This study has two objectives: first, to survey and examine how the introduction of foreign capital after Korea’s liberation from Japan has affected Korea’s economic growth; and, second, to analyze in detail how the foreign capital has affected the Korean national economy.
Lacking much of the capital necessary to fuel its industrialization, South Korea set out to modernize its industrial structure and develop a pool of fixed capital through an export-centric economic strategy. Foreign capital allowed Korea to import capital goods, technology, and professional expertise from advanced economies, thereby improving the productivity and competitiveness of Korean industries, while also providing greater financial resources for investment in export-oriented industries. This, in turn, has further fueled Korea’s economic growth and rising income level, increased Koreans’ marginal propensity to save, and ultimately reduced the Korean economy’s dependence on foreign capital.
Nevertheless, the introduction of foreign capital into the Korean economy has also had its downsides. The amount of foreign capital that came in to Korea in the 1950s amounted to 13.7 percent of the gross national product (GNP), but it was barely enough to help Korea realize its goals of increasing the number of jobs, improving its trade balance, and achieving rapid economic growth. Stagnation persisted until 1961, despite Korea’s maintained 13-percent range of foreign capital influxes.
Interestingly, the Korean economy began to accelerate in 1962, when the amount of foreign capital was reduced to 7.4 percent of the GNP. However, a careful analysi of the impact of foreign capital on the national economy should not be focused solely on these numbers, but should take into account how foreign capital has affected Korea’s economic growth, helped Korean industries form their own pool of capital, contributed to economic development, and benefitted Koreans’ efforts to raise their own capital for industrialization. Most importantly, this kind of analysis should also enable us to determine what kind or mode of economic cooperation with other countries will help Korea maintain and improve its trade balance.
Introduction of foreign capital into Korea gave Koreans greater spending power, thus improving consumers’ welfare. It also increased Koreans’ propensity to save, thereby providing the resources for Korea’s economic growth. By enhancing the Korean economy’s capacity for collection and exportation, foreign capital has also set a pattern of high growth and high propensity to save. Despite this, Korea is still trapped in a stage of economic development that requires much financial and capital assistance from abroad.
The Korean economy can escape the current predicament only by eliminating the external obstacles to its growth. To this end, the Korean government and industries ought to form active capital partnerships abroad to secure increasing amounts of foreign capital from the international financial market that serve Korean interests. Foreign capital is still needed to expand and strengthen the Korean plant-building, heavy, and chemical industries that are machinery-heavy and export-oriented. The Korean heavy and chemical industries, in particular, will need to play bigger roles in ensuring the continued growth of the Korean economy by adopting advanced technologies from abroad. Technological progress is crucial in order for Korean businesses to engage in capital transactions with their counterparts in advanced countries on an equal footing.
- 외자도입의 국민경제적 효과분석(Analysis of the impact of foreign capital on the national economy)
외자도입의 국민경제적 효과분석(Analysis of the impact of foreign capital on the national economy)
[서울] : 한국개발연구원
|Series Title; No||정책연구시리즈 / 78-03|
|Subject||Economy < Direct Investment|