Korean Market

 

 

Korean Market can be used to define the market structure in Korea. Although the country is divided into South Korea and North Korea, the term “Korea” is generally used to define the South Korean economy. The two Koreas were united until 1945 and the modern Korean republic was from 1948 since when, the governments have continued to embrace Western-style democracy and the market structure. While the North remains a totalitarian state, South Korea is a largely free market economy. The Korean market economy has taken great paces since the 1950’s and is now the 12th largest economy in the world (and the third in Asia after Japan and China) in terms of nominal value of GDP (Gross Domestic Product). One of the most technologically advanced and digitally-connected countries, Korea is also a member of the OECD (Organization for Economic Cooperation and Development) having the third highest number of broadband internet users among all the OECD nations.

The highlights of the Korean Economy can be summarized as follows:

Eleventh largest economy in the world if measured by Purchasing Power Parity (PPP) and the fourth largest in Asia, after China, Japan and India according to PPP estimates. It is referred to as a “Tiger Economy” due to its rapid economic growth through exports of manufactured goods.

Since 1962, a series of ambitious five-year plans have been adopted for economic development and after normalization of relations with Japan in 1965, a policy with emphasis on foreign trade was adopted. This followed a period of boom in trade and investment and a period of rapid expansion in the 1960’s and then in the 1970’s concentrated on investment on light and then heavy industries during which the annual economic growth averaged at 8.6%.

>The South Korean model of encouraging the growth of large, internationally competitive companies called “chaebol” through easy financing and tax incentives led to the rise of family-controlled corporations which later emerged as global corporations. Some examples can be Hyundai, Samsung and LG.

The Asian Financial Crisis of 1997 exposed some of the continuing weaknesses of the economy such as high debt-to-equity ratios, massive foreign borrowing, and an undisciplined financial sector led to massive industrial and financial restructuring.

The South Korean economy is characterized by moderate inflation, low unemployment rates, an export surplus, and fairly even distribution of income. South Korea has opened various employment opportunities in various industries. In 2005, the government proposed labour reform legislation and a corporate pension scheme in a move to make the labour market more flexible, and also introduced new real estate policies to cool property speculations.

The key Korean Markets would include:

Money and Capital Markets: The South Korean currency Won is poised for a reverse of its gains versus the dollar as more and more people tend to buy overseas property and offshore borrowing by the local lenders are beginning to diminish. The Korean capital market is small in size and its quality is also low. An increase in the size and quality of the market will only help the corporation’s ton raise funds. The leading banks are the Chohung Bank, the Commercial Bank of Korea, the Korea Development Bank, the Korea Exchange Bank and the Korea First Bank. There are also mutual funds and offshore funds companies such as Daewoo Securities Limited and the Dongwon Securities Limited. The Korea Stock Market is the traditional stock market division of the Korea Exchange.

Commodity Markets: Bulk of the commodity trade in case of Korea takes place in rice and variations in rice such as semi-milled and wholly-milled rice and broken rice. Commodity prices in Korea have risen for the third straight month in April 2007 due to the rise in crude and other raw materials. According to the Bank of Korea, the price index for raw materials and intermediate goods rose 2.0 % from last month and 3.9 % from the previous year. Prices of raw materials climbed 4.1% in April from a month earlier as the costs of importing crude and various other minerals have risen.

Labour Markets: The importance of the labour market policies has become especially relevant after the Asian Financial Crisis of 1997 and the structure of the Korean labour market has been changing very fast. According to the OECD, greater labour force participation is being encouraged and the economy needs to tide over the inherent characteristic of dualism in the labour market. Although the rising proportion of non-regular workers lowers labour costs and increases employment flexibility, it has a negative impact on both equity and efficiency over the long run. Increasing the coverage of the social safety net for non-regular workers will help reduce this dualism. Participation of women also has to be encouraged as the country faces a rapidly aging population.