Korea in Focus
KOREA IN FOCUS
A People and History in Harmony
In the past two decades, Korea has been one of the fastest developing
nations in the world - both in economic and social terms. Rapid industrial
and economic growth has seen the Republic nearly reach developed nation
status in a remarkably short time. The Korean people also find themselves
in the midst of a new era of democratic development following the birth of
the civilian Administration of President Kim Young Sam on February 25,
1993. This wiped out the negative legacy of decades of military-backed
authoritarian rule. The country has since been implementing bold political
and economic reforms to eradicate corruption and revitalize and restructure
the economy with the goal of building a New Korea - a mature and vibrant
This rapid economic and social development has brought Korea
increased international exposure and recognition, as the Republic begins to
expand its role on the international stage. Testifying to this was the
successful hosting of the 1988 Seoul Olympics, the largest held in history
up to that time. This was following by the 1993 hosting of an international
exposition, the Taejon Expo ‘93. Both the Seoul Olympics and the Taejon
Expo played an important role in deepening ties between Korea and countries
all over the world and gave an impetus to the Korean economy.
This era of stability and expanding international ties represents the
most exciting period in the country’s history - and yet, in retrospect,
Korea has, in its 5,000-year history, quite an enviable record for
governments of longevity and stability. The country’s last dynasty, the Yi
Dynasty of the Choson Kingdom, lasted 500 years.
The Koreans of today, while enormously proud of their country’s past,
look at Korea’s role and reputation from a more recent historical
perspective; but, in order to understand today’s Korea - its land, people,
culture, history, and recent economic and political transitions - it is
necessary to look at both the past and the present. “Korea In Focus” aims
to give you a brief overview to help in your general awareness of Korea
today. More detailed information can be obtained from individual
organizations or government offices.
The Korean Peninsula, located in Northeast Asia, is bordered on the
north by China and Russia and juts towards Japan to the southeast. Since
1948, the 221,487 square kilometers which make up the entire Peninsula
have been divided, roughly along the 38th parallel, into the Republic of
Korea in the south and the Democratic People’s Republic of Korea in the
north. The Republic of Korea covers 99,221 square kilometers, a land area a
little more than twice the size of Switzerland.
Seoul is the capital of the country which is made up of nine
provinces; other major cities include Pusan, Taegu, Inch’on, Kwangju, and
The landscape is spectacular in its variations and about 70 percent
of it is mountaneous. The oceans around the Peninsula are a major source of
livelihood and recreation for Koreans. The shoreline is dotted by more than
The Peninsula’s longest river is the Amnokkang (790 km) in the North.
One of the South’s major waterways is the Han-gang River, which flows
through Seoul to the West Sea (Yellow Sea).
A look back at the 5,000 years of Korean history reveals triumphs and
tragedies, successes and struggles which have been instrumental in shaping
the Korea and Koreans of today. One remarkable fact that emerges from such
a historical examination is that Korea has largely been ruled by long-
term, stable governments. Korea’s kindoms and dynasties generally lasted
about 500 years or more.
Although Korea’s traceable history began considerably earlier that
the seventh century, it was the Shilla Unification in 668 that Korea, as a
historical entity with a cohesive culture and society, came to occuðy most
of the Peninsula as it exists today.
It was almost a decade after the end of the war before the Republic
of Korea had recovered sufficiently to establish stability and start the
momentum for its now remarkable recovery and development. The three decades
since then have been a time of spectacular progress which has seen the
creation of a modern, industrialized nation.
Korea is homogeneous society, although there have been historic and
prehistoric migrations of Chinese, Mongols and Japanese. Koreans are very
conscious of the ethnic differences and cultural distinctions which give
them their unique identity.
The population of the Republic of Korea was estimated at 44.1 million
in 1993. Its population density is among the world’s highest and Seoul, the
capital, has more than 10 million inhabitants. The annual population growth
in the Republic has dropped from an average of 2.7 percent in the 1960-66
period to only 0.90 percent in 1993. The slowdown is also partly the
result of the increasing number of young working women.
The country’s rapid industrialization is responsible for today’s
concentration of population in urban centers. The proportion of Koreans
living in cities has jumped from only 28 percent in 1960 to 74.4 percent as
of 1990 - very similar to the 73 to 76 percent levels in the United States,
Japan and France.
The Korean language is spoken by some 60 million people living on
the Peninsula and its outlying islands as well as some 1.5 million Koreans
living in other parts of the world.
Korean belongs to the Ural-Altaic language group, which is found in
an narrow band from Korea and Japan across Mongolia and central Asia to
Turkey. Korean is a non-tonal language, with agglutinative and
Religion in today’s Korea covers a broad spectrum of faiths and
beliefs. Buddhism, Christianity, Confucianism, Islam and numerous other
indigenous religions exist in Korea. Although none of them dominates, they
all influence contemporary culture.
Education has been at the heart of Korea’s growth by training and
supplying the manpower needed for rapid industrial and economic expansion.
