Economic growth continued at a moderate pace in 2016, supported by a supplementary budget and record low interest rates. Growth is projected to edge up from 2.75% in 2016-17 to 3% in 2018. Inflation is projected to converge to the central bank’s 2% target by 2018, and the current account surplus to remain large at 6.5% of GDP.
In 2016, we celebrate Korea’s 20th anniversary of OECD membership. Throughout this time, Korea has achieved impressive convergence in living standards towards the Organisation’s top performers. In fact, as this special anniversary edition shows, from being one of the poorest countries in the world half a century ago, Korea is now the world’s 11th largest economy and 6th largest exporter. It is home, not only to some of the world’s most famous household brands, from cars to smartphones, but to the K-pop and fashion wave that has seduced young people everywhere. No wonder people refer to Korea’s transformation as “the Miracle on the Han River”.
This year, 2016, marks the 20th anniversary of Korea’s accession to the OECD. In the meantime, Korea has continued to grow, both in quantitative and qualitative terms, yielding a remarkable outcome that befits the ranks of the OECD countries. Korea has one of the most impressive economic growth performances among the OECD countries, with its economic size now almost three times greater than it was at the time of accession. As of today, Korea proudly ranks as the 8th OECD country in terms of economic size.
This year marks the 20th anniversary of Korea’s membership in the OECD. Korea joined the OECD in 1996, following its membership to the World Trade Organization in 1995 as part of its globalisation efforts, and has thereafter risen as a full-fledged middle power, actively contributing to the international community.
Twenty years of age is often regarded as the threshold of adulthood. Coming-of-age celebrations vary across cultures, but the common understanding is that once you become an adult, you are expected to be a mature and responsible member of the society.
Korea’s transition from one of the poorest countries on earth in the early 1960s to the world’s 11th-largest economy and sixth-largest exporter by 2015 is unprecedented.
While policy making and OECD membership helps explain much of Korea’s successes in the last two decades, major firms have had a role to play too. In fact, Korea is associated with several global household brands, as strong demand for the likes of Samsung curved televisions, Hyundai hybrid cars and K-pop hits like “Gangnam Style” jolting the Land of the Morning Calm into the sixth-largest exporter in the world. But while productivity in many large manufacturers has pushed Korea into the world’s top ten producers of cars, ships, mobile phones and DVDs, productivity in smaller firms and the service industry means overall productivity is half the level of leading OECD countries.
Since the 1970s, economic growth in Korea has largely been driven by big companies such as Samsung, Hyundai and LG. These so-called chaebol have been remarkably successful, but have dominated the economy, with little room for small and medium-sized businesses (SME) to gain traction and grow.
Given Korea’s prowess in digital goods, it should come as no surprise to see the country leading the field in e-governance. Its lead, notably in open data, owes much to government efforts and investments in digital infrastructure and systems since the 1990s. In 2014 more than 70% of all Koreans reported having used the internet at least once over the previous 12 months to interact with the public authorities, whether to obtain information on a government website, or to download or file a form, for instance. That’s far more than the OECD average of 55%.
Korea’s transformation into an economic powerhouse in just 20 years is largely due to what is often claimed to be its only natural resource–its people. Huge investments in education and training boosted productivity and growth, turning the country into an international player with a booming high-tech, export-led economy.
Jeju Island lies in the Strait of Korea. Often described as the “Hawaii of Korea”, it is also a tropical jewel in the country’s strategy towards greening its economy.
Cities are in fashion nowadays among policy-makers as countries everywhere look to urban areas as hubs for innovation and growth. But what about the countryside? Economic development led by continuous rural-to-urban migration and rising living standards and opportunities in the urban milieu, not to mention industrialisation, contributes to widening disparities between rural and urban areas. Korea’s development experience shows that socially-inclusive and sustainable growth requires developing rural areas as an integral part of successful economic development. Indeed, Korea’s rapid rise from a mainly agricultural and food-aid recipient nation to one of the fastest-growing, developed OECD economies was made possible by a structural transformation that involved urban and rural areas alike.
