Challenges and Tasks Faced by Korean Economy

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Challenges and Tasks Faced by Korean
Economy Implications for Madagascars Development
Efforts
In-Ho Kim (Republic of Korea)
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The History of the Korean Economys Crises and
Challenges
But faced many hardship along the way

• The Korean War (1950)
• First Oil Crisis (1971)
• Second Oil Crisis and Political Instability
  (1980)
• Democratization and Labor-Management Conflicts
  (1987)
• Finacial Crisis (1997)

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Shortcomings of Korean Development Model
Government-led Investment Decision Resource
Allocation
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? Government Decided Investment Priority and
Selected Winners
? Market Intervention Through Industrial
Financial Policies
? Need to Reassess Governments Role Function
in the Changing Economic Environment
? Inability to adjust to New Global Economic
Order( i.e WTO)
? Unhealthy relationship between gevernment and
business
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Over-investment in Heavy and Chemical Industries
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? Ecnonomic Business Management Overly
enthusiastic for growth
? Chronic Trade (BOP) Deficit
? Decreased Profitability weakened business
balance sheet
? Relying heavily on External Debt and External
Demand resulted in Current Account Deficit
? Uneven Development among sectors and industries
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Corruption and Crony Capitalism
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? Government Over-Involvement and Korea, Inc.
? Corruption Crony Capitalism impeded
transition toward market-based economy
? Political System Unmatched Economic
Development which resulted in decrease of
Economic Efficiency
? Negative impact of governments
over-involvement in the market
? Low level of trasparency decreased confidence
of foreigh investors
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Issues to be Resolved for Continued Economic
Development
III
Need to open non-competitive industries such as
agriculture
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• World-class manufacturing and information
  industries vs. traditional industries

• Need for continued opening and fundamental
  restructuring of traditional industries

• Difficulties in nurturing domestic social
  cohesion

• Resultant Conflicts with international community

• Need for economic management consistent with
  global standards

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Financial Reforms
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• Significance of finance in achieving further
  economic development

• Launching financial reform before and after the
  97 Financial Crisis

• Continued reforms in the financial industry
  increased profitability

• Lack of market mechanism and unhealthy
  relationship between government and finacial
  industry

• Need to restructure the financial market to
  increase competitiveness

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Consistency between Economic and other related
policies
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• Most pressing issue Reconciling the principles
  of the economy with operational principles of
  non-economic sectors

• Inefficiency due to Discord with
  labor-management relations, social welfare,
  healthcare, and education

• Improvement impeded by poor leadership and
  opposing interest groups

• Dialogue with citizenry and sound political
  leadership needed

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Globalization and Adopting Global Standards
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• Need to actively adopt global economic standards

• Stabilizing the principles of the Market Economy
  Essential for Continuous Development

• True competitiveness Attainable only under
  competitive market structure

• Changes Required shift in public perception,
  reform of governments role, and political
  leadership

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The Role and Function of the Government
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• The governments role during the early stages of
  development no longer sustainable

• Such a role would hinder efforts for
  globalization and market economy stabilization

• Government reform must start with the questions
  of what to do and what not to do

• Despite efforts made after the financial crisis,
  need for fundamental reforms still remains

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How Madagascars Development Efforts Can Gain
from Koreas Experience
IV
The Government simultaneously a problem-solving
entity and problem itself
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• Role of government is to evolve according to the
  pace of development

• Strong government forces weaken the market and
  the economys structure of competition

• Need to reflect on the governments role and its
  relationship to the market

• Trade-off between Corruption and
  Government-driven economic development

• Strong leadership by example necessary for
  eradicating corruption

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Market Economy Structure and National Leadership
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• Adopting a market economy essential for economic
  success

• Determined national leadership necessary for
  economic success

• Specific program development needed to change
  the perception of political leaders, media,
  intellectuals, and the citizens

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The importance of globalization and the necessary
national leadership
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• Appropriate economic system as well as
  cooperation and assistance from the international
  community needed for efficient economic
  development

• External competition is necessary to strengthen
  the economys competitiveness however, may cause
  internal problems

• Implementation of advanced policy reform by a
  strong national leadership needed in pursuit of
  globalization

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Relationship between strong administration and
Congress
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• Political democratization required for adoption
  of market economy and international cooperation

• Powerful administration (President) may result
  in conflict with Congress during early stages of
  development

• In the case of Korea, policy implementation
  driven by the administration was effective after
  the military coup, but often resulted in
  dictatorial rule

• Desire for democratization along with the
  economic development caused economic instability
  and slow-down of development

• Democratization and sound relationship with
  Congress required since it is not feasible for
  the administration to act alone

• Understanding and cooperation from politicians,
  including Congress, needed for smooth policy
  implementation

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