war. 4.   High level of poverty and low saving (8%) 5.   US aid accounted for 50% of its budget, 70% of imports, 80% of foreign exchanges 6.   Exports $41 million 7.   Trade $ 33 million, only 3.3% of GDP 8.   Life expectancy 55 9.   School and university enrolment were 29% & 9 % for boys and girls respectively in 1970 10.   Population around 25 million 3.   Key Policy Reform Following are the key policy reforms which government of South taken into action after world war second. 1.   High investment in human Capital: High investment in education system and high-quality workers and entrepreneurs resulted huge reform in economic sector. 2.   Industrialization: Agricultural economy replaced with heavy industry and electronics. Electronics, automobile, telecoms equipment’s and shipbuilding are the four -main pillar of the South Korea economy. 3.   Trade: Expert oriented economic take off in 1960 in South Korea. Export incentives and free trade zone established in South Korea. Now the South Korea is one of the biggest exporters in the world. 4.   Foreign direct investment: Played minor role in economic development of Korea. 5.   Five years plans: The First Five-Year Economic Development Plan (1962-66) consisted of initial steps toward the building of a self-sufficient industrial structure that was neither consumption oriented nor overdependent on oil. Such areas as electrification, fertilizers, oil refining, synthetic fibers, and cement were emphasized. The Second Five-Year  5 Economic Development Plan (1967- 71) stressed modernizing the industrial structure and rapidly building import-substitution industries, including steel, machinery, and chemical industries. The Third Five-Year Economic Development Plan (1972-76) achieved rapid progress in building an export-oriented structure by promoting heavy and chemical industries. The Fourth Five-Year Economic Development Plan (1977-81) fostered the development of industries designed to compete effectively in the world's industrial export markets. The Fifth Five-Year Economic and Social Development Plan (1982-86) sought to shift the emphasis away from heavy and chemical industries, to technology-intensive industries, such as precision machinery, electronics (televisions, videocassette recorders, and semiconductor-related products), and information. The Sixth Five-Year Economic and Social Development Plan (1987-91) to a large extent continued to emphasize the goals of the previous plan. The government intended to accelerate import liberalization and to remove various types of restrictions and nontariff barriers on imports.
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