challenges and tasks faced by the korean economy in-ho kim (republic of korea) in-ho kim (republic...

Challenges and Tasks Faced by the Korean EconomyChallenges and Tasks Faced by the Korean Economy

Challenges and Tasks Faced by Korean EconomyChallenges and Tasks Faced by Korean EconomyImplications for Madagascar’s Development EffortsImplications for Madagascar’s Development Efforts

In-Ho Kim(Republic of Korea)

In-Ho Kim(Republic of Korea)


The History of the Korean Economy’s Crises and ChallengesThe History of the Korean Economy’s Crises and Challenges

1

The Korean War (1950) First Oil Crisis (1971) Second Oil Crisis and Political Instability (1980) Democratization and Labor-Management Conflicts (1987) Finacial Crisis (1997)

But faced many hardship along the way:But faced many hardship along the way:

Korean Economy achieved great success under government-led expor

t-oriented industrialization during the 60s and 70s.

Korean Economy achieved great success under government-led expor

t-oriented industrialization during the 60s and 70s.

History of the Korean Economic development is series of challenges and efforts to overcome them

History of the Korean Economic development is series of challenges and efforts to overcome them

II


Shortcomings of Korean Development ModelShortcomings of Korean Development Model

2

IIII

Market Intervention Through Industrial & Financial Policies Market Intervention Through Industrial & Financial Policies

Government Decided Investment Priority and Selected Winners Government Decided Investment Priority and Selected Winners

Need to Reassess Government’s Role & Function in the Changing Economic Environment

Need to Reassess Government’s Role & Function in the Changing Economic Environment

Inability to adjust to New Global Economic Order( i.e WTO) Inability to adjust to New Global Economic Order( i.e WTO)

Government-led Investment Decision & Resource AllocationGovernment-led Investment Decision & Resource Allocation

Unhealthy relationship between gevernment and business Unhealthy relationship between gevernment and business


3

Chronic Trade (BOP) Deficit Chronic Trade (BOP) Deficit

Ecnonomic & Business Management Overly enthusiastic for growth Ecnonomic & Business Management Overly enthusiastic for growth

Decreased Profitability weakened business balance sheet Decreased Profitability weakened business balance sheet

Relying heavily on External Debt and External Demand resulted in Current Account Deficit

Relying heavily on External Debt and External Demand resulted in Current Account Deficit

Over-investment in Heavy and Chemical IndustriesOver-investment in Heavy and Chemical Industries

Uneven Development among sectors and industries Uneven Development among sectors and industries


4

Corruption & Crony Capitalism impeded transition toward market-based economy

Corruption & Crony Capitalism impeded transition toward market-based economy

Government Over-Involvement and “Korea, Inc.” Government Over-Involvement and “Korea, Inc.”

Political System Unmatched Economic Development: which resulted in decrease of Economic Efficiency

Political System Unmatched Economic Development: which resulted in decrease of Economic Efficiency

Negative impact of government’s over-involvement in the market Negative impact of government’s over-involvement in the market

Corruption and Crony Capitalism Corruption and Crony Capitalism

Low level of trasparency decreased confidence of foreigh investors Low level of trasparency decreased confidence of foreigh investors


Issues to be Resolved for Continued Economic DevelopmentIssues to be Resolved for Continued Economic Development

5

IIIIII

Need to open non-competitive industries such as agricultureNeed to open non-competitive industries such as agriculture

World-class manufacturing and information industries vs. traditional industries

Need for continued opening and fundamental restructuring of traditional industries

Difficulties in nurturing domestic social cohesion

Resultant Conflicts with international community

Need for economic management consistent with global standards


6

Financial Reforms Financial Reforms

Significance of finance in achieving further economic development

Launching financial reform before and after the ‘97 Financial Crisis

Continued reforms in the financial industry increased profitability

Lack of market mechanism and unhealthy relationship between government and finacial industry

Need to restructure the financial market to increase competitiveness


7

Consistency between Economic and other related policiesConsistency between Economic and other related policies

Most pressing issue: Reconciling the principles of the economy with operational principles of non-economic sectors

Inefficiency due to Discord with labor-management relations, social welfare, healthcare, and education

Improvement impeded by poor leadership and opposing interest groups

Dialogue with citizenry and sound political leadership needed


8

Globalization and Adopting Global StandardsGlobalization and Adopting Global Standards

Need to actively adopt global economic standards

Stabilizing the principles of the Market Economy – Essential for Continuous Development

True competitiveness Attainable only under competitive market structure

Changes Required: shift in public perception, reform of government’s role, and political leadership


9

The Role and Function of the GovernmentThe Role and Function of the Government

The government’s role during the early stages of development no longer sustainable

Such a role would hinder efforts for globalization and market economy stabilization

Government reform must start with the questions of what to do and what not to do

Despite efforts made after the financial crisis, need for fundamental reforms still remains


How Madagascar’s Development Efforts Can Gain from Korea’

s Experience

How Madagascar’s Development Efforts Can Gain from Korea’

s Experience

10

IVIV

The Government simultaneously a problem-solving entity and p

roblem itself

The Government simultaneously a problem-solving entity and p

roblem itself

Role of government is to evolve according to the pace of development

Strong government forces weaken the market and the economy’s structure of competition

Need to reflect on the government’s role and its relationship to the market

Trade-off between Corruption and Government-driven economic development

Strong leadership by example necessary for eradicating corruption


11

Market Economy Structure and National LeadershipMarket Economy Structure and National Leadership

Adopting a market economy essential for economic success

Determined national leadership necessary for economic success

Specific program development needed to change the perception of political leaders, media, intellectuals, and the citizens


12

The importance of globalization and the necessary national lea

dership

The importance of globalization and the necessary national lea

dership

Appropriate economic system as well as cooperation and assistance from the international community needed for efficient economic development

External competition is necessary to strengthen the economy’s competitiveness; however, may cause internal problems

Implementation of advanced policy reform by a strong national leadership needed in pursuit of globalization


13

Relationship between strong administration and Congress Relationship between strong administration and Congress

Political democratization required for adoption of market economy and international cooperation

Powerful administration (President) may result in conflict with Congress during early stages of development

In the case of Korea, policy implementation driven by the administration was effective after the military coup, but often resulted in dictatorial rule

Desire for democratization along with the economic development caused economic instability and slow-down of development

Democratization and sound relationship with Congress required since it is not feasible for the administration to act alone

Understanding and cooperation from politicians, including Congress, needed for smooth policy implementation

challenges and tasks faced by the korean economy in-ho kim (republic of korea) in-ho kim (republic...

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