H.E. SHIN Boonam

Ambassador of the Republic of Korea

The Success of Korean Economy

Table of Contents

1.Korea at a Glance

2.Relations between the Republic of

Korea and the Republic of Bulgaria

3.Growth of Korea’s Economy

4.Causes of Korean Success

5.Challenges

1. Korea at a Glance

Area 99,720 sq km - 109th

Population 50,924,172 (2016) -28th /SEOUL 9.774 million

Population growth rate 0.53% (2016)- 156th

GDP(nominal/PPP) $1.4 trillion(2016) - 11th / $1.93 trillion(2016)- 14th

GDP- per capita (nominal/

PPP) $27,632 (2016) -28th /$37,900 (2016)- 45th

GDP - real growth rate 2.7%(2016 ) – 110th

Gross national saving 36.1% of GDP (2016) -10th

GDP Composition by sector Agriculture: 2.3%/ Industry: 37.6%/ Services: 60.2%(2016)

Source: CIA The World Fact book(Area, Population, Gross national saving, real growth rate, GDP PPP), IMF(GDP Nominal)

Korea at a Glance

The Republic of Korea

World War II, Two Koreas

Joint Declaration on the Establishment of

Diplomatic Relations (March 23, 1990)

Minister of Foreign Affairs - Choi Ho-joong

(March 23, 1990)

2. Korea-Bulgaria Relations

- How everything began…

Prime Minister -Han Myeong-sook

( June, 2006)

Speaker of the National Assembly - Kim Hyong-o

(May, 2009)

Korea-Bulgaria Relations –High Level Visits ①

President - Georgi Parvanov

(October, 2010)

President - Rosen Plevneliev

(May, 2015)

Korea-Bulgaria Relations –High Level Visits ②

Three MOUs on Cooperation in the Field of Defense, Science and

Technology, and Sports

Arrangement on Cooperation in the Field of Education and Culture

Joint Declaration on the Comprehensive and Future-Oriented Partnership

between the Republic of Korea and the Republic of Bulgaria (May, 2015)

1st session of Intergovernmental Joint Commission on

Economic Cooperation (October, 2015)

Minister of Foreign Affairs - Yun Byung-se

(June,2016)

The 2nd session of the Joint Commission on Economic Cooperation will be

held this year in Seoul

Science and technology, IT and industrial cooperation are under discussion

Korea-Bulgaria Relations -Follow-up Actions

4th and 5th Nuclear Tests - January 2016, September 2016

Missile tests –24 times in 2016 and 7 times in 2017

The only country to conduct nuclear test in the 21st century,

threat to international community

Korea-Bulgaria Relations -Political Relations ①

: North Korean Provocations (2016-2017)

Korea-Bulgaria Relations -Political Relations ②

Both side reaffirmed shared commitment to the denuclearization of

North Korea (May,2015)

The Ministry of Foreign Affairs of the Republic of Bulgaria issued 5

statements in 2016 and 3 so far in 2017, condemning North Korean

nuclear tests and missile launches

In accordance with Resolution 2321, two North Korean Embassy

officials left Bulgaria in February 2017 and the Republic of Bulgaria

has asked North Korea to take measure to cease the commercial

use of their real estate property in Bulgaria

The Republic of Bulgaria supports

Peaceful Unification on the Korean

Peninsula and welcomes “North Asia

Peace and Cooperation Initiative” of

the Republic of Korea

Korea-Bulgaria Relations

-Educational & Cultural Relations ①

Education FieldSofia University, Center for Korean Studies, Korean Department

18th School “William Gladstone”, Korean language classes

Sofia Sejong Institute – Learning Korean Culture and Languages

Korean Government Scholarship Program

Bulgarian Government Scholarship

Cultural FieldKorea Corner in the Sofia City Library

Intergovernmental Youth Exchange Program

Korean Ambassador’s Cup Taekwondo Tournament

Annual Korean-Bulgarian Friendship Concert

Korean Cinema Week

Sofia University, Center for Korean Studies 18th School “William Gladstone”, Korean language classes

Korea Corner in the Sofia City LibrarySofia Sejong Institute

Korea-Bulgaria Relations

-Educational & Cultural Relations ②

KGSP Korean Government Scholarship Program Intergovernmental Youth Exchange Program

The 3rd Korean Ambassador’s Cup

Taekwondo Tournament (June, 2016)

The 4th Korean-Bulgarian Friendship Concert

(October, 2016)

Korea-Bulgaria Relations

-Educational & Cultural Relations ③

Bulgaria

Bulgaria exported $102million to Korea in 2016 - Feed(Corn, wheat), Clothes,Heavy Electricals, Top shell, Industrial Electronics

Bulgaria Imported $134 million from Korea in 2016-Petrochemicals, Transporting machine, Industrial Electronics,Nonferrous metal products, Electronic component

Korea is 2nd largest trading partner among East Asia after China and it has 3rd largest trade volume among non-EU OECD countries after Turkey and USA- $ 210 million (2015)/ $ 236 million (2016)

Source: Korea Customs Service, Bulgaria NSI

Korea-Bulgaria Relations

-Economic Relations ①

Korean companies in Bulgaria

Photovoltaic plant : KOSEP, SDN,

Samsung C&T, EU Sunday, PNH

Manufacturing : Hyundai Heavy Industry

Agriculture : Asia Invest

Cars: Hyundai(IND Commerce), KIA

Subsidiary : Samsung Electronics, LG Electronics, Alpha Display(Monitor), River(used car)

Bulgarian Companies with business in Korea

Agria Group Holding(corn, wheat), Aurubis(waste of precious metals), LB Bularicum(Bacteria), Sever Export(top shell), Deniva(rose oil), Vikitex(textile) etc.

