Rebounding after Crisis: South Korea
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : ECON042
Case Length : 18 Pages
Period : 2012-2013
Pub. Date : 2013
Teaching Note :Not Available
Organization : --
Industry : -
Countries : Korea
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ECON042) click on the button below, and select the case from the list of available cases:
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Background
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Till the 1960s, Korea was mainly characterized by declining economic growth and rising unemployment. It was an agrarian economy, with 68.3% of its workforce depending on agriculture, forestry, and fishery for their livelihood and only 1.5% on manufacturing. Korea’s per capita income in 1961 was USD82 , which was lower than that of Haiti, Ethiopia, Peru, Honduras, and Yemen and almost 40% lower than India’s per capita income.
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Beginning with General Park Chung-hee’s (Park) military coup in 1961, the country’s economy made a dramatic turnaround. In 1962, Park launched his first five-year plan and during those five years, Korea’s annual GNP growth averaged 8.3%, exceeding the planners' own forecasts. Park gave priority to exports, due to which Korea’s per capita income tripled by 1980. During the 34 years from 1962-1995, Korea transformed itself from an agrarian economy into an industrialized economy with the development of light, heavy, and high-tech industries....
In 1994, with a per capita income of US$8,260, Korea was closer to high income countries like Portugal (US$9,320) and Spain (US$13,440), when compared countries like India (US$320) and Ethiopia (US$ 100). By 1995, just a year before the financial crisis hit Korea, it had a per capita income of over US$10,000 and had emerged as the world’s eleventh largest trading nation . Korea’s real GDP during 1962-1995 advanced 8.7% per annum and its real per-capita GDP grew at 7% per annum during the same period....
However, behind Korea’s splendid transition, lay a very complex structure by which the economy was managed by the state. The state was guided by the belief that it should play an active role in the early stages of industrialization, rather than leaving the economy at the mercy of market-forces.....
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