Republic of Korea, is it the best economic model?


During General Park Chung-hee’s government (1961 to 1979),  a series of economic policies brought rapid economic growth and industrialization.

The government encouraged the growth of family-owned industrial conglomerates like Samsung, Lotte, Hyundai, or LG.

Called “Chaebol”, these conglomerates led the country to register trade surpluses over the years due to constant export growth.

Over the last few years, spending on R&D and Education, might help to better understand the Republic of Korea’s outstanding performance.

In 2018, gross domestic spending on R&D was 4.5% of GDP. Korea ranks 2nd worldwide, according to OECD data.

The gross domestic spending on R&D rankings 2018 (% GDP):

  1. Israel 4.94%
  2. Korea 4.53%
  3. Taiwan 3.46%
  4. Sweden 3.31%
  5. Japan 3.26%
  6. Austria 3.17%
  7. Germany 3.13%
  8. Denmark 3.03%
  9. United States 2.83%
  10. Belgium 2.76%

In education, Korea holds top positions in PISA rankings 2018:

  • 4th Reading performance
  • 2nd Mathematics performance
  • 3rd Science performance

With regard to foreign trade, Korea was the 7th largest exporting economy in 2019, with a total of 542 billion US dollars, according International Trade Centre.

Behind France (6) with 555 Billion and followed by Hong Kong (8), with 536 Billion dollars. Other countries like Japan, Canada and Singapore were placed in positions 5, 11 and 14 respectively.

Imports reached 503 billion in 2019. The trade balance surplus stood at 39 billion.

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Key takeaways

GDP per capita 40,112 dollars (2018)

Population 51.6 million inhabitants

Trade balance surplus 39 billion (2019)

Foreign direct investment (FDI) 14.4 billion (2018)

Exports of technological products  75% out of the total manufactured exports (2017)



Foreign trade

During the period 2016-2019, exports increased at an average annual rate of 2.7% from 495 billion in 2016 to 542 billion in 2019.

In 2019, the top 5 Korean exports with 36% out of the total, were:

  • 15% Electronic integrated circuits; parts thereof
  • 7% Motor cars and other motor vehicles principally designed for the transport of persons, incl.
  • 7% Petroleum oils and oils obtained from bituminous minerals (excluding crude); preparations containing
  • 4% Parts and accessories for tractors, motor vehicles for the transport of ten or more persons
  • 3% Telephone sets, incl. telephones for cellular networks or for other wireless networks; other

The following 5 product groups represent 32% out of total top Korean imports in 2019:

  • 14% Petroleum oils and oils obtained from bituminous minerals, crude
  • 7% Electronic integrated circuits; parts thereof
  • 5% Petroleum gas and other gaseous hydrocarbons
  • 3% Petroleum oils and oils obtained from bituminous minerals (excluding crude); preparations containing
  • 3% Coal; briquettes, ovoids and similar solid fuels manufactured from coal

Exports of services rose by an average annual rate of 1.1% in the period 2016-2018, from 95 to 99 Billion.

During the period 2015-2018, foreign direct investment (FDI) received by Korea reached the average annual figure of 12.2 billion US dollars.

Its main trading partners are China, which represents 23% of exchanges, followed by USA with 13% of exchanges and finally Japan with 7% of exchanges.

Regarding bilateral agreements, Korea has 18 existing regional trade treaties. Its presence in international markets will be bolstered by 2 new treaties which will come into force soon (at the date of this publication).

Social and Technological

The urban population is 81%. The biggest cities are: Seoul (10.3 million), Busan (3.6 million) and Incheon (2.6 million).

96% out of total population uses internet. The number of mobile phone subscriptions is 1.30 per inhabitant.

Political and legal

The current Chief of State and Head of Government is President MOON Jae-in. The next elections are foreseen to be held in March 2022.

The Republic of Korea’s legal system is a mixed system combining European civil law, Anglo-American law, and Chinese classical thought. The type of government is a presidential republic.



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Need more information about the market, please contact me xavireverter@exportwings.com

Data from 2019, other years are stated.

Sources:

Photo by Shawn Ang on Unsplash

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