A multi-tiered educational system is currently in use, encompassing
elementary school (six years), middle school (three years), high school
(three years), and college (four years), as well as various graduate and
The government has eased regulations on overseas study. This new
policy also encourages those in the teaching profession to take advantage
of opportunities for training abroad.
The tremendous pace of domestic economic growth in the past two
decades has been reflected in the expansion of transportation facilities
and the increases in Korea’s annual passenger and cargo volumes. The annual
volume of passenger transportation rose from 1.6 billion persons in 1996 to
14.24 billion in 1993.
Seoul has a well-developed mass transit system of subways, buses, and
taxis. Airport shuttles or city buses are conveniently available and
operate throughout the city. The subway system is the eighth longest in the
world, carrying 1,388 million people in 1993. Its four lines reach most
major locations in the city.
Korea has three international airports in Seoul (Kimpo), Pusan
(Kimhae) and Cheju (Cheju), all of which are equipped with modern air
traffic control facilities and support systems. Korean Air’s worldwide
network serves 43 cities in 24 nations, including recently inaugurated
flights to Rome. The newly launched Asiana Airlines recently started
international flights with regular service to fourteen cities in Japan, the
U.S., Singapore, Hong Kong, Taipei and Bangkok.
All expressway system also connects Seoul with provincial cities and
towns, putting any place in mainland South Korea within a one-day round
trip of the capital. Express buses transport passengers to and from all
principal cities and resorts in the country.
The railway also serve the entire country through an efficient and
extensive network. The super-express train, Saemaul, runs 444.5 kilometers
from Seoul to Pusan in four hours and 10 minutes. There are also ordinary
express and local trains.
Ocean liners, cruise ships, and passenger-carrying freighters visit
Korean ports. A ferry service links Pusan with Chejudo Island and the
Japanese ports of Shimonoseki, Kobe and Hakada. Another ferry service
recently started between Inch’on and Tianjin China.
Telephone services have rapidly expanded during the last decade,
particularly during the last 5 Years (1988-”92). During these years, with
the investment of US$2.64 billion in communications annually, 1.76 million
new telephone circuits were installed each year, increasing the total
number of telephone lines to 10.14 million as of 1993. Virtually every home
in the country now has its own telephone and all the telephone circuits are
connected by automatic switching systems.
Also, through the launch of KOREASAT scheduled in 1995, Korea will be
able to provide satellite communication services by using its own satellite
from October 1995.
Looking Ahead to the 21st Century
In the last quarter century, Korea’s economic growth has been among
the fastest in the world. The country has overcome obstacles and challenges
to transform itself from a subsistence-level economy into one of the
world’s leading newly industrialized countries. Today, however, the Korean
economy faces the new challenges of internationalization and globalization
in an increasingly complex global economic environment.
Past Performance and Policies
Since Korea launched its First Five-Year Economic Development Plan in
1962, the country’s real GNP has expanded by an average of more than 8
percent per year. As a result, Korea’s GNP has grown from US$2.3 billion in
1962 to US$328.7 billion in 1993; per capita GNP has increased from a
meager US$82 in 1962 to US$7,466 in 1993 at current price levels.
The industrial structure of the Korean economy has also been
completely transformed. The agricultural sector’s share of GNP declined
from 37.0 percent in 1962 to 7.1 percent in 1993. The manufacturing
sector’s share has increased from 14.4 percent to 27.1 percent in the same
period. The service sector accounted for only 24.1 percent of GNP in 1962
but grew to 40.0 percent in 1993.
Korea’s merchandise trade volume increased from US$500 million in
1962 to US$166 billion in 1993. The nation continuously posted trade
deficits until 1985 when its foreign debt reached US$46.8 billion, the
fourth largest in the world. From 1986 to 1989, Korea recorded current
account surpluses and its debt declined.
Trends of Major Economic Indicators
| |Unit |‘62 |‘70 |‘80 |‘85 |‘90 |‘92 |‘93 |
|GNP |US$ |2.3 |8.1 |60.5 |91.1 |251.8|305.7|328.7|
| |bil. | | | | | | | |
|Per Capita GNP |US$ |8.2 |242 |2,194|2,242|5,883|7,007|7,466|
|GNP Growth Rate |% |2.2 |7.6 |7.0 |7.0 |9.6 |5.0 |5.6 |
|Domestic Savings |% |3.3 |17.9 |29.1 |29.8 |35.9 |34.9 |34.9 |
|Ratio | | | | | | | | |
|Trade Volume |US$ |0.5 |2.8 |39.8 |61.4 |134.9|158.4|166.0|
| |bil. | | | | | | | |
|Producer Price |% |9.4 |9.2 |38.9 |0.9 |4.2 |2.2 |1.5 |
|Consumer Price |% |8.3 |15.9 |28.8 |2.4 |8.6 |6.2 |4.8 |
Inflation in Korea was one of the major economic problems in the 70s
and early 80s, during which consumer prices rose at annual rates of 10-20
percent. Since 1982, Korea has managed to keep inflation down to a single
digit. The ratio of domestic savings to GNP grew from 3.3 percent in 1962
to 34.9 percent in 1993.
