The most significant factor in rapid industrialization was the adoption of an outward-looking strategy in the early 1960s. This strategy was particularly well suited to that time because of South Korea’s poor natural resource endowment, low savings rate, and tiny domestic market. The inflow of foreign capital was greatly encouraged to supplement the shortage of domestic savings. South Korea’s real gross domestic product expanded by an average of more than 8 percent per year, from â‚¬ 2 billion in 1962 to â‚¬ 171.6 billion in 1989.
Despite the global financial crisis, the South Korean economy, helped by timely stimulus measures and strong domestic consumption of products that compensated for a drop in export was able to avoid a recession unlike most industrialized economies, posting positive economic growth for two consecutive years of the crisis. In 2010, South Korea made a strong economic rebound with a growth rate of 6.1% (FMI), signalling a return of the economy to pre-crisis levels, nevertheless growth forecasts for 2011 stand at 4.5% of GDP anticipating a slowdown linked to the gradual dismantling of the fiscal stimulus from the end of 2010.
The South Korean economy of the 21st century, as a Next Eleven economy, is expected to grow from 3.9% to 4.2% annually between 2011 and 2030, similar to growth rates of developing countries such as Brazil or Russia.
South Korea is a member of the Four Asian Tigers (or Dragons), its main industries are found in electronics, automobile production, chemicals, steel, textiles, clothing, footwear, food processing and treatment sectors. Furthermore South Korea is the world’s leader in shipbuilding. In 2008 it represented 50.6% of the world’s production.
More than 3.8 million cars were produced last year by this industry, what represents approximately 10 % of the global market. Today, Korean cars are among the most advanced in the world. The local market is dominated by Hyundai and its sister company Kia who hold 81 % of the market. Despite the local supply chain in this sector, Korea still requires foreign expertise in the fields of design and product engineering and the development of new and green vehicles. Currently green vehicle development is in high demand.
Korea wants to have a world leading low carbon economy. As part of a five-year plan Korea will invest two-percent of its GDP in green growth. Korea is voluntarily reducing greenhouse gas emissions by 4 per cent by 2020 through the use of bio and nuclear energy, and energy-efficient technologies. Target sectors for the Korean Government to achieve this aim are wind energy, photovoltaic and hydrogen & fuel cell.
The South Korean government will invest â‚¬31 billion by 2012 on environmental projects in a “Green New Deal” to aid economic growth and create nearly a million jobs. The projects cover the following areas: energy conservation, recycling and carbon reduction. This is in addition to flood prevention and development around the country’s four main rivers and maintaining forest resources. South Korea is also dealing with several environmental issues including: air pollution, acid rain, water pollution from the discharge of sewage and industrial effluents.
In 2002 the market was valued at £2 billion with over half of the largest global cosmetic companies officially trading in South Korea. The market attracts 88 per cent of Japanese cosmetics firms, 54 per cent of European ones and 38 per cent of U.S. cosmetics firms. The market share of imported cosmetics products is approximately 30 per cent of the total cosmetics market in South Korea. In addition to female products, sales of male grooming products, targeted at 20 to 30 year olds are increasing due to young South Korean men become more concerned about their appearance. This is an expanding market for both sexes.
Since the country has a fairly small geographical territory, a large portion of its economy is based on importing from other countries, particularly the water.
The size of the Korean water industry in 2010 is expected to be £6,290 million. Korea has well established in waterworks, sewerage services and desalination in terms of technologies. However, Korea has a lack of technology to address membrane filtration, water reuse and recycling.
The software and ICT sector is significant and South Korea has become one of the leading information economies in Asia. South Korea is looking to invest in developing its software capabilities to complement its hardware strengths and it is now its fastest growing sector in the IT industry. In 2010 the Korean Government plans to stimulate exporting and attract foreign companies in the medical, educational, and other high value services sectors.
Broadband connections are the fastest in the world and internet usage, through broadband,
is 93 per cent. Korea’s mobile phone communications market is expected to reach 100 per cent in 2010 resulting in mobile operators looking for new revenue streams.