Korea is the largest investor among Asia

$ 519 million: Photovoltaic plants, transformer manufacturing, agriculture

103MW, 1/10 of Bulgarian solar power generation

Korea-Bulgaria Relations

-Economic Relations ②

3.Growth of Korea’s Economy

Source: KDI

Established Korea Development Institute (KDI)

Trade Volume

Source: WTO, KITA

Trade VolumeTrade Volume

$857 billion

$280 billion

Trade volume between 1957 and 2012 (Unit: USD) $1.098 trillion ( 2.387 times compared to 1957)

(2014)

$0.46 billion(1957)

(1996)

(2008)

Leading exporters and importers in world merchandise trade, 2015 (USD billion)

1950s2000s

Cheong-Gye-Cheon Stream in Seoul

With no natural resources, capital and technology

However, Korea achieved

the Miracle of Han River.

1962 1992 1997 2007 2013 2014 2015

Economic Development

GDP per capita$87

(101st)$7,714 $11,505 $23,103 $25,998 $27,989 $27,221

Investment (/GDP) 13.8 36.0 34.6 30.5 29.1 29.2 27.97

Export (/GDP) 5.1 26.8 31.7 39.2 53.9 50.3 45.9

Import (/GDP) 16.8 27.0 32.2 38.1 48.9 45.0 38.94

Trade* (/GDP) 21.9 53.8 63.9 77.3 102.8 95.3 85

Social Development

Life Expectancy 55 72 74 79 82 82 -

Infant Mortality Rate(/1,000)(under the age of 5)

138 8.5 7.2 5.2 3.0 3.0 -

*Trade volume exceeded $1 trillion in 2011, 9th largest trading nation.

Source: KDI (1996-2007 data), WB(GDP, Export, Import, Trade 2013-2015), Economywatch(Investment 2013-2015),

OECD(Life Expectancy, Infant Mortality Rate 2013-2014)

Korea's Economic and Social Development Indicators

The leader in innovation Korea ranked first in the 2016 Bloomberg Innovation Index, with a top score

of 91.31 points

This is the third year in a row that Korea topped the innovation index,

having scored first place in 2014 and 2015.

Gross R&D investment as a percentage of GDP

Bloomberg Rankings Most Innovative in the world 2014: Countries

Source: OECD

Global Manufacturing Competitiveness Index 2016

5th

15 Korean Companies

in FORTUNE Global 500 in 2016

(13)

(84)(172)

(173)

(208)

(180)

(237)

(294)

(277)

(431)(414)

(464)

(439)(429)

(310)

Market Share of Mobile Phones

1st

36.2%8th5.9%

Source: Strategy Analytics (2013)

Market Share of Displays

1st

2nd

Source: Displaysearch 2013

22.1%

22.9%

Currently Korea is the leader in display

manufacturing, with Taiwan and China on its

heels and Japan a distant fourth.

Source: HS Displaysearch and Linde Internal(2016)

1st

3rd

14.2%

21.7%

Source: SNE Researcher2013

Market Share of Lithium Batteries

Source: SNE Researche 2015

Market share of Small-sized Battery from

5 Major Suppliers

Production of Steel

Source: World Steel Association(2015)

Automobiles5th Motor vehicle producing country in 2015

Semiconductors

Memory semiconductor:66.5% Source: MOTIE, HIS technology (2013)

Leading Semiconductor companies from 2014 to 2016(in billion U.S. dollars)

Source: www.statista.com

Shipbuilding

Source: World Shipyard Monitor 2013

Korea45.4%

Other9.6%

China34%

Japan11%

Global Shipbuilding Share(CGT Contracting 2013)

Source: http://worldmaritimenews.com (March,2016)

Petrochemicals

USA China Saudi Arabia Korea Japan Germany

27.1

16.3 15.8

8.4 85.6

Ethylene Production Capacity (2012)

World’s

(Mn. Tons / Year)

REFINING

CAPACITY4th

Source: Korean Petrochemical Industry Association

4.Causes of Korean Success

Economic Policy

Education Policy

Leadership/ Willingness of People

Trend of Economic Policies

Extensive government involvement

1980s1970s1960s1950s

Industrialization through import substitution under protection

Export Promotion Heavy and

Chemical Industry

Drive

Trade LiberalizationInstitutional Reforms

Economic policies have been different from period to period.

