Case studies-II

Case studies2Consolidation (1973-80)
As the 1970s progressed, internal and external challenges threatened the continuation of export-led growth, the rapid manufacturing increases of the 1969s, strained transportation, electricity and communications systems. The insland suffered profound external setbacks.

Beginning in 1973, the government chose a more self-reliant development strategy based on industrial consolidation and renewed export growth. Once again, it turned to foreign experts and commissioned the US management firm of Arthur D Little to find solutions to the economic crisis. Based on Taiwan, China’s economic needs and capabilities, the Americans recommended heavy investments in infrastructure industrial upgrading and secondary import substitution. A government’s plan incorporating the recommendations focussed on development of capital-intensive, heavy and petrochemical industries to increase production of raw materials and intermediates for the use of export industries.

Functional Incentives and Liberalization (1980-90)
Support for strategic industries was curtailed and abruptly reversed. The currency was devalued, and credit allocation policies switched, with a termination of largescale preferences to the HCI sector. The five-year economic plan drafted in 1979 recognized that the complexity of the economy was exceeding the government’s management capacities. The plan’s emphasis on indicative planning and a greater role for the market was eventually translated into a range of financial and import-liberalization programmes. Intervention since 1979 has focussed on the restructuring of distressed industries, support for the development of technology and the promotion of competition.

Financial Sector Liberalization (1990)
The key to Korea’s future industrial policy lies in its approach to financial sector reform. The government has been coping with the residue of the excesses of the 1970s, and has been particularly active in bailouts of over leveraged industries. The remanants of past policies are part of the price. Korea is paying for prior intervention policies and for the failure to establish an independent financial sector.

Present Growth Rate
In 1993, according to estimates by the World Bank, South Korea’s gross national product (GNP), measured at average 1991-93, prices was US$ 338,062m, equivalent to $7,670 per head, provisional figures for 1994 according to South Korean sources, estimated GNP per head, measured in current prices, to be $8,483. During 1985-93, it was estimated, GNP per head industrial upgrading and secondary import substitution. A government’s plan incorporating the recommendations focussed on development of capital-intensive, heavy and petrochemical industries to increase production of raw materials and intermediates for the use of export industries.

Functional Incentives and Liberalization (1980-90)
Support for strategic industries was curtailed and abruptly reversed. The currency was devalued, and. credit allocation policies switched, with a termination of largescale preferences to the HCI sector. The five-year economic plan drafted in 1979 recognized that the complexity of the economy was exceeding the government’s management capacities. The plan’s emphasis on indicative planning and a greater role for the market was eventually translated into a range of financial and import-liberalization programmes. Intervention since 1979 has focussed on the restructuring of distressed industries, support for the development of technology and the promotion of competition.

Financial Sector Liberalization (1990)
The key to Korea’s future industrial policy lies in its approach to financial sector reform. The government has been coping with the residue of the excesses of the 1970s, and has been particularly active in bailouts of over leveraged industries. The remanants of past policies are part of the price. Korea is paying for prior intervention policies and for the failure to establish an independent financial sector.

Present Growth Rate
In 1993, according to estimates by the World Bank, South Korea’s gross national product (GNP), measured at average 1991-93, prices was US$ 338,062m, equivalent to $7,670 per head, provisional figures for 1994 according to South Korean sources, estimated GNP per head, measured in current prices, to be $8,483. During 1985-93, it was estimated, GNP per head increased, in real terms, at an average annual rate of 8.1%24, among the highest growth rates in the world. Over the same period the population increased by an annual average of 1.0%. South Korea’s gross domestic product (GDP) increased, in real terms, by an annual average of 9.4% in 1980-92. GDP increased by 5.8% in 1993 and by 8.4% in 1994.

Welfare
The Government provides social relief services for handicapped people, for wounded ex-servicemen and for war widows. Numerous official and voluntary bodies also give special grants or subsidies to aged people, to victims of disasters and to orphans. Under the national insurance scheme, medical and industrial accident insurance covers 24% of the total population and 26% of the economically active population.

There is no system of unemployment benefit. In 1981 the country had 63,804 hospital beds and in 1986 there were 35,657 practicing physicians. Budget estimates for 199225 allocated 469,000m to health and 3,958,000m to social security and welfare (representing respectively, 1.2% and 9.8% of total expenditure by the central Gvoernment).

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