Beginning in 1989, the Korean economy began experiencing slower
growth, high inflation and a deterioration in the balance of payments. The
GNP growth rate fell to 6.7 percent in 1989 from the 12 percent level of
previous years. A slump in the growth of the manufacturing sector, from
18.8 percent in 1987 and 13.4 percent in 1988 to 13.7 percent in 1989,
contributed largely to this decline in GNP growth rate. The export growth
rate on a customs clearance basis, which was 36.2 percent in 1987 and 28.4
percent in 1988, fell to just 2.8 percent in 1989. Reflecting this fall in
the export growth rate, the current account surplus lowered to around
US$5.1 billion, a significant drop from the 1988 surplus of US$14.2
In 1991, the economic growth rate showed signs of recovery. The GNP
grew during the year 9.1 percent. However, most of this growth was
attributed to an increase in domestic demand, particularly domestic
consumption. Exports increased 10.3 percent compared to 1990, while the
growth rate of imports increased 17.7 percent. The trade balance
deteriorate rapidly to a US$7.0 billion deficit in 1991 from the US$4.6
billion surplus in 1989. In addition, price stability, which had served to
boost Korea’s competitiveness, weakened. Consumer prices, which had risen
on an annual average of 2-3 percent between 1984 and 1987, rose 9.3 percent
Recent Economic Trends
| | |‘91 |‘92 |‘93 |‘94. 1 |
| | | | | |( 6 |
|GNP | | | | | |
| GNP |Growth Rate in |9.1 |5.0 |5.6 |8.5 |
| |% | | | | |
| Manufacturing |Growth Rate in |9.1 |5.1 |5.0 | |
|Sector |% | | | |10.0 |
| Private |Growth Rate in |9.5 |6.6 |5.7 |7.2 |
|Consumption |% | | | | |
| Investment |Growth Rate in | |0.8 |3.6 | |
| |% |12.6 | | |10.3 |
| Equipment |Growth Rate in | |1.1 |0.2 | |
| |% |12.1 | | |17.7 |
|Prices | | | | | |
| Producer Price |% |4.7 |2.2 |1.5 |2.2 |
| Consumer Price |% |9.3 |6.2 |4.8 |6.2 |
|Balance of Payments| |7.0 |2.2 |1.9 |1.6 |
| Export |US$ bil. | | | | |
| | |69.6 |75.1 |81.0 |43.1 |
| Imports |US$ bil. | | | | |
| | |76.6 |77.3 |79.1 |44.7 |
|Current Account | | | | | |
| Balance |US$ bil. |8.7 |4.5 |0.4 |2.7 |
In 1992, the Korean economy rapidly cooled off, with the GNP growth
rate dipping to 5.0 percent, influenced chiefly by blunted investment in
capital goods. The consumer price index rose just 6.2 percent, and the
deficit in the balance of payments also dropped to US$4.5 billion.
At that time, the Korean economy faced many challenges on both the
internal and external fronts. Part of the economic slowdown may be
explained by the cyclical adjustment of the economy after three consecutive
years of rapid growth. However, the stagnation was more likely the result
of a structural deterioration in competitiveness, due to a combination of
the lingering legacies of the past government-led economic management
system, which had now become inefficient, and the disappearance of the
advantages derived from the once ample availability of low-cost labor: Thus
the country was forced to search for a new driving force sufficient for
sustained economic growth.
Major Tasks and Policy Directions
To revitalize the economy, the Kim Young Sam Administration, which
was inaugurated in February 1993 as the first civilian democratic
government in over three decades, is endeavoring to construct a new
developmental paradigm called “the New Economy”. This signals a clean
departure from the past, when the government directed and controlled the
concentrated investment of capital, labor and other resources in selected
“strategic” industrial sectors to achieve rapid economic growth. Instead,
the New Economy will promote the autonomy and creativity of all economic
actors in order to maximize efficiency, while ensuring the equitable
distribution of income. In that way, it seeks to enable the nation to leap
into the ranks of the developed nations within the next five years.
As an initial step, the new Administration implemented a short-term
100-Day Plan for the New Economy in March 1993, designed to promptly create
conditions conductive to revitalizing the economy. This was followed by the
development of a new five-year economic development plan. Formally
announced in July 1993, the Five-Year Plan for the New Economy was
conceived primarily to lay the basis for joining the ranks of advanced
countries and thus to effectively prepare for the eventual unification of
the Korean Peninsula.
The Government will continue its efforts to ensure the effective
implementation of the five-year plan through the spontaneous participation
of the people by reforming economic institutions including the improvement
or simplification of existing financial and tax systems and administrative
measures. Furthermore, the Government will continue to endeavor to fully
realized the nation’s economic growth potential, strengthen its
international competitiveness, and improve the economic conditions of the
If the plan is implemented as intended, the Korean economy is
projected to change as follows:
First with increased efficiency and greater realization of growth
potential, the gross national product should rise at an average annual rate
of about 6.9 percent, raising per capita GNP to US$14,076 in 1998.
