South Korea’s economy is a market economy with a high degree of state control. A strong export-oriented industry is the mainstay of the South Korean economy. China is South Korea’s most important trading partner.
When Korea was divided, the southern part was essentially an agricultural country. Most of the industry was located in the north, which also had the bulk of Korea’s significant mineral deposits. Until the mid-1960s, living standards in North Korea were higher than in South Korea. Since the 1960s, South Korea has prioritized rapid economic development. A thriving export industry has been built, with an emphasis on consumer electronics, semiconductors, automobiles, steel and petrochemicals, partly thanks to Japanese loans and investments.
After constant high economic growth since the 1960s, in the early 1990s, South Korea entered a period of somewhat slower growth rates. Two-digit wage increases in the period 1988–1993 led to a slight weakening of competitiveness. South Korea was hit hard by the Asian financial crisis of 1997-1998, and unemployment reached 8 percent. Car manufacturer Daewoo Motors was hit in 2000 by the largest bankruptcy in the country’s history with a debt of $ 70 billion. Around the turn of the millennium, economic growth accelerated again. Already in 2001, unemployment had fallen to 3 percent, a level that persisted for the following years.
Agriculture used to be the main trade route, and as late as 1966, it employed 56 percent of the working population. In 2002, the primary industries (agriculture, forestry and fisheries) accounted for only 10 percent of employment and 4 percent of gross domestic product (GDP). In 2017, these figures had fallen to 4.8 percent of employment and 2.2 per cent of GDP.
Only one fifth of the land can be cultivated, but where climate and terrain allow, two crops are harvested a year. Farms are generally small (10 to 15 acres) and usually divided into small tigers, but thanks to a stronger degree of artificial irrigation, increased mechanization and more extensive use of improved cereals, yields in South Korean agriculture have increased significantly. Today, the country is largely self-sufficient with rice, but not with other cereals. It is grown among other things rice, barley, soybeans, sweet potatoes, potatoes, fruits, yams, tobacco, maize, millet, wheat and various kinds beans. For use in the textile and silk industry some cotton and mulberry trees are grown.
Like North Korea, since the 1990s, South Korea has been repeatedly haunted by natural disasters with major agricultural damage.
Forestry plays a modest role in the country’s economy. The timber is usually of poor quality and not sufficient to meet local needs. Some South Korean companies own forests in Malaysia and Indonesia, among others.
South Korea is one of the world’s leading fishing nations. Fishing meets the country’s own need for fish, and the surplus is exported. In addition to fishing, farming is driven by oysters and clams, and shellfish and edible seaweed are exported to Japan.
South Korea has only 10-15 percent of Korea’s estimated mineral resources. Mining accounts for about 0.3 percent of GDP, and only 0.1 percent of the workforce is employed in the mining sector. There are deposits of coal, iron ore, graphite, tungsten and gold.
A strong export-oriented industry is the mainstay of the South Korean economy. In 2017, exports of goods and services accounted for 43 percent of GDP. In 2017, the industry accounted for 24.6 percent of the country’s employment and 39.3 percent of GDP.
The industry has had a very rapid expansion in foreign capital investment, including many Japanese corporations, which have withdrawn much of their profits and made little use of domestic capital.
The country’s industrial policy is reminiscent of Japan, with an export-oriented industry based on imported raw materials. The export industry was partially transformed in the 1980s and 1990s from industries such as textiles and footwear to more advanced industries such as cars and electronics. The automotive industry has seen particularly strong growth. The country’s industry is largely dominated by so-called chaebols; large industrial conglomerates, such as Hyundai. An increasing part of the production base has been moved to other countries, not only to China and other low-cost countries in Asia, but also to Europe and America.
The Japanese have, among other things, participated in the development of the country’s iron and steel industry, which includes the large integrated iron and steel plant in Pohang on the southeast coast and smaller plants in Busan, Ulsan and Seoul. Primary metal production forms the basis for an extensive mechanical industry, and South Korea is one of the world’s largest shipbuilding nations. In the early 1990s, South Korea became the world’s leading shipbuilding nation, led by Hyundai Heavy Industries. The largest shipyards are located in Ulsan and Okpo on the island of Koje southwest of Pusan, but Pusan, Mokpo, Kunsan and Inchon also have a considerable shipbuilding industry.
In 2004, work was started on the infrastructure of three financial fronts for foreign investors. The Incheon Free Economic Area is located at one of Asia’s largest airports, which opened in 2001. A stated goal with the freezes is to make South Korea more of an economic hub in Asia.
South Korea’s export-driven economy has benefited from the strong Japanese yen currency. In 1995, South Korea became the 12th country in the world whose exports have passed US $ 100 billion. In 2017, exports reached US $ 577 billion, while imports reached US $ 457.5 billion that year. Industrial products primarily focus on semiconductors, consumer electronics, automobiles, steel and petrochemical products. Japan and the United States are the main targets for South Korea’s exports, in addition to Hong Kong, Singapore and Germany. Since the establishment of diplomatic relations between South Korea and China in 1992, trade with China has increased significantly.
According to Countryaah, Japan and the United States are the most important countries for South Korea’s imports, as well as Germany, Saudi Arabia and Australia. Since the establishment of diplomatic relations with China in 1992, China’s trade has shown particularly strong growth. In 2017, 25.1 percent of exports to China and 12.2 percent to the United States went, while Vietnam took 8.2 percent, Hong Kong 6.9 percent and Japan 4.2 percent.
Of South Korea’s imports, 20.5 percent came from China, 11.5 percent from Japan, 10.5 percent from the United States, 4.2 percent from Germany and 4.1 percent from Saudi Arabia (2017). The main import goods are machinery and transport equipment, petroleum and petroleum products, chemical products and various factory-manufactured goods.
Transport and Communications
During the rapid economic development, transport has been heavily invested. The country has a well-developed state-owned high-speed rail network that connects the capital of Seoul with, among others, Pusan (via Taegu), Mokpo on the southwest coast and Samchok on the northeast coast.
In 2001, North and South Korea agreed to reopen the old railroad between North and South, and on May 17, 2007, a passenger train crossed the border between the two countries for the first time in over 50 years. This was a preliminary one-off event, but is seen as an important part of the process of normalizing the relationship between North and South Korea.
The road network has a total length of approximately 100 428 kilometers (2016), which includes the 428 kilometer long motorway between Seoul and Busan. A highway through the DMZ border zone was opened in 2005, but only for strictly regulated traffic to/from a joint Korean industrial project near Kaesong. However, efforts are being made to improve the road connection between the two countries.
During the 1990s, the car fleet multiplied from just over 2 to 8 million. Seoul has had a subway since 1974.
The privately owned airlines Korean Airlines (KAL) and Asiana operate domestic and foreign routes from Seoul. In 2001, one of Asia’s largest airports opened on reclaimed land at the port of Inchon. Other international airports can be found at Seoul (Kimpo), Busan and Cheju. The main port cities are Pusan, Inchon, Donghae, Masan, Yosu, Kunsan, Mokpo, Pohang, Ulsan, Cheju and Kwangyang.