Focus on Korea : Economic Giant
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The 1997 – 98 crisis , though triggered by external events , was largely a product of internal problems , relating at base to a weak system of corporate governance , a dysfunctional financial system , and poor labor relations .
began rising even faster . International trade started expanding . An agricultural revitalization movement was launched . Having grown 3.4 percent annually between 1953 and 1962 , growth accelerated to 8 percent a year in the following decade For forty-five years starting in 1963 , the economy averaged over 7 percent growth annually .
In 1963 , primary products such as agricultural produce accounted for more than half of South Korea ’ s exports , with human-hair wigs the thirdleading item . A decade later , South Korea ’ s exports were dominated by manufactures such as textiles , electrical products , and iron and steel ; only one primary product category , fish , made the top ten . Today , South Korea ’ s merchandise exports are concentrated in motor vehicles and telecommunications equipment , and the country generates increasing cultural exports , typified by PSY and his “ Gangnam Style .” Lucien : The ROK had some significant problems in the Asian financial crisis of the mid-1990s . Why was this the case , and what kinds of change ( if any ) did policymakers implement to lessen the probability of another meltdown ? Marcus Noland : Under Park Chung-hee , the South Korean economy followed Japan ’ s reasonably well-defined industrial path . But problems arose as South Korea approached the international technological frontier . The old development strategy of imitating the prior trajectories of more advanced economies was no longer adequate , which put a heightened premium on the ability of corporate managements and their financiers to discern emerging profit opportunities . But decades of state-led growth had bureaucratized the financial system and created a formidable constellation of incumbent stakeholders opposed to liberalization and a transition toward a more market-oriented development model .
The financial sector liberalization undertaken in the early 1990s was less a product of textbook economic analysis than of parochial politicking . It created unintended incentives for short-term bank borrowing and left the economy vulnerable to a variety of negative shocks . In 1997 , in the context of the broader Asian upheaval , South Korea experienced a financial crisis with net cleanup costs that eventually amounted to 16 percent of national income .
The 1997 – 98 crisis , though triggered by external events , was largely a product of internal problems , relating at base to a weak system of corporate governance , a dysfunctional financial system , and poor labor relations . In its aftermath , South Korea undertook considerable reforms , most evidently in the financial sector . Prudential regulation was strengthened through the creation of the Financial Supervisory Commission and the introduction of new regulatory practices , approaches , and standards . In the corporate sector , South Korea experienced what was at the time the largest corporate bankruptcy in history ( Daewoo ) and came close to another ( Hyundai ), but the chaebŏl ( family-dominated conglomerates ) embarked on a process of restructuring , encouraged by market forces , political prodding , and legal changes . In the labor market , the government greatly broadened and strengthened the social safety net . All in all , in the period following the 1997 – 98 crisis , South Korea arguably made better progress on economic reform than the other heavily affected Asian crisis countries , or Japan , for that matter .
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