Second, greater price stability should prevail as balance is
maintained between the more steadily rising demand and the more briskly
expanding supply, while wage increases are linked to rises in productivity.
The stabilization of the value of the won currency should help stabilize
the prices of imported goods and services. The net effect should be to hold
down the rise in consumer prices to an annual average of 3.7 percent, the
increase in producer prices to an annual average of 1.6 percent and the
rise in the GNP deflator to an annual average of 4.6 percent.
Targets of the 5-Year Plan for the New Economy
| |‘91 |‘92 |‘93 |‘94 |‘95 |‘96 |‘97 |‘98 |‘93-’9|
| | | | | | | | | |8 |
|GNP growth, % |8.4 |4.7 |6.0 |7.1 |7.2 |7.1 |7.0 |7.0 |6.9 |
|Per capita GNP, |6,51|6,74|7,30|8,19|9,33|10,7|12,3|14,0|14,076|
|US$ |8 |9 |6 |6 |9 |16 |05 |76 |2) |
|Rise in producer |4.7 |2.2 |1.8 |1.8 |1.7 |1.6 |1.5 |1.4 |1.6 |
|prices, % | | | | | | | | | |
|Rise in consumer |9.3 |6.2 |4.9 |4.3 |3.7 |3.6 |3.2 |2.9 |3.7 |
|prices, % | | | | | | | | | |
|Rise in GNP |11.2|6.3 |5.3 |5.3 |4.8 |4.5 |4.1 |3.8 |4.6 |
|deflator, % | | | | | | | | | |
|Balance on curren |8.7 |4.6 |1.4 |0 |0.9 |2.1 |3.7 |5.3 |5.32) |
|account, | | | | | | | | | |
|US$ billion | | | | | | | | | |
|Exports 1) ,US$ |69.6|75.1|82.3|82.3|99.3|110.|122.|136.|136.32|
|billion | | | | | |1 |6 |3 |) |
| Rate of |(10.|(7.9|(9.5|(9.5|(10.|(10.|(11.|(11.|(10.4)|
|increase, % |2) |) |) |) |2) |9) |3) |2) | |
|Imports, US$ |76.6|77.3|81.3|81.3|95.8|105.|116.|128.|128.12|
|billion | | | | | |3 |1 |1 |) |
|Rate of increase, |(17.|(1.0|(5.1|(5.1|(9.3|(9.9|(10.|(10.|(8.8) |
|% |5) |) |) |) |) |) |2) |3) | |
Note: 1) On a balance-of-payments basis
2) In terms of 1998 current market prices
The Real name Financial Transaction System
On August 12, 1993, the President took a decisive step toward
revitalizing the economy and eliminating corruption by announcing the
inplementation of the long-anticipated real-name financial transaction
system. In the past, it had been possible to open accounts and conduct
business transactions under false names, directly and indirectly fostering
institutionalized-corruption and illegal financial dealings. Deeming this
reform as the most important in the creation of a New Korea, the President
announced this action in a Presidential Emergency Decree, stating that the
real-name system was essential for cutting the dark link between politics
With the introduction of the real-name financial transaction system,
it appears that financial dealings are becoming fully transparent and
underground economic dealings and nonproductive land speculation are
diminishing. It is hoped the funds that had been channeled into political
circles in the past as a result of government-business collusion are now
available for more productive activities.
The implementation of a real-name financial transaction system, the
easing of administrative controls, expanded capital investment by major
enterprises, and increased financial and administrative support for small-
and medium-sized enterprises all combined to lay a solid foundation for
another economic take-off. Exports rose 7.6 percent in 1993 to US$82.4
billion, while imports grew just 2.5 percent. Korea was thus able to
register a US$600 million trade surplus last year for the first time in
four years. The current account also yielded a surplus of US$200-300
million. Industrial production has been growing at about a 10 percent rate
during the first half of 1994. Furthermore, labor disputes decreased
markedly last year, while the composite stock index of the Seoul Stock
Exchange climbed markedly. In view of these indications, the Korean economy
seems to be well on the way to revitalization.
External Policies for Greater International Cooperation
Korea is committed to fulfilling its international responsibilities.
It positively supports the trend toward openness and utilizes it as a
catalyst for further enhancing the international competitiveness of
industry and thus speeding the advancement of the economy, so that it can
join the group of advancedcountries.
Since 1980, Korea has made continuous efforts toward import
liberalization. The import liberalization rate increased from 68.6 percent
in 1980 to 98.1 percent in 1993. The average tariff rate decreased from
24.9 percent to 8.9 percent during the same period and is expected to be
only 7.9 percent by the end of 1994, the same average level of tariffs
found in OECD member countries.
In October 1989, Korea decided to relinquish GATT balance of payments
protection which mostly covers agricultural products. According to the
decision Korea will move to eliminate its remaining restrictions or
otherwise make them conform with GATT rules by July 1, 1997.
