International Economics - South Korea

International economics - South Korea

The international context is subjected to numerous changes that not only affect the greatest powers of the world, but also the more insignificant players on the global scene. The palette of examples in this sense is various but one could simply look at the American automobile industry, which has decreased in sales in favor of the Japanese manufacturers. The example is similar in the case of technologies, where the Asian continent is becoming significantly more important. In this line of thoughts, the supremacy of Asia becomes obvious. But however the countries in the region possess cheap and skilled workforce to produce the latest technologies and contribute to the political, economic and social advancements, they remain growingly dependent upon other international powers. A relevant example in this sense is given by South Korea, a country that has registered economic growth along the past five decades, to now become one of the largest and strongest economies of the globe. But despite their advancements, they possess limited natural resources and remain highly dependent upon the international movements in the market of crude oil and natural gas.

The current paper commences with a presentation of the country's economic background and also looks at the state's population and their standards of living. The criminality in South Korea is also analyzed and the findings indicate reduced general rates, but increased in the field of petty crimes. Foremost, another major aspect of South Korean criminality is given by the political involvement in illicit actions through actions of corruption. Finally, three major problems are identified as they could severely impact the economic well-being of the country and recommendations are made for the resolution of these problems.

2. South Korea's Economic Background

According to the annual statistics calculated by the Central Intelligence Agency, South Korea is the world fourteenth largest economy in terms of gross domestic product (an estimated $1.206 trillion for 2007). "Since the 1960s, South Korea has achieved an incredible record of growth and integration into the high-tech modern world economy. Four decades ago, GDP per capita was comparable with levels in the poorer countries of Africa and Asia. In 2004, South Korea joined the trillion dollar club of world economies. Today its GDP per capita is roughly the same as that of Greece and Spain. This success was achieved by a system of close government/business ties including directed credit, import restrictions, sponsorship of specific industries, and a strong labor effort" (Central Intelligence Agency, 2008). The primary economic features can be summarized as follows:

the country's economic development came with the armistice of 1953 which divided the region into North and South Korea; South Korea "achieved rapid economic growth with per capita income rising to roughly 14 times the level of North Korea" (Central Intelligence Agency, 2008) the growth and development were possible due to an increased governmental focus towards saving and investments rather than consumerism imports of raw materials and technologies were preferred over finished consumer goods the financial crisis in 1997 and 1998 Asia impacted the country and left it suffering from high debt/equity ratios, far too large external debts and a weak financial sector; the economic growth was of a negative 6.9% in 1998 in 1999, the country's economy revived and registered a 9.5% increase; in 2000, the economic growth was of 8.5% international economic stagnation led to the slowing of the country's economic growth to 3.3% in 2001; this regained its strength in 2002, when in registered a 7% increase; up to 2007, the growth was at about 4% per annum consumerism decreased slightly as the country's officials were more concerned with exporting goods, rather than importing or distributing the manufactured items nationwide the primary positive aspects of the South Korean economy are a moderate inflation (approximately 2.5 in 2007), export surplus and a relatively low unemployment rate (an estimated 3.2% in 2007)

75.2% of the population works in the service departments, 17.3% work in industry and 7.5% in agriculture the country produces 17,050 bbl of oil per day, consumes 2.13 million bbl per day and imports 2.41 million bbl per day, resulting as such a great dependency upon the international oil reserves; the situation is similar in the case of natural gas, but South Korea does not import any energy as they are able to sustain the internal demand from production the primary threat to the country's economic stability is posed by the increasing price of oil and this will most likely increase the inflation and the unemployment rate (Central Intelligence Agency, 2008)

South Korea has a total population of 49 million individuals and this grows at an estimated 0.371% per annum; out of these, 15% live below the poverty line. The income distribution within South Korea is uneven and it has often been considered as an effect of a corrupted political system and an increased criminality (You, 2005).

72% of the inhabitants are between 15 and 63, 18% are younger and 10% are older. The life expectancy at birth is of 77 years, revealing proper conditions within the country and a superior position relative to other countries (the global average is of 66 years). From an ethnic standpoint, the country is rather homogenous, with the exception of 20,000 Chinese. The official language is Korean and English is widely spoken and taught in schools. The most widely spread religion is Christianity (26%), followed by Buddhism (23%), other (1.3%) and next to half of the country's population is atheist (Central Intelligence Agency, 2008).