Korea joined the OECD on 12 December 1996, the first Asian country to become a member of the organisation in over 30 years. By all accounts, the country’s economic transformation has been unprecedented, from one of the poorest countries in the world half a century ago to one of its leading economies. In this OECD Observer Roundtable, we asked a range of experts who have witnessed Korea’s progress over the years:
During my tenure as secretary-general of the OECD, few events gave me as much pleasure as welcoming Korea as a member in the autumn of 1996.
In 2016 Korea celebrates 20 years of membership in the OECD. In the early 1980s, following a period of remarkably successful economic growth, it commenced a programme of financial liberalisation and then, from 1993, more general economic and regulatory reform. There were three major reasons for the change in approach. The first was the increasing international influence of the market and the second was growing international and domestic pressure for Korea to remove trade restrictions, increasingly important as the Uruguay Round negotiations led to the establishment of the WTO. A third reason was pressure from increasingly powerful industrial groups or chaebols for liberalisation, especially as regards lifting the ceiling on their ownership of bank shares, greater freedom in foreign borrowing and raising the aggregate credit ceiling.
An impressive 14 million viewers–that’s not far short of a third of Korea’s population–have flocked to see the film, “Ode to My Father”.
If there is one area where Korea has jostled to the front of the OECD field in 20 years, it is in education. Take school performance: according to the OECD’s Programme for International Student Assessment (PISA), a renowned global benchmark which surveys competence among 15-year-olds around the world, Korea’s young students perform better at school than most of their peers in other OECD countries. In the last test in 2012, Korea led the OECD field in mathematics, was second to Japan for reading (our chart), and was in the top seven for science. Some 64 countries and economies with comparable data took the tests. In the 2009 tests Korea had also commanded a top spot.
Traditionally, men have tended to be more educated than women in Korea, especially when it comes to higher education. Only 34% of doctoral graduates or equivalent graduates are women, which is among the lowest shares across G7 and OECD countries. However, women in Korea have made great strides in educational attainment over the past decade.
Korean trade with Africa has more than quadrupled since the late 1990s.
One country with an exemplary record in broadband is Korea, host of the 2008 OECD ministerial meeting on the Future of the Internet Economy. On broadband reach it is the seventh in the OECD in December 2007, for fibre-optics it lies second only to Japan and is well ahead of the rest of the field, and for download speeds, it is in a comfortable third, after France and Japan. Korea is also a leader in mobile technology.
Secretary-General Donald Johnston, and distinguished guests!
Of the abundant resources given to mankind, what is the most underused resource of our time? Without a doubt, women!
Korea Snapshot 2013
Find key economic figures and trends for Korea from OECD Yearbook 2013
The rise of IT and the Internet have been boons to Asia, but not everyone has benefited. There are challenges to overcome, not least in the area of governance.
The budget deficit for the OECD area as a whole probably peaked at around 7.5% of GDP in 2010. That’s the equivalent of some US$3.3 trillion. A decrease to around 6.1% of GDP is expected in 2011, which will still be high by historical standards. But while the need to restore public finances is a global challenge, the state of government balance sheets varies widely. Economic starting points, causes of deficits and budgetary strategies also vary. Some countries have started down the road of austerity, others are maintaining stimulus and plan to rein in their deficits from 2011.
In December 2010 we asked finance ministers from a broad selection of countries facing different fiscal challenges–France, Germany, Indonesia, Ireland, Korea, Mexico, New Zealand and South Africa–to answer this question: “What actions is your government taking to bolster public finances, while upholding growth and services?”
Korea's joining the OECD in 1996 was an important milestone in the globalisation of the organisation. It remains the only Asian country to have joined the OECD since Japan in 1964. Its membership was also an important recognition of the exceptional economic, social and political progress Korea had made in previous decades, rising from the ashes of war to become a world economic power and full-fledged democracy.
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