Korea opens its doors to U.S. firms - also includes a related article on how the Commerce Department can help firms interested in doing business with Korea

Korea has been called one of the great "economic miracles of modern times." In 1953, after 35 years as a Japanese colony, World War 11, and a three-year civil war which left three million Koreans dead, Korea was poorer than most African countries, with three-fourths of its people living as impoverished peasants. In 1961, Korea ranked 101 among world trading nations and per-capita GNP averaged less than $100 per year.

Today, Korea boasts the world's 17th largest economy, and is the world's 12th largest trading nation, with annual foreign trade totaling nearly $100 billion. Between 1962 and 1985, gross national product (GNP) expanded at an average annual rate of 8.5 percent, from $2.3 billion to $83.1 billion. In 1988, the Korean economy achieved its third consecutive year of doubledigit growth, with GNP expanding by a spectacular 12.1 percent. This compares with an estimated 3.8 percent in the United States, 3.5 percent for the European Community, 5.8 percent for Japan, and 7.25 percent for Taiwan. Since 1953, per-capita income has expanded dramatically, from $87 in that year to $3,728 in 1988, while the employed population increased by an average of 6.1 percent annually from 7.7 million to 17 million, With this impressive level of growth, it is easy to understand why Korea has often been held up as a model for other developing countries throughout the world.

Underlying the successful economic growth of Korea has been an emphasis on development led by exports. This is due primarily to the country's lack of important natural resources, the relatively small size of the domestic market, and a productive, industrious work force.

Korea's export-oriented economy has been closely directed and supported by the government. Officials from Korea's Economic Planning Board would target a specific industry for development and then work with other government agencies and financial institutions (which were controlled by the government) to employ a variety of tools (e.g., subsidies, tax and tariff exemptions, favorable terms of financing, etc.) to either enlarge or, in some cases, create an export-oriented industry. The success of this strategy has been nothing short of phenomenal: over two decades, Korea has developed worldclass export industries in textiles, shipbuilding, iron and steel, electronics, footwear, and most recently, automobiles.

During the development stages of the early 1960s and 1970s, the Korean market remained relatively closed to foreign participation. Imports were severely restricted, limited almost entirely to goods used in the production of exports, or essential agricultural commodities. Direct foreign investment was restricted to a few select areas (primarily manufacturing and high-tech industries), and foreign participation in the services sector, other than banking (e.g. , insurance, advertising, accounting and legal services, etc.) was prohibited. The objective of the Korean government during this period was to provide local "infant" industries with sufficient protection from foreign competition in order to permit their development.

As the success of the Korean economy became more apparent, Korean government economic policy reflected an awareness that liberalization and internationalization were integrally associated with continued Korean prosperity. Trading nations throughout the world began to encourage the government to adopt policies commensurate with Korea's new position in the global economy. Over the past several years, the Korean government has made significant progress in liberalizing its market. Barriers to both imports and direct investment have been largely reduced or eliminated, and the government has diminished its direct interference in the economy. However, Korea still needs to do more to fully support the open international system from which it has so greatly benefited.

In his 1988 budget statement, Korean President Roh, Tae-Woo, confirmed Korea's commitment to open further its economy-in terms of trade and investment access, foreign exchange rates, and capital market reform-and to resolving specific trade problems with its major economic partners. A Presidential Commission on economic restructuring, which consulted with representatives from all segments of the community, recommended a variety of liberalization measures, noting that such steps would clearly be in the interest of Korea's citizens. These recommendations included: reducing government's role in the economy; increasing Korea's imports, particularly from the United States; and liberalizing the financial sector.

These and other developments signal a determined commitment on the part of the government, manifest in a redirection of economic policy, that has the potential to reduce conflict with Korea's key trading partners, and to greatly increase the ability of U.S. firms to successfully penetrate the Korean market.

The following articles address many of the changes in both the policy and direction of the Korean economy in recent years, and discuss why these changes have made Korea one of the most promising markets in the world for U.S. exports. A discussion of the "best export prospects" for U.S. firms is also included, as well as tips on how to most effectively exploit both export and investment opportunities in the Korean market.

Commerce Can Help

Both the Department of Commerce and the American Embassy in Seoul actively assist U.S. firmsinterested in pursuing opportunities in Korea. The Department of Commerce's recently initiated trade promotion program, EXPORT NOWKOREA, offers U.S. firms a broad range of programs, including seminars, trade missions, and product exhibitions which are designed to help U.S. firms increase their exports to Korea (see Dec. 5, 1988 edition of Business America). If you are interested in finding out more about EXPORT NOW-KOREA, or would like to receive a brochure on the program, contact the Korea Desk Officer at (202) 377-4958.

COPYRIGHT 1989 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group