History of South Korea (Essay Sample)

The history of South Korea’s development
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Institution
The history of South Korea’s development
South Korea is a country that has emerged to be among the wealthiest countries of the east, following the success of development programs in the mid-20th century (Lee & Kim, 2010). However, before this period, South Korea existed in the list of the poorest countries; it had a Gross Domestic Product (GDP) of $ 81, in 1961. Currently in the 21st Century, South Korea recorded a GDP of $ 20,000, in 2011 (Kim & Lee, 2013). This paper explores the history of South Korea in the 20th century by analyzing the major events that transformed the political and economic systems of the country.
The major event that brought light to South Korea was the withdrawal of Japan from the country in 1945 (Lee & Kim, 2010). Although it was followed by the Korean War (1950-53) that destroyed the physical infrastructure and industries, it provided the base on which the Korean Institutions would function without external interference. The GDP of the country was at $ 87 in 1962; by this time, South Korea had similar characteristics exhibited by the poor countries of the world. In early 1960s, however, the literacy level of the Korean population was at 80 percent, the Global economy was growing at the rate of nine percent annually. The efforts of regionalism and trade protections were minimal; these events favored the country’s development programs. The political collaborations that Korea established with Japan enabled the inflow of capital worth US$ 40million as short –term credit, and US$ 37 million long-term credit in 1962 and 1963 respectively. By 1969, Japan’s capital in South Korea was more than US$ 500 million, in the form of loans.
South Korea experienced the major systems of economic reforms between 1950s and 1960s (Maksymenk & Rabban 2011). The country adopted the system of minimal government control and enhanced the external business ties. The government provided and controlled the financial systems while monitoring the imports of the country. The Korean regime promoted the importation of raw materials and the technology while barring the introduction of consumer goods. The export-oriented type of industrialization common in 1960s and 1970s was meant to spur the economic development. The Park regime adopted the strategy of controlling the labor and the capital, and exhibiting a virtual influence to the total economic progress. The majority of the banks in 1960-80s were owned by the government. According to Maksymenk and Rabban (2011), the regime provided financial incentives to the traditional family-owned business (Jaebeol) and gave them conditions that impelled them to adopt the state-initiated strategies of development. The foreign direct investment (FDI) policy, however, brought an impact on the foreign exchange controls and poor regulation of overseas direct investment (ODI) in early 1990s. The country was plunged into financial crisis in 1997-98 when the model became unfavorable leading to increasing debts and foreign borrowing. During this period, the GDP dropped by 6-9%, and later recovered by 9% in 1999-2000 periods.
The political landscape of Korea changed from Kim Young-sam, who introduced the development strategy, to Roh Moo-hyun, who introduced reforms to curb the 1997 economic shocks (Maksymenk & Rabban 2011). The changes were meant to promote the inward FDI through the Foreign Investment Promotion Act (FIPA) of 1998. The Act was intended to make FDI, which was previously not significant, to have the impact. In 1960s the FDI had been used to compensate the domestic savings and foreign reserves; FIPA was meant to give it a different goal of taming internal and external market forces. However, due to challenges such as ineffective incentives, regulations of medical, housing and education, the FDI did not achieve the intended ends of tapping the high-tech sectors in (2002-06). In 2007, a Free Trade Agreement (FTA) between Korea and the United States (KORUS) was not passed when Roh Moo-hyun failed to conclude the negotiations (Maksymenk & Rabban, 2011). He was believed to have failed the efforts of globalization that Kim Young-sam had started by early 1960s to salvage the staggering economy.
The changes that occurred in South Korea in 1960s were treated with suspicion by the citizens and the government, following the effects of colonization (Maksymenk & Rabban, 2011). For instance, the FDI programs were perceived to be a strategy of weakening the economy; in 2005, 40% of the companies’ shares were owned by foreigners. The effect created policy issues on economic nationalism and globalization struggles. The development strategy, as implemented by the government favored the local Jaebeol; it provided an opposition to investors when their growth became enormous. For example, the Bank of Korea and the government promoted the Jaebeol businesses at the expense of foreign investors, giving the outsiders (investors) unfavorable competition in the gl...