Liberalizing Foreign Exchange Transactions and Capital Markets
In June 1993, the Korean Government made public the third-phase of
the blueprint for financial liberalization and internationalization, which
was implemented from the second half of 1993. Under the plan, procedures
for various foreign exchange transactions are being gradually simplified.
Beginning in 1994, the ceiling on foreign investment in the stock market
will be gradually raised, and the bond market will also be gradually opened
to foreign investment. Initially, from 1994 foreign investors will be
allowed to purchase convertible bonds, even those issued by small-and
medium-sized domestic enterprises.
Foreign-invested firms engaged in the manufacture of high-tech
products or banking and other services are currenlty allowed to induce
foreign credit repayable within three years. Beginning in 1997, the
liberal inducement of foreign credit by both domestic and foreign-invested
enterprises will be allowed.
Increasing Opportunities for Foreign Investors
In June 1993, the Korean Government also announced a five-year plan
for liberalizing foreign investment. Under the plan, 132 of the 224
business lines currently being protected from foreign competition will be
opened to foreign investment in five phases, over a period of five years
starting from July 1993. With the implementation of this plan, of the total
1,148 business lines under the standard industrial classification of Korea,
1,056 will be open to foreign competition. This means that the foreign
investment liberalization rate will rise from 83 percent as of June 2, 1993
to 93.4 percent by 1997.
Included among the business lines to be opened to foreign competition
under the plan are most of the service industries including distribution
and transportation, hospital management, vocational training and “value-
The business conditions for foreign-invested firms will also be
greatly improved through various measures, including relaxed control on the
acquisition of land by foreign-invested firms, the augmented protection of
foreign intellectual rights, and other similar steps.
Cooperation with the Rest of the World, Including Developing Nations and
Expanding Trade and Economic Exchanges
The Republic of Korea has emerged as a major global trader by
steadily pursuing freer trade and greater openness, while promoting its
business presence around the world. In the past, Korea’s foreign trade
concentrated on the developed world - mainly the United States, Japan and
the EU. In more recent years, however, it has rapidly expanded trade and
capital cooperation with Southeast Asia, former and present socialist
countries and Third World nations as well.
Especially since the 1988 Seoul Olympics, economic interactions with
the former Soviet republics have been brisk. The Republic of Korea is also
increasing its support of economic development efforts in the Third World
on the basis of its more than three decades’ experience with successful
The nation will continue to pursue expanded and more diversified
trade and to promote economic cooperation on a long-term basis with the
rest of the world, taking into consideration the individual economic
characteristics of each country.
With the United States, the Republic of Korea will pursue not only
expanded bilateral trade and increased mutual private investment and
technological cooperation but also government-to-government cooperation in
industrial technologies. As for Japan, the Republic will pursue Forward-
lookoing practical economic relations and will, in particular, strive to
attract Japanese investment more effectively. Since Korea does not have
serious trade issues with the EU it will focus on promoting overall
economic cooperation, including mutual investment and industrial and
With the dinamically growing Asian economies, such as China and
Southeast Asian Nations, the Republic of Korea will endeavor to continue to
expand two-way trade, especially by helping to meet their expanding needs
for capital goods and intermediate products to support their continuing
rapid development, while increasing imports from them as much as possible.
The nation will also encourage Korean business investment in these
countries and make efforts to build an industrial structure complementary
The Republic of Korea is increasing its official development
assistance to developing countries proportionate to its economic strength.
In this, efforts are being made to combine such assistance with private
Korean investment, with the aim of maximizing its effect, while developing
two-way trade and other economic ties on a long-term basis.
Economic ties with the Commonwealth of Independent States and East
European countries will continue to focus on commercial applications of
their high technologies and other forms of technological cooperation and
joint development of natural resources.
Korea Trade with and Investment in Various Countries and Regions
|Country or |Trade (US$ bil.) |Investment (US$ mil.) |
|Region | | |
| |1987 |1993 |1987 |1993 |
|U.S.A. |27.1 |36.1 |165.3 |380 (30.3) |
| |(30.7) |(21.7) |(40.3) | |
|Japan |22.1 |31.6 |1.4 (0.3) |6 (0.5) |
| |(25.0) |(19.0) | | |
|EU |11.2 |19.6 |6.5 (1.6) |157 (12.5) |
| |(12.7) |(11.8) | | |
|China |1.7 (1.9) |9.1 (5.5) |6.0 (1.5) |260 (20.7) |
|Southeast Asia |8.9 (10.1)|27.8 |130.5 |179 (14.3) |
| | |(16.7) |(31.8) | |
Note: Figures in parenthesis represent percentage of the total.
Active Participation in Multilateral Economic Forums
Korea has actively participated in virtually all major multilateral forums.
During the Uruguay Round of trade talks, finally concluded in December
1993, Korea tried to make conrtibutions commensurate with its capabilities
as a major world trading power, and play a mediating role between the
developed and developing countries. Korea introduced various proposals in
the Uruguay Round negotiations to reduce tariffs, eliminate non-tariff
barriers, liberalize the textile trade, improve safeguards and reduce
subsidies and countervailing duties.
