South Korea Economy

South Korea Economy

Business

In the early 1960s, the damage from the Korean War had largely been eliminated. With foreign aid and an export-oriented development strategy, South Korea developed as a Ā»Little TigerĀ« into a leading western industrial state (member of the OECD from 1996). Around 70% of the gross domestic product is now generated in the service sector.

The economic system is oriented towards the market economy, but with strong indirect state guidance and control. Economic growth with steady growth rates continued after brief interruptions due to the Asian crisis (1997/98) and the international financial and economic crisis (2007/08). Due to the low unemployment rate (2018: 3.8%), foreign workers from China, Malaysia and Indonesia are working in South Korea. On the other hand, unemployment among those under 30 is more than 10%. After the Asian crisis, South Korea’s economy underwent radical restructuring (including deregulation, opening up to foreign capital).

Foreign trade: South Korea is one of the major world trading countries. Up until 1997 the trade balance was in deficit in most of the years; since then, annual surpluses have been generated. The main exports are electronic components, telecommunications equipment, motor vehicles and machines. Fuels (petroleum, liquefied gas) and other raw materials as well as machines and transport equipment, industrial consumer goods, chemical products and food are imported. The main buyer countries are the PR China, the USA and Vietnam, the main supplier countries are China, Japan, the USA and Germany. Free trade agreements were concluded with the EU, the USA and China from 2011 onwards.

Agriculture

Less than a fifth of the country’s area can be used for agriculture. As a result of the rapidly growing industrial and service sectors, the agricultural sector’s share of GDP fell from almost 40% (1965) to around 2% today. Around 5% of the workforce is employed in agriculture and fishing. The average size of the mostly small farms is only 1.2 ha. In addition to rice, the main foodstuff, which is heavily subsidized by the state on half of the arable land, especially on wet fields, are cabbage, onions, melons, potatoes, tropical fruits and Apples are the most important crops. The supply of the population with rice is assured; other grain is mostly imported. With the growing purchasing power of consumers, land use shifted from staple foods to special crops (fruit, vegetables in greenhouses). Livestock farming, especially dairy farming, has also gained in importance.

Forestry: Forestry only plays a subordinate role. The forest area (2014: 63.5% of the territory) consisted almost entirely of scrub forest at the beginning of the 1960s due to long-term overexploitation (firewood extraction, slash and burn), but was then systematically reforested and converted into regulated forestry.

Fisheries: South Korea is one of the world’s leading fishing countries. Deep sea fishing is more important than inshore fishing; the adjacent waters have been fished almost empty. Fish is increasingly being produced in aquaculture. The centers of the fish processing industry are Busan, Ulsan and Masan.

Industry

The manufacturing industry (including construction) generates almost two fifths of the gross domestic product (GDP). It employs a quarter of the workforce. The main driver of economic growth is the export-oriented electrical, electronics and semiconductor industries (especially computers, entertainment electronics, memory chips, flat screens and cell phones). The shipbuilding industry has been an important branch of the economy since 1980; South Korea is a major shipbuilding nation. Also of importance are automobile production, heavy industry (iron and steel production), the chemical, food and textile industries. The appreciation of the won, the import restrictions of the buyer countries and increased labor costs particularly burdened the labor-intensive light industry, which is therefore increasingly exported abroad. mainly to China. The corporate structure is still characterized by large family-owned conglomerates (chaebol); the 30 largest conglomerates dominate around 40% of the economy. There are also a large number of small businesses that mainly produce for the domestic market.

Natural resources

South Korea is poor in raw material deposits that can be mined; the importance of mining is declining. In addition to hard coal, mainly iron, zinc and lead ore as well as small amounts of kaolin, feldspar and pyrophyllite are mined. There are smaller oil and gas deposits off the coast.

Energy industry

South Korea has to import almost all of its energy resources. The share of oil in total primary energy consumption is more than 40%. Other important energy sources are coal, natural gas and nuclear energy. In 1978 the first Korean nuclear power plant went into operation in Kori near Busan; In 2018, a total of 24 reactor blocks generated electricity at four locations. South Korea said goodbye to expansion projects in 2017, rather the government planned to phase out nuclear power and expand renewable energies to 20% of energy generation by 2030.

Tourism

According to Bridgat, the main tourist attractions are the metropolis of Seoul with its historical palaces and parks, the old capital of the Silla empire Gyeongju with the nearby Buddhist temple complex of Seokguram, the mountains in the north-east (especially Seoraksan National Park) and the volcanic island of Jeju located off the south coast.

Transportation

In order to keep pace with economic growth, considerable resources have been invested in the expansion of an efficient transport network. A motorway network was created from scratch. The rail network includes three high-speed train routes (KTX, in service from 2004), the longest between Seoul and Busan. Coastal and maritime shipping are particularly important. The majority of foreign trade is carried out via the ports of Busan in the southeast and Incheon on the Yellow Sea. The most important industrial ports are Gwangyang on the south coast at the location of one of the world’s largest steelworks and Pohang, Ulsan and Tonghae on the east coast. South Korea also has a large merchant fleet. Incheon has the largest of eight international airports. National airlines are Korean Air and Asiana.

South Korea Economy

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