I) Overview of Korea’s Economic Development Process until 1997
To achieve its incredible growth, South Korea has undergone 3 major phases of development:
1) Post-war import substitution phase (1953-1961)
After the Korean War ended in 1953, South Korea with 20 millions inhabitants was a poorly endowed and agrarian (agriculture, forestry, fishing) country. Dependant on International (US) aid and with a limited budget the country would impose high tariffs to protect its national industry. The industrialization process was centered on import-substitution industries.
2) Development based on export growth (1961-1970)
After a military coup in 1961, the new government decided that modernization should be the primary goal for South Korea. This development strategy aimed at boosting savings in order to entail higher growth, through policies that promoted rises in foreign capital inflow, government savings, and by giving priority to exports-led industrialization.
Those policies were mostly:
-Government policies and subsidies that would compensate losses on profit margins for export of labor intensive commodities as there was keen competition in these sectors.
-Relaxed import substitution policies so enterprises’ decisions would be motivated by profit and they therefore there would be a gain of attention for exports.
- Education designed for productive activities.
As a result we noticed capital accumulation, that was further used for development of the agricultural sector and to promote the Heavy and Chemical Industry in order to accelerate the industrialization process.
3) Heavy and Chemical Industry (HCI) development(1970-1980_
In the 1970’s, a new set of development strategies was set up. Indeed, the country was facing imbalances in growth and weaknesses in international competitiveness because the measures of implemented in the 1960’s were based on heavy government protection and support.
Therefore the new policies were designed as to see a shift...