This study examines how the Korean government’s strategy of export-centric industrialization in the early 1960s has determined the path of industrial growth in Korea ever since, and discusses some of the future criteria that Korea’s industrial strategy must fulfill.
The Korean state made a critical conversion from import substitution to export orientation in its industrialization strategy in the early 1960s. It took Korea four to five years of transition before the new strategy was securely established, but the new strategy provided timely support for Korea’s industries to secure rapid and sustained economic growth in the subsequent decades. The increase in the exports of manufactured goods has caused a dramatic expansion of the Korean economy, and also diversified the structure of exported goods.
Believing that the nation’s comparative advantage on the international market lay in its cheap and abundant labor, the Korean state first focused on fostering labor-intensive industries. The export-oriented industrialization strategy did ensure the efficient allocation and uses of production resources until the late 1960s. Korea’s exporting industries, however, began to outgrow their focus on labor in the early 1970s, in response to the abrupt rise of the wage-capital cost ratio and the protectionist policies of other countries against the import of labor-intensive goods. These two factors have prompted the Korean government to redirect its attention to the heavy and chemical industries in the mid-1970s as the new source of Korea’s economic growth. Consequently, the Korean industrial structure became increasingly capital-intensive. This excessive focus on capital and investment has also contributed to the declining efficiency of the distribution of production factors in the 1970s.
The Second Oil Shock of 1979 forced the world economy into a recession, from which Korea was not immune. The domestic political turmoil also caused some disturbance to Korea’s industries. Nevertheless, the country has managed to cope with these crises and is now expecting to achieve an economic growth of at least six percent this year, and to see this rate of economic growth continue well into next year. In order for Korea to sustain its development, it needs to revisit and revise its development strategy in response to the actual and anticipated changes in the domestic and international environments.
First, Korea needs to strengthen the export-led development strategy even further in the future. Second, Korea should abandon its focus on capital-intensive industries, and instead foster technology-developing and labor-intensive industries. Third, while it is necessary to limit inflation and promote economic growth, some reduction in the rate of economic growth will be necessary in order for Korea to achieve economic stability. Fourth, the government should begin to curb its supportive, but also heavy-handed), influence in industrialization. Finally, the Korean government should also conduct thorough economic reviews and refrain from supporting energy and other resource-intensive industries that are forced to rely on imported resources and raw materials.
수출주도형 공업화전략의 성과와 과제(Achievements and tasks of korea’s export-oriented industrialization strategy)
|Journal Title; Vol./Issue||한국개발연구:vol. 3(no. 4)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KDI; KDI School|