Economic Take-Off with Outward-looking Development Strategy

Mechanism of Outward-looking Development Strategy

Government

Export

PromotionManufacturingProcessing

PrivateEnterprises

Technology

Development

Economic Growth

S

Financial Tax

Support

Well-educated

Labor force

Imports

Foreign Technology

Imports Capital Good

Imports Raw Material

Foreign Capital Inducement(Economic Aids External Debt)

S

The Role of Each Sector for Export Promotion

Economic Take-Off with Outward-looking Development Strategy

Export Growth of 40%

Per annum in 1964-80

Strong export promotion

supports high growth

35

Stages for Econ. Development

Economic Development Policy Education Policy

Phase 1(1945-1960)

Agricultural Society, Rehabilitation, Seek for export-oriented growth policy

Establishment of elementary education system and universal primary education

Phase 2

1960sDevelopment of labor-intense industry(Esp. light industry-oriented) Expansion of secondary education,

reinforcement and expansion of professional advancement education

1970sBirth of conglomerates, Promote policies of heavy chemical industry

Phase 3(1980s-1990s)

Development of technology, knowledge, information-intense industry

Expansion of higher education

Phase 4(2000-present)

Enter into the Global Era, Transform into the information and knowledge-oriented economy

Popularize higher education, informatization of education, lifelong education, efforts in developing human resources at national level

Trend of Education Policy

36

Budget in Education Public Expenditure on Education as a percentage of GDP

Year 1970 1980 1982 1990 2001 2010 2016

% of GDP 3.27 3.34 6.08 3.02 3.90 4.54(36th ) 4.90(30th )

Source: http://data.uis.unesco.org/

Source: TheGlobalEconomy.com, UNESCO

* Educational tax was introduced in 1982

http://one-europe.net/eurographics/infographic-countries-that-invest-the-

most-in-education (April, 2015)

Leadership

“The House That Park Built: A survey of South Korea”

The Economist, June 3, 1995 p.15

Prof. Tanev

“How strategists think”

Willingness of the People

Korean nurses and miners went to work in West Germany in exchange for a

public loan from West Germany (1960’s- 1970’s)

Koreans sold or donated their gold to help

country pay debt (1997-1998)

19975.Challenges

Asian Financial Crisis

The countries most affected

by the 1997 Asian financial

crisis

Causes of 1997-98 Financial Crisis

Increased Corporate

Failure

Heavy CorporateDebt Leverage

Labor MarketRigidity

IMFRescue Package

• Massive Capital Outflow• Denied Rollover of

Short-term external Debt

DeterioratedFinancial

Soundness

South East AsianCrisis

IncreasingCompetitionfrom China

Declining MarginalProductivity of

Capital

Further Expansionof Chaebols’Investment

Decreasing Profitability

Lax Financial Supervision

Cleaning up Non-performing Loans

AcceleratingLiberalization

Improving Corporate Governance

Expanding Social Safety Net

- Early Graduation from the IMF Rescue Package

- Foreign Reserves of more thanUSD 200bn in 2004

Improved External Positions

- GDP Growth: -6.7% (1998) 10.7% (1999)

- Unemployment: 6.8% (1998) 3.5% (2004)

Rapid Economic Recovery

- Debt-equity Ratio: 396% (1997) 110% (2004)

- No. of Banks: 33 (1997) 19 (2004)

Stronger Corporate and Financial Sector

Overview

- Swift Crisis Resolution and Economic Recovery

Aging Shock

0

10

20

30

40

50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50

(%)

India

OECD

Japan

Korea

ChinaUSA

Source: KDI

Korea is the fastest aging society

The ratio of population aged over 65 increased from 7% in 2000 to 14% in 2015 due to low birth rate and better medicine

Population Share of 65+

Decline in Potential Growth Rate

Growth potential of Korea based on growth accounting (%)

Source: KDI.

0

2

4

6

8

10

12

1970~80 1980~90 1990~00 2000~10 2010~20 2020~30

노동 자본 총요소생산성Labor Capital Total Factor

Productivity

• Low labor input due to the low birthrate and aging population &

Low productivity of the capital⇨ Decline of potential growth.

• To boost the potential growth, total factor productivity should be improved

through creativity and innovation.

Growth Patterns of the Korean Economy

High tech + Innovation

Manufacturing with capital

After economic crisisLabor intensive

productionHeavy &chemical industriesInitial stage of

development

Stages of Economic Growth - Korea

Labor-oriented

Capital-oriented

Innovation-oriented

Years for Transition

UK

Japan

Korea

China

200 years

100 years

30~40 years

30 years?

’60s- ’70s

’70s- ’90s

’00s -

• Previously, the forces of growth were capital and labor.

• Now innovation based on knowledge, creativity and exploration is

more important than economic resources.

The Korean economy entered the stage of growth by innovation.

“Creative Economy” Strategies Since 2013

Focus on creativity and convergence of business

Invest in Science & Technology, Education &Culture

Thank You