3. Criminality in South Korea

The corruption in South Korea has long been debated by the specialized economists and politicians and the results have often varied. The similar conclusion however resides in that prior to the economic crisis in the 1997 Asia, the country was rather corruption free, or at least, corruption levels were minimal; but following the crisis and due to the endless desire to revive the economy, the bureaucracy and corruption in the systems have increased. The actual numbers are difficult to get mostly because corruption is in its nature a secretly conducted operation (You, 2005). South Korea's control over its internal corruption levels are depicted in the chart below:

Source: You, J.S., 2005, Embedded Autonomy or Crony Capitalism? Explaining Corruption in South Korea, Relative to Taiwan and the Philippines, Focusing on the Role of Land Reform and Industrial Policy, Inequality and Social Program, Harvard University

However it is not the highest corrupted country in the region, South Korea still has to make several efforts to reduce corruption in its internal systems. And these efforts are necessary to reduce the negative impacts increased levels of corruption can have upon the country's economic growth. In this particular instance, high corruption levels can damage the country's economic stability as they can easily estrange it from wealthy investors who would wish to withdraw their investments. It can also lead to political instability and a loss of trust in the country's organizations, all to culminate with economic side effects. Aside from the loss of investors, the damage could also materialize in the loss of international trade partners, the raising of barriers to imports and exports, the offering of oil and gas at increased prices. All these would then generate a weakening of the national currency (the South Korean won, or KRW), the loss of the created jobs and an increase in the unemployment rate, an increased inflation, an even grater income inequality and a general decrease in the living standards and the quality of live for the South Korean population.

Although the crime rate in the Republic of Korea is low, there is a higher incidence of pick-pocketing, purse snatching, assault, hotel room and residential burglary, and residential crime in major metropolitan areas, such as Seoul and Busan, than elsewhere in Korea. U.S. citizens are more likely to be targeted in known tourist areas, such as Itaewon (near the U.S. Army Garrison in the Yongsan area) and large market areas downtown. Incidents of rape have been reported in popular nightlife districts in Seoul, as well as in the victims' residences" (Travel State, 2008). But these petty crimes could have major negative effects upon the country's economy in the meaning of severely affecting the touristy industry. For instance, an American traveling agency that has registered several complaints from unsatisfied customers that have been robbed during their stay in South Korea, might cancel the trips to the location, causing major losses to the hotels, local craftsmen and other facilities engaged in the touristy activity. The growing economy has however sustained a reduction in the number of small crimes as they offered more jobs, tried to balance the distribution of wealth and also reduced the need to steel. Vice versa, when economic growth ceases, crime rates increase exponentially as the population suffers from reduced purchasing power and fewer jobs.

4. Position

South Korea is the world fourteenth largest economy in terms of measured GDP per 2007 and it is cataloged as a high income state. The country has been met with significant growth after the armistice of 1953 when the economy revived and continued to grow until the major Asian financial crisis of 1997. After the crisis, South Korea increased its efforts to regain their economic status and years of growth followed. The state officials have however been accused that their efforts went as far as getting them involved in illegal operations and this then led to increased levels of corruption within the state. In the last couple of years, the rate of economic growth has been at a steady 4% per annum.

The country is able to sustain itself in terms of consumed and produced energy, but when it comes to crude oil and natural gas, they have to import most of it. Therefore, South Korea is increasingly dependent upon the international movements that modify the price of oil.

South Korea hosts next to 50 million inhabitants who continue to support the country in further developing. The workers in Korea have generally high incomes and are able to provide for themselves and their families. 15% of the country's entire population lives below the poverty line and there still exists a rather large income gap, materialized in uneven distribution of wealth.

Criminality rates are rather reduced within the Asian country (or Asian Tiger, called so for its economic power - it is the fourth largest economy in Asia). However, the number of petty crimes remains rather high and the tourists are often frightened of the South Korean streets.

5. Recommendations for Regional Policies

Throughout the current paper, three major problems have been identified within South Korea:

Dependency upon international oil and gas

Poverty and income inequality

Petty crimes

These issues pose major threats as they influence the country's economic, social and political development and could materialize in lost partners for international operations, a weak business sector and a major reduction in the population's quality of life. The recommendations to resolve the three problems are succinctly presented below:

Dependency upon international oil and gas

The fact that South Korea imports most of its resources makes it highly susceptible to the international movements in the market of natural resources. For instance, the increasing price of the oil barrel has materialized in major economic impediments. Given that the natural resources are limited in the country and they are unable to extract and use internal resources, they have two possible alternatives to resolving the matter.

The first possible solution has a more political side and refers to the signing of strategic alliances with international exporters of oil and gas. The contracts could be signed for longer periods of time, generally more than one year and would establish the price a priori. The second alternative, but basically that should be implemented alongside and simultaneously with the political strategies, has a more technological nature and refers to the development of alternative resources that could replace or at least reduce the consumption of oil and natural gas.