From their traditional tight spending habits, Japanese consumers are learning from past lessons and letting loose and letting go on expenses (Gordon 2006). This phenomenal change of behavior is deemed to benefit not only their deflation-ravished economy. It will also be a relief to the country's neighbors and trading partners. Japan keeps its rank as the second largest world economy. It remains a record-holder with a 5.5% annual rate of growth in the fourth quarter of 2005 largely because of the revival in consumer demand. It registered five times higher than the U.S.' annual growth rate at 1.1% during the same period. It also registered as thrice the GDP growth in Europe in that quarter (Gordon).
Quarterly growth rate in GDP rose 4.5% in four quarters and this compensated for the slow 2004 count (Gordon 2006). China's domestic demand and import slowdown did not affect Japan's improved growth rate, although China's slowdown contained Japan's net export for a while. The chief factor in Japan's GDP growth was and has been domestic demand. The current acceleration of the U.S. economy may mean that Japan's GDP would run faster. But if the Americans could learn to save more and the Japanese to spend more, global imbalances would be resolved (Gordon).
South Korea, or the Republic of Korea, is located in north-eastern Asia at the southern portion of the Korean Peninsula (Duus 2009). On its north side is North Korea, on the east the Sea of Japan, on the southeast and south by the Korea Strait, and on the west by the Yellow Seal It measures 99,268 square kilometers. Its biggest island is Cheiu (Duus). The capital is Seoul (Bureau of East Asian and Pacific Affairs 2009). Latest population count in 2008 was 48,379,392. The people have a high literacy level at 98%. Korean is the major language although English is taught in junior high and high school. South Korea had a 24.34 million workforce as of 2008. Of this number, 75% are in industry. As of 2008, South Korea's GDP was $1.278 million; GDP growth rate 2.2%; per capita GNI $19,231; and consumer price index $4.7%. Chief industries are electronics and electrical products, telecommunications, motor vehicles, shipbuilding, mining and manufacturing, petrochemicals, industrial machinery and steel. Its 2008 exports were valued at $433 billion. These were electronic products, automobiles, machinery and equipment, steel, ships, and petrochemicals. Its major imports in the same year were worth $427 billion. These were crude oil, food, machinery and transportation equipment, chemicals and chemical products, base metals and articles. Its major markets as of 2008 were China at 21%, U.S. At 11%, Japan at 6.7% and Hong Kong at 4/7%. Major suppliers as of the same year were China at 17.7%, Japan at 14%, U.S. At 8.8%, Saudi Arabia at 7.8% and UAE at 4.4% (Bureau of East Asian and Pacific Affairs).
South Koreans are among the most ethnically and linguistically homogeneous peoples in the world (Bureau of East Asian and Pacific Affairs 2009). They are grown into a common culture and with a common language. It has one of the highest emigration rates. As of latest statistics, there are 2.4 million Koreans in China, 2.1 million in the U.S., 600,000 in Japan and 532,000 in the former Soviet Union. The Republic's economic growth in the last many decades has been impressive. Its per capita spiraled from only $100 in 1963 to $20,000 today. It has become the 13th largest economy in the world and the U.S.' 7th largest trading partner (Bureau of East Asian and Pacific Affairs).
In the early 60s, the government under Park Chung Hee introduced radical economic policies, which focused on exports and labor-intensive light industries (Bureau of East Asian and Pacific Affairs 2009). The new turn led to fast-breaking debt-financed industrial expansion. The government instituted currency reform, strengthened financial institutions and enforced flexible economic planning. In the 70s, the Republic was promoting heavy and chemical industries, consumer electronics and automobiles.
The fast manufacturing growth continued to the 80s and the early 90s. Korean economy dramatically turned from the centrally planned and government-directed investment type into a more market-oriented type. With some help from the IMF, it managed to survive the 1997-1998 Asian financial crisis. But the achievement was large the result of extensive financial reforms, which stabilized its markets. Economic reforms vigorously implemented by President Kim Dae-jung put Korea back into the growth tracks at 10% in 1999 and 9% in 2000. Slow global economy and falling exports strained its growth at only 3.3% in 2001. The situation roused consumer measures, which restored growth at 7% in 2002. Again 2003, consumer over-shopping, increased household debt and some external factors stunted growth to almost 3% only. But a surge in exports in 2004 lifted economic performance to 4.6%. It remained at that level or over 4% in 2005, 2006 and 2007. But the global and financial crisis at the third quarter of 2008 once more reduced the Republic's annual growth to 2.2% (Bureau of East Asian and Pacific Affairs).
Economists attribute the slack in South Korea's economic growth to its rapidly aging population and structural defects (Bureau of East Asian and Pacific Affairs 2009). South Korea's labor regulations were rigid. Management and workers needed to form more workable and constructive relations. Financial markets were underdeveloped. And there was a general lack of regulatory transparency. Policy makers did not favor corporate expansion to China and other lower-wage countries and falling foreign direct investment. President Lee's platform targeted an increase in economic growth through deregulation, tax reform, increased foreign direct investment, labor reform and free trade agreements with big markets. The two-way trade between North and South Korea achieved almost $1.82 billion in 2008. Out-processing or assembly work by South Korean firms in the Kaesong Industrial Complex accounted for much of the gain. About 98% of the total trade consisted of commercial transactions, mostly based on processing-on-commission deals and the light industry operations in the Industrial Complex. The Republic is the second largest trading partner of North Korea, the largest being China (Bureau of East Asian and Pacific Affairs).
The South Korean economy was traditionally dominated by conglomerates or big
Enterprises, called chaebol, like Samsung and Hundai (Microsoft Encarta 2009). These conglomerates were the targets of recent reform legislation for inhibiting competition. South Korea was among the hardest-hit during the financial crisis, which razed the tiger economies of East and Southeast Asia from 1996. Korean currency and Korean assets were cracked down. Major conglomerates were collapsing or got heavily indebted. The value of the currency fell and international credits were withdrawn for Korean banks. In November 1997, South Korea was compelled to seek emergency assistance from the IMF. The following month, a U.S.$8.8 billion aid package was finalized by the IMF. At that time, Kim Dae-jung was elected as president. His rule at first plunged the Republic deeper into an economic crisis when he proposed a renegotiation of the IMF package (Microsoft Encarta).
In January 1998, President-elect Kim Dae-jung went to work on the economic reforms demanded by the IMF (Microsoft Encarta 2009). He sought a restructuring of South Korea's short-term debt while the citizens donated gold to help out in the foreign exchange crisis. The new President was threatened by a boycott of his ministerial appointments but received support from trade unions on labor reforms. In that same month, North Korea unexpectedly proposed talks with South Korea. The first was held in Beijing that April but bogged down on account of North Korea's connecting food-aid issues with political matters. By 1999, restructuring schemes and stringent compliance with IMF conditions produced signs of economic recovery (Microsoft Encarta).
Commerce and Trade
Exports increased at a brisk 27.2% from 1965 to 1980 and rose to 14.7% from 1980 to 1988 (Microsoft Encarta 2009). Major imports at the time included industrial machinery, petroleum and petroleum products, chemical products, transport equipment, raw materials and electronic components. Chief exports were textiles and clothing, transport equipment, electrical machinery, electronic equipment, footwear, fishery products, and steel Imports in 2004 cost U.S.$224 billion and exports at approximately U.S.$24 billion. Principal trading partners were Japan, U.S., Germany, Singapore, Saudi Arabia, Australia, Malaysia, the United Kingdom, Canada and Hong Kong (Microsoft Encarta).
The total labor force in 2006 was 24.5 million (Microsoft Encarta 2009). In 1996, 11.6% of the workforce was in agriculture, forestry and fishing; 32% in industry; and 55% in services. The leading labor organization is the Federation of Korean Trade Unions with more than 1.5 million members (Microsoft Encarta).
Light manufacturing was dominated by labor-intensive industries, such as textiles and clothing, footwear and foodstuffs (Microsoft Encarta 2009). Emphasis, however, moved to heavy industry in a bid to reduce imports. The new focus was on chemicals and fertilizers, cars, electric and electronic equipment, non-electric machinery, ships, iron and steel, textiles, food products, copper, tungsten, plywood and cement. Its ship-building and motor industries became major world producers. The Republic's annual industrial production in 1996 consisted of…