Is South Korea the shining light in Asia?
South Korea has come so far in such little time. In 1960, after a devastating war South Korea was one of the poorest countries in the world. Now they are on average richer than their European counterparts, with their influence growing over Asia. Their economy ranks as the 15th best in the world using Nominal GDP and 12th best if you consider Purchasing power parity (PPP). They are included in the “Four Asian Tigers” a group made up of South Korea, Singapore, Hong Kong and Taiwan, referring to their advanced economies and growth within Asia. This is highly impressive when you consider the size of the country, its lack of any natural resources and its problem of being overpopulated. South Korea got around this by concentrating on producing high technological products and is now the 7th largest exporter in the world. Their resilience is also praised, as they are able to resist the negative effect of their neighbours North Korea and were one of the few countries not to go into recession when the financial crisis hit. Just to put into perspective how far they have come; their GDP per person is nearly 13 times the figure it was 30 years ago, while they are the only nation to go from being a major recipient of Aid to a major Donor of Aid – donating $1.7 billion in 2009 (with a separate Aid given to North Korea almost double that amount). South Korea is also the dominant shipbuilder in the world with over half of the market share, another incredible feat giving the size of the country. Furthermore, they have very low state debt compared to other countries, with the Debt to GDP ratio only 24%, a good figure when you compare to Europe’s strongest economy right now, Germany who have a Debt to GDP ratio of 80%.
Shows South Korea has as good an infrastructure as the western world, and by far the best in Asia along with Japan.
But then most countries in Asia are doing well right now you might argue? Yes, but South Korea is a more plausible example of how to grow. China may be the biggest economy in Asia, but it is unrealistic for other countries to think they could copy that model as it relies on the size of China and its population. Even looking at the other three members of the “Four Asian Tigers”, all three are much smaller; Singapore and Hong Kong are city states while Taiwan has disputes over it sovereignty. Japan meanwhile is declining rather than growing and still faces an issue with deflation. South Korea is the model most other countries could follow; they are an average size, do not rely on debt and have used investment to build up their country and its infrastructure (with some of the biggest urban-recreation projects in the world). Their tactics have also been fairly simple, copy other methods but do them better; Toyota has lost out to South Korea’s Hyundai in selling cheap, reliable cars.
Hyundai beating Toyota in share prices in 2010.
That’s not to say their isn’t problems, South Korea are dominated by big firms (Hyundai, Samsung) and give little chance to small firms or entrepreneurs, with lower levels of start-ups than most other rich countries. The big firms are also incredibly dominated by family ownership, which can lead to favouritism and poor management decisions e.g. Samsung have appointed the owners son as the CEO, if he isn’t talented enough this could backfire massively. South Korea is also guilty of having a low standard of services compared to its manufacturing, with the service market dominated by small local firms that aren’t efficient. These firms are also heavily protected by South Korea’s tactics of protectionism, with subsidies and trade barriers keeping these organisations afloat when they surely would have failed against the international market. These policies do not help the service market though, they keep inefficient firms from failing and are a drain on the economy, and South Korea will need to open up its service market if it wants to achieve a better internal market. Another problem is that South Korea’s low taxes (aimed at helping industries and workers) result in low government spending, with its tax-benefit system only helping to reduce poverty by 18%, compared to Sweden’s whose tax-benefit system manages to reduce poverty by 80%. Finally, South Korea has the impending chaos of an inevitable re-unification with North Korea, which would shock the economy and cost billions.
A re-unification could shock the economy.
But even more than its economic model, it is South Korea’s democracy that makes it a shining light for other countries in Asia. South Korea has had a democratic government for the last 25 years which along with Japan is a rare quality in a region of dictatorships. Their success can be attributed to this solid foundation as much as any economic factors, which should give incentives to other countries to invest in democracy.
Shows South Korea as one of the few successful democracies in Asia. With democratic economies in green and red/orange countries representing dictatorships.
South Korea more than any other country is a shining light in Asia, promoting sensible economical choices, political freedom and innovation when all three are so heavily ignored.