The Republic of Korea is actively participating in global efforts to
protect the environment, a crucial task facing all of humanity. In recent
years it has joined the Convention on Climate Change, the Basel Convention
on the Control of Transboundary Movements of Hazardous Wastes and their
Disposal, the Convention on the Prevention of Marine Pollution by Dumping
of Wastes and Other Matter, also called the London Dumping Convention, the
Convention on International Trade in Endangered Species of Wild Fauna and
Flora, and the Convention on Biological Diversity.
Korea has also begun an informal dialogue with the Organization for
Economic Cooperation and Development (OECD) and has expanded participation
in its various committees . Korea hopes and intends to improve its economic
systems to the level of advanced countries so as to join the OECD in 1996.
One organization in which the Republic of Korea has played a
particularly critical role has been the Asia-Pacific Economic Cooperation
(APEC) forum, a forum for multilateral discussions on economic issues
concerning the Asia-Pacific region.Two examples of Korea’s valuable efforts
have been the “Seoul Declaration” adopted at the third APEC Ministerial
Meeting hosted by the Republic which laid the foundation for the
institutionalization of APEC, and its diplomatic role in bringing China,
Taiwan and Hong Kong, three key regional economic powers, into the APEC
fold, giving the forum a new impetus. Subsequently, the Republic played a
leading role at the first APEC Leaders Economic Meeting in Seattle in
November 1993, which coincided with the fifth APEC Ministerial Meeting, and
was elected the chair member of the Committee on Trade and Investment
The rise of the Korean economy over the past several decades, often
called the “Miracle of the Han”, has been an inspiring model of modern
economic development. The rapid pace with which the Koeran economy rose
from the ashes of war and expanded stunned the outside world. However, this
rapid growth was not unaccompanied by growing pains which began to manifest
themselves in all sectors of society particularly during the late 1980s.
Excessive wage hikes, high capital costs and an overly bureaucratic
administration, not to mention institutionalized corruption, served to
weaken Korea’s international competitiveness, and this was aggravated by
unfavourable external circumstances. In the past year, though, strenuous
efforts have been made to overcome these impediments and through this, as
well as improving international economic climate, it appears that the
Korean economy is regaining its former vigor. The upcoming years pose
severe challenges for the Republic in light of the December 1993
conclusion of the Uruguay Round and the rise of the Asia-Pacific region as
the new global economic center, but with the increasing emphasis in both
the public and private sector on globalization and internalization, the
Republic seems braced to meet these challenges.
REFORM TOWARD A NEW KOREA
The Basic Goals and Reform Process of the Kim Young Sam Administration
What are the vision and goals of the Administration of Kim Young Sam,
inaugurated on February 25, 1993. In a nutshell, the answer is the
“creation of a New Korea” through “Reform Admist Stability.” This concept
was the keynote of the President’s inaugural address as well as the main
slogan of his presidential election campaign in December 1992.
“I have a dream. It is the creation of a New Korea in which a new
politics, a new economy and a new culture will bloom. This is my dream and
vision; it is the dream and vision of all our people.” This quotation
appears in the book, “Kim Young Sam: New Korea 2000,” published in Korea in
October 1992 prior to the presidential election.
In his inaugural speech on February 25, 1993, President Kim Young Sam
defined the three major priorities of his policies to create a New Korea:
the eradication of social injustice and corruption, the revitalization of
the national economy and the establishment of official discipline and
The President declared that the eradication of corruption was a vital
foundation for reforms in every sector of the country, and that there would
be no sanctuary from the investigation of misconduct. The movement to
establish official discipline and public order, which began with high-
ranking government officials, is intended to ensure integrity and high
ethical standards by “purifying the upper reaches of the stream,” i.e., the
upper levels of government and society.
The main purpose of these reforms is to revitalize the nation and
elevate the overall standard of living. President Kim Young Sam has thus
pushed ahead with firm determination since his inauguration, bringing about
enormous changes in this country.
From the very start of his Administration, President Kim Young Sam
concentrated on eliminating corrupt practices and behavior which arose from
decades of authoritarian rule. This kind of housecleaning was unhead of in
the past. President Kim believes, and popular opinion supports him on this,
that such reform must be carried on without letting up in the interest of
the long-term stability and economic development of Korea.
The Concept of a New Korea
The creation of a New Korea means the building of unified, fully
mature democratic state. To that end, drastic changes and reforms are being
pursued to raise the quality of life for all those who were sacrificed in
the blind quest for rapid growth over the past 30-odd years.
What will the future New Korea be like? Korea’s first non-military
President since 1961, President Kim in his inaugural address said the New
Korea will be:
. A freer and more mature democratic society.
. A community where people share, work and live together in harmony. A
higher quality of life will flourish and the dignity of the individual
will be upheld.
. A state where justice flows like a river throughout the land. In other
words, it will be a just society in which honest and earnest individuals
. A new country in which human dignity is respected and culture is valued.
. A unified land where the presently divided people live in peace as one.
. And, it will stand tall and proud on the center stage of the civilized
world, making vital contributions to global peace and progress.
Curing the Korean Disease
The problems which are widespread in Korea today are often referred
to as the Korean disease: (1) Korean industriousness and ingenuity - long
the envy of the world - seem to be evaporating, (2) values continue to
erode, due to injustice, corruption, lethargy, bigotry, inertia, strife and
confrontation, and narrow self-interests, and (3) self-confidence has been
lost and defeatism has set in.
To create a New Korea, the new Administration has been vigorously
addressing these symptoms through drastic change and reform. The President
outlined the goals of these changes and reforms in his inaugural address:
(1) the establishment of a new era of courage and hope by shaking off
frustration and lethargy, (2) the replacement of bigotry and inertia with
openmindedness and vitality, strife and confrontation with dialogue and
cooperation, mistrust with trust, and (3) the building of a society which
sees all citizens not only living together but also truly carring about one
another, discarding narrow self-interests.
The President outlined three essential tasks in his inaugural
First, misconduct and corruption must be rooted out. He defined
misconduct and corruption as the most terrifying enemies attacking the
foundation of society, and called for an end to all manner of impropriety
and graft, allowing no sanctuary. He called for immediate reform starting
from the very top.
Second, the economy must be revitalized. He vowed that the new
Administration would do away with unwarranted controls and protection and
instead guarantee self-regulation and fair competition. “Private initiative
and creativity will thus be allowed to flourish”. He went on to say. “The
Administration will be the first to tighten uts belt. Our citizens must
also conserve more and save more. Extravagance and wastefulness must be
eliminated... Only when the Government and the people, and labor and
business work together with enthusiasm will it be possible to turn our
Third, national discipline must be enhanced. “Respect for authority
must be reestablished... Freedom must serve society... The true meaning of
freedom is in using it to plant a flower in the park rather than picking a
flower from the park.” The President also said, “Ethics... must be made to
prevail. To this end, education must henceforth cultivate wholesome
character and unwavering democratic belief, as well as equip our young
people for the future with knowledge and skill in science and
Four majot Goals of the New Administration
The four major goals of the Administration are clean government, a
sound economy, a healthy society and peaceful unification.
Clean government means a government free of corruption and
injustice. There is a saying that the lower reaches of a river will be
clean only when the upper reaches are kept clean. The President is
determined to keep the upper reaches of the stream clean, and all the
Cabinet members and high-ranking public officials will join in this effort
so that the public will have confidence in the Government.
The campaign to keep the upper reaches of the stream clean means
reforms from the top. The new Government has required high-ranking public
officials to register and make public their personal assets to discourage
the illegal accumulation of wealth under the Public Officials’ Ethics Law.
The President himself has made public his own assets and has said that he
would not accept political contributions.
A sound economy means a New Economy free of unwarranted controls and
protection - an economy which guarantees self-regulation and fair
competition and encourages the private initiative and creativity necessary
for economic revitalization. The economy has been marked by quantitative
growth in the past three decades; now it needs qualitative development. In
order to develop New Economy, Korea must (1) establish a liberal market
system, (2) liberalize financing, (3) decentralize economic power and (4)
promote economic reforms.
The New Economy emphasizes concentrated efforts for the renovation of
science and technology. In the 21st century, the strength of nations will
be measured by the development of science and technology. It is for this
reason the new Administration is sharply raising research and development
President Kim Young Sam announced on August 12, 1993, implementation
of real-name system for all financial transactions to assist in the
realization of economic justice and clean government. The new
Administration also has a firm position to control speculation in real
estate and institute tax reforms.
By effecting all these changes, it is predicted that the inflation
rate as measured by the consumer price index will fall to the 3-4 percent
range by the end of 1994 from the usual past level of nearly 6 percent,
while the balance on current account will shift into the black. The
economy as a whole should grow at an average annual rate of 6.9 percent,
boosting per capita GNP to US$14,076 in 1998 from US$7,466 in 1993.
A healthy society means a society in which all people work hard and
receive just rewards. It is obvious that a clean government and sound
economy alone cannot create a New Korea. A healthy society is absolutely
required as well. Everyone must spontaneously take responsibility for
keeping society healthy. Each and every person must be honest, courageous
Peaceful unification is the supreme task for Koreans. the Republic’s
Korean national Community Unification Formula envisages a Korean
Commonwealth, an interim arrangement designed to build political, economic
and military trust and restore national homogeneity, leading to full
national integration through free general elections throughout the Korean
Peninsula. President Kim will consistently pursue this unification formula,
widely regarded as being very realistic. He will, however, flexibly adapt
it to changes in the international situation. In a Liberation Day speech on
August 15, 1994, he thus prpoposed South-North joint projects for national
development, including light-water nuclear reactor construction in the
North, once the North Korean nuclear issue is resolved.
