Korea as a Model of Economic Development Korea, with its distinguished pattern of economic development, has proved itself a good

model for many developing countries. Apart from Japan, Korea is indeed a unique example of a Non-Western country becoming a member of the OECD as a major trading nation. The most predominant factor was the effectiveness of the triangle formed by the government, industries and financial institutions. The Chaebols, the banking sector, and the government formed a solid triangle of economic development. This triangle would not have led to shining results however, had it not been for certain favorable external factors. The rapid economic development of Japan as well as Japanese economic and technical cooperation contributed significantly to the early stages of Korean economic development. Then came the waves of globalization. The export led pattern of growth of the Korean economy rode successfully on the waves of globalization and Korean development was, in turn, an aspect of the globalization (in the sense of growing interdependence)of the world economy. The Korean economy based on this triangle, however, became the victim of its own success. This was witnessed very clearly during the Asian economic crisis of the late 1990s. The solid triangle had led to the excessive dependence on the short-term capital from abroad and had left intact the structural rigidity of the economy. Korea demonstrated itself to be a good example of a developing country overcoming external financial difficulties combined with internal rigidities. The courageous opening of the Korean financial as well as commodity markets to foreign investors and traders, coupled with the restructuring of Chaebols and of the labor market, contributed a great deal to Koreas efforts to overcome the crisis. More than the introduction of various new economic measures, however, what should be emulated by developing countries is the political skill of appealing to national solidarity and the determination to restore international credibility by faithfully observing the IMFs conditionalities. Looking back at the history of Korean economic development over the last thirty years or so, one might today wonder whether Korea can become another model of economic progress in the coming decade and, in that connection, what major tasks remain ahead. If Korea can become, for the third time, a good model of development for other similarly placed economies of the world, it appears that Korea should, at least, be able to deal successfully with the following problems or tasks. The first is the growing income gap between the rich and the poor, not only inside the Korean society itself, but all around the world. To what extent the Korean government will be able to provide an effective safety-net to the underprivileged is a serious problem to be tackled, particularly in view of the rapid demographic changes of the Korean society. The Republic of Korea was established more than half a century years ago. The Peninsula was split after the World War II. The Republic of Korea was established in the south and the Democratic Peoples Republic of Korea was set up in the north. The South Korea became a newly born country thereafter. Whenever South Korea is mentioned, people show their respect to this country. South Korea worked a miracle in its development process and changed into a modern and developed country, from a poor and laggard one.

A brilliant achievement in four strides The realization of economic modernization is an important goal for the construction of South Korea. South Korea's modernization process, which lasted from early 1960s to the late 1990s, took four great strides. The first stride was to achieve wealth and get rid of poverty. The government played a significant role in this process. During this period, South Korea realized its dream of being a powerful nation. The gross national product ranks the 11th in the world. The per capita gross national product surpassed 10,000 U.S. dollars. South Korea joined OECD and became a member of the developed countries club. President Park Chung Hee built up a government leadership system similar to a military headquarters. This government directly designed, organized and operated the economic development; organized and mobilized the necessary resources in the economic development and promoted the implementation of the economic plans and projects. South Korea established the strategies of industrialization development and export orientation, and carried out its economic development from the low end, i.e. to develop a labor intensive export processing industry by using cheap labor resources. South Korea not only created employment, but also increased foreign exchange earnings, and realized the initial capital accumulation in its modern industry development. After several years of development, South Korea's labor intensive products, such as wigs, luggage, clothing, plywood and so on, entered the international market and became brand goods which are popular world-wide today. By 1970, South Korea's national income per capita grew from 60 U.S. dollars to 250 U.S. dollars. The per capita income quadrupled. The second stride was to develop modern large-scale industries, develop the export vigorously and achieve a good standard of living. On the basis of the first stride of successful development, South Korea further set new development goals, i.e. developing the capital intensive industry, laying solid foundations for industrial modernization, enhancing the international competitiveness of products, quadrupling the per capita income again, and realizing that good standard of living. During this period, the government continued to play a leading role in economic development and gave strong support to the development of big industries. After 10 years effort, South Korea made prominent progress in the development of heavy chemical, steel, shipbuilding and other heavy industries. The automobile industry was also built up. During this period, South Korea achieved a fast growth in its foreign trade and became very competitive in the areas of steel, shipbuilding, chemical or even automobile industries. In 10 years, South Korea's gross domestic production increased by nearly 7.5 times and per capita national income grew by 6.7 times. Thus South Korea entered the ranks of middle-income countries and achieved a decent standard of living.

The third stride was to achieve steady economic growth, reduce direct government intervention, carry out reform of the economic system, and develop marketability and internationalization. After economic development achieved a certain foundation, how to make further enhancements was a new situation that South Korean encountered. In this case, further insistence on excessive government intervention in the economy would become an obstacle to future economic development. Therefore, since the 1990s, the government has carried out marketability, privