Economic Development in South Korea

At the end of World War II, Korea was a poor former agricultural colony of Japan. But the rapid growth of Korea’s industrial economy has been remarkable. The economy of South Korea is now the third-largest in Asia and the 13th largest in the world by GDP as of 2007. To trace back the economic development of South Korea, the former president Park Chung-Hee played a pivotal role, and was credited for shifting its focus to export-oriented favoring a few large conglomerates. Unlike his predecessors, Park showed a strong commitment to economic development, believing good economic performance as a primary means for enhancing his political legitimacy. Under the President Park Chung-Hee’s era, the government played a dominating role in a country’s economy. It was able to do so by allocating resources, fixing prices, and owning and controlling enterprises directly. The government of Republic of Korea’s role in the economic development plan was “either direclty participate or indirectly render guidance to the basic industries and other important fields.” The government actively intervened in economic development, providing financial incentives, offering industry-specific information, regulating labor force as well as entry and exit of the market, and initiating almost every major investment by the private sector. South Korean economy in 1961-1979 could be defined as the capitalist world’s most tightly supervised economy, often characterized as a state-led industrialization. The essay dealt with how the President Park Chung Hee’s government played an exact role in finance, investment, regulation, and administration to carry out the economic development plan during 1961 to 1979.

I. Financial Incentives by the Government The Korean government had been a pervasive force in every sector of the economy, pursuing the state “shall encourage the foreign trade, and shall regulate and co-ordinate it.” In South Korea, a policy moved toward primary-export substitution. In