Reform backed by the Korean people
The Korean people’s deep support of President Kim’s comprehensive
reform agenda has been reflected in the Korean leader’s strong public
approval rating. President Kim has fared consistently well in public
opinion polls which indicate that his reform policies continue to enjoy the
support of a solid majority of Koreans.
To maintain the public’s trust, President Kim has pledged to create a
corruption-free political environment by establishing high ethical
standards for the members of his administration and political party.
Symbolizing his strong commitment to this goal on February 27, 1993, just
two days after his inauguration President Kim disclosed all of his
financial assets to the public, and encouraged all senior cabinet and
ruling party figures to do the same. A number of his government’s newly
appointed officials were forced to resign for their past unethical
financial conduct and President Kim declared that there would be “no
sanctuary” from his clean-up campaign. He stressed that the new ethical
standards “must be internalized and become a way of life” for all Koreans.
In order to institutionalize the disclosure of public officials’
assets, the existing Public Officials’ Ethics Act as revised in June 1993,
and ranking government officials are now required to register and
disclosure their assets under this law. As a result of the clean-up drive
resulting from the asset disclosure, 1,363 public officials were dismissed
for malfeasance and 242 were forced to resign due to improperly acquired
President Kim’s inauguration brought to an end the deep involvement
of the military in Korea’s political arena. Corruption in the armed forces,
long a taboo subject, became a focus of the new reform drive. Promotion
kickback scandals were uncovered, and a number of senior military officers
have been removed from their posts. The Administration has also
investigated and taken legal action against defense procurement
irregularitites. At the same time, Prsident Kim has moved to depoliticize
the government bureaucracy. In particular, he has reformed the nation’s
intelligence apparatus, ending its involvement in domestic politics and
directing it to focus solely on Korea’s national security concerns.
President Kim has taken steps to reform the Office of the President
itself. The President’s residence and office complex, Chong Wa Dae, better
known as a Blue House, has been made more accessible to the public. For the
first time in decades, the avenue in front of the Blue House is now open to
traffic, as are the scenic mountain hiking trails adjacent to the
presidential residence. Gone are the lavish Blue House meals once served to
staff and guests. Instead, everyone, including the President himself, dines
on simple yet traditional Korean cuisine.
Following this reform to require the disclosure of personal assets by
public officials, President Kim Young Sam boldly introduced a real-name
financial transaction system in order to achieve fundamental structural
reform that will greatly assist in the realization of economic justice and
This real-name financial transaction system, which was put into
effect by an emergency presidential decree on August 12, 1993 is the core
of the entire reform movement, “the reform of all reforms.” This reform is
helping eradicate misconducts and realize economic justice by rectifying
the distorted economic structure and income distribution caused by
underground economic activities and real estate speculation and by cutting
shady financial ties between politicians and businessmen. In order to join
the ranks of advanced countries, Korea must eradicate the corruption and
irregularities stemming from certain aspects of past administrations’
pursuance of rapid growth-oriented economic development.
With the introduction of the real-name financial transaction system,
all financial dealing have become transparent, underground economic
dealings have diminished, and nonproductive land speculation has been
curbed. The funds that were channeled into political circles in the past as
a result of government-business collusion are now being invested in
As a result drastic changes are occurring in political, economic and
social activities in virtually every sector of Korean society. Business
investment is actively increasing, and the past distorted economic
structure and income distribution is being rectified.
President Kim’s declaration not to receive any money from businesses
so as to maintain a clean government and to build a clean society, combined
with his political philosophy, laid the foundation for the introduction of
the real-name financial transaction system. The success of the real-name
financial transaction system is serving as a stepping-stone to a New Korea.
Reform Legislation Promoting Clean Polities and Participatory Democracy
As President Kim’s urging, a package of three political reform bills
was unanimously passed by the National Assembly on March 24, 1994. Marked
by heavy penalties for offenders, the Law for Electing Public Officials and
Preventing Electoral Irregularities is designed to ensure the transparency
of campaign financing, limit campaign expenditures while encouraging freer
campaigns, and ban “premature electioneering,” as well as all other
electoral misconduct. The amended Political Fund Law is intended to control
fund raising by political parties and individual politicians with the aim
of stamping out “money politics” and “politics-business collusion,” while
encouraging relatively small contributions by individuals and groups to the
coffers of the parties or politicians that they support. Together, these
two laws are aimed at ensuring free, fair, clean and frugal politics in
general. The revised Local Autonomy Law provides for the election of the
chief executives of local governments in addition to the local councils
already instituted in 1991 to restore local autonomy after a 30-year
Under the new Local Autonomy Law, four kinds of local elections are
scheduled to be conducted on June 27, 1995, to choose 15 provincial
governors and metropolitan mayors, 866 members of provincial and
metropolitan councils, 260 city mayors, country executives and municipal
district chiefs, and 4,304 members of lower-level local councils - for a
total of 5,445.
In line with the key goals of President Kim’s political reform, the
enforcement of these new laws will enhance the ability of Korean citizens
from all walks of life to more fully participate in the democratic