South Korea’s economy, traditionally based on agriculture, has, since the early 1960s, undergone an extraordinarily rapid industrialization. With the country’s gross domestic product (GDP) expanding by more than 9 percent yearly between the mid-1960s and the mid-1990s, economic observers often called South Korea one of Asia’s “Four Tigers” (joining Singapore, Hong Kong, and Taiwan). A series of five-year economic plans begun in 1962 have concentrated on the development of manufacturing, much of it oriented toward exports. Economic aid, especially from the United States and Japan, was important to the economic growth of the country, which in the span of a generation grew from one of the world’s poorest to an industrial power. In 1997 annual national budget figures showed revenues of $95.4 billion and expenditures of $83 billion. The GDP in 1999 stood at $406.9 billion.
The South Korean economy has grown remarkably since the early 1960s. In that time, South Korea transformed itself from a poor, agrarian society to one of the world's most highly industrialized nations. This growth was driven primarily by the development of export-oriented industries, fostered by strong government support. Government and business leaders together fashioned a strategy of targeting specific industries for development, and beginning in 1962 this strategy was implemented in a series of economic development plans. The first targeted industries were textiles and light manufacturing, followed in the 1970s by such heavy industries as iron and steel and chemicals. Still later, the focus shifted to such enterprises as automobiles and electronics.
As one of the Four Dragons of East Asia, South Korea has achieved an incredible record of growth. Three decades ago GDP per capita was comparable with levels in the poorer countries of Africa and Asia. Today its GDP per capita is seven times India's, 16 times North Korea's, and comparable to the lesser economies of the European Union. This success through the late 1980s was achieved by a system of close government/business ties, including directed credit, import restrictions, sponsorship of specific industries, and a strong labor effort. The government promoted the import of raw materials and technology at the expense of consumer goods and encouraged savings and investment over consumption. The Asian financial crisis of 1997-99 exposed certain longstanding weaknesses in South Korea's development model, including high debt/equity ratios, massive foreign borrowing, and an undisciplined financial sector. By 1999 GDP growth had recovered, reversing the substantial decline of 1998. Seoul has pressed the country's largest business groups to restructure and to strengthen their financial base. Growth in 2001 likely will be a more sustainable rate of 5%.
