Korea in Focus

Korea in Focus

KOREA IN FOCUS

A People and History in Harmony

Introduction

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 revitalize 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

organizations or government offices.

Land

The Korean Peninsula, located in Northeast Asia, is bordered on the

north by China and Russia and juts towards Japan to the southeast. Since

1948, the 221,487 square kilometers 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 kilometers, 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 mountaneous. 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).

History

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 kindoms 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 occuрy 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, industrialized nation.

People

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 industrialization is responsible for today’s

concentration of population in urban centers. 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

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 worldwide

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 kilometers

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.

THE ECONOMY

Looking Ahead to the 21st Century

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 industrialized countries. Today, however, the Korean

economy faces the new challenges of internationalization and globalization

in an increasingly complex global economic environment.

Past Performance and Policies

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.

Trends of Major Economic Indicators

| |Unit |‘62 |‘70 |‘80 |‘85 |‘90 |‘92 |‘93 |

|GNP |US$ |2.3 |8.1 |60.5 |91.1 |251.8|305.7|328.7|

| |bil. | | | | | | | |

|Per Capita GNP |US$ |8.2 |242 |2,194|2,242|5,883|7,007|7,466|

|GNP Growth Rate |% |2.2 |7.6 |7.0 |7.0 |9.6 |5.0 |5.6 |

|Domestic Savings |% |3.3 |17.9 |29.1 |29.8 |35.9 |34.9 |34.9 |

|Ratio | | | | | | | | |

|Trade Volume |US$ |0.5 |2.8 |39.8 |61.4 |134.9|158.4|166.0|

| |bil. | | | | | | | |

|Producer Price |% |9.4 |9.2 |38.9 |0.9 |4.2 |2.2 |1.5 |

|Consumer Price |% |8.3 |15.9 |28.8 |2.4 |8.6 |6.2 |4.8 |

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.

Recent Challenges

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.

Recent Economic Trends

| | |‘91 |‘92 |‘93 |‘94. 1 |

| | | | | |( 6 |

|GNP | | | | | |

| GNP |Growth Rate in |9.1 |5.0 |5.6 |8.5 |

| |% | | | | |

| Manufacturing |Growth Rate in |9.1 |5.1 |5.0 | |

|Sector |% | | | |10.0 |

| Private |Growth Rate in |9.5 |6.6 |5.7 |7.2 |

|Consumption |% | | | | |

| Investment |Growth Rate in | |0.8 |3.6 | |

| |% |12.6 | | |10.3 |

| Equipment |Growth Rate in | |1.1 |0.2 | |

| |% |12.1 | | |17.7 |

|Prices | | | | | |

| Producer Price |% |4.7 |2.2 |1.5 |2.2 |

| Consumer Price |% |9.3 |6.2 |4.8 |6.2 |

|Balance of Payments| |7.0 |2.2 |1.9 |1.6 |

| Export |US$ bil. | | | | |

| | |69.6 |75.1 |81.0 |43.1 |

| Imports |US$ bil. | | | | |

| | |76.6 |77.3 |79.1 |44.7 |

|Current Account | | | | | |

| Balance |US$ bil. |8.7 |4.5 |0.4 |2.7 |

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 labor: Thus

the country was forced to search for a new driving force sufficient for

sustained economic growth.

Major Tasks and Policy Directions

To revitalize the economy, the Kim Young Sam Administration, which

was inaugurated in February 1993 as the first civilian democratic

government in over three decades, is endeavoring 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, labor 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 maximize 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 revitalizing 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 endeavor to fully

realized 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 realization 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 stabilization of the value of the won currency should help stabilize

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.

Targets of the 5-Year Plan for the New Economy

| |‘91 |‘92 |‘93 |‘94 |‘95 |‘96 |‘97 |‘98 |‘93-’9|

| | | | | | | | | |8 |

|GNP growth, % |8.4 |4.7 |6.0 |7.1 |7.2 |7.1 |7.0 |7.0 |6.9 |

|Per capita GNP, |6,51|6,74|7,30|8,19|9,33|10,7|12,3|14,0|14,076|

|US$ |8 |9 |6 |6 |9 |16 |05 |76 |2) |

|Rise in producer |4.7 |2.2 |1.8 |1.8 |1.7 |1.6 |1.5 |1.4 |1.6 |

|prices, % | | | | | | | | | |

|Rise in consumer |9.3 |6.2 |4.9 |4.3 |3.7 |3.6 |3.2 |2.9 |3.7 |

|prices, % | | | | | | | | | |

|Rise in GNP |11.2|6.3 |5.3 |5.3 |4.8 |4.5 |4.1 |3.8 |4.6 |

|deflator, % | | | | | | | | | |

|Balance on curren |8.7 |4.6 |1.4 |0 |0.9 |2.1 |3.7 |5.3 |5.32) |

|account, | | | | | | | | | |

|US$ billion | | | | | | | | | |

|Exports 1) ,US$ |69.6|75.1|82.3|82.3|99.3|110.|122.|136.|136.32|

|billion | | | | | |1 |6 |3 |) |

| Rate of |(10.|(7.9|(9.5|(9.5|(10.|(10.|(11.|(11.|(10.4)|

|increase, % |2) |) |) |) |2) |9) |3) |2) | |

|Imports, US$ |76.6|77.3|81.3|81.3|95.8|105.|116.|128.|128.12|

|billion | | | | | |3 |1 |1 |) |

|Rate of increase, |(17.|(1.0|(5.1|(5.1|(9.3|(9.9|(10.|(10.|(8.8) |

|% |5) |) |) |) |) |) |2) |3) | |

Note: 1) On a balance-of-payments basis

2) In terms of 1998 current market prices

The Real name Financial Transaction System

On August 12, 1993, the President took a decisive step toward

revitalizing the economy and eliminating corruption by announcing the

inplementation 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

institutionalized-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 nonproductive land speculation are

diminishing. It is hoped the funds that had been channeled into political

circles in the past as a result of government-business collusion are now

available for more productive activities.

Encouraging Signs

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-

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