Transforming of South Korean Economy and the “Chaebols”’ Riddle

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  • Topic: South Korea, North Korea, Korea
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  • Published : March 19, 2013
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Nadezhda Sarelska
ID: 10210680317
EMA- Chinese Economy
School of Economics
Fudan University

Transforming of South Korean Economy and the “Chaebols”’ riddle

Political Economy of East Asia
Term Paper

Professor Dingping Guo

October, 2012
Shanghai, China

Table of contents:

1. Introduction 3

2. The beginning of Korea 4

2.1. Collective will for success of South Korea 6

3. South Korea and modern economy 7

3.1 Reasons behind Economic growth 8

4. The Birth of “Chaebols” 9

4.1 Factors of Development of “Chaebols 10

4.2 “Chaebol” and 1977 Asian Crisis 14

5. Case Study of Samsung Group 15

6. Conclusion and Recommendation 19

7. Reference List 21

1. Introduction

South Koreas ‘s significant transformation - an evolution from impoverished to high-income economy during three decades starting from 1960s to 1990s is one of Asian phenomena famous as -“Four Asian Tigers”- a term used to describe the tremendous performance of four Asian economies - Hong Kong, Singapore, Taiwan and South Korea. Between the early 1960s and 1997s, the four Tigers rapidly industrialized and maintained sustained high growth rates (Ref*1). Today, Korea is an example for a market economy, one highly developed country which ranks 15th in the world by nominal GDP and 12th by purchasing power parity (PPP), identifying it as one of the G-20 major economies(Ref*2). In 2010, Korea’s trade volume amounted to US$892 billion, ranking the country the 7th largest exporter in the world(Ref*2). Korea’s shipbuilding sector currently accounts for about 34% of the world’s total shipbuilding orders. As a major auto manufacturer, Korea produces over 4.2 million vehicles annually. The success of South Korea is often called "The Miracle on the Han River" and it has been identified by several factors where the presidency of Park Chung-Hee (1961-1979) played a vital role. Under the President Park Chung-Hee’s era, the government played a dominating role in a country’s economy. His policies of shifting away the focus from import substitution strategies towards export- orientated industrialization and technical progress, favored the development of South Korean economy and establishment of a strong business environment appeared with a result of large conglomerates called “Chaebols”. To be defined as a “Chaebol”, an organization should satisfy two conditions: it should be owned by family /relatives members and it should have a diversified business operations ( REF*3). The “Chaebols” have created such a diversification that, as Anna Fifield said in her article, - “You can be born in a Samsung hospital and end up in a Samsung mortuary” (Ref*4). The giants of yesterday are one of today’s best brands in technology field as Samsung, Hyundai and LG. They and the other “Chaebols” was the core of Korean spectacular growth and still their success can be accepted as South Korea’s success.

How and why Korean’s economy was shaped by historical events and what are the reasons behind “Chaebol” establishment? What was the impact they have created over South Korean economy and could we say “Chaebols”are the reason for "the Miracle on the Han River."? Case study of Samsung will be performed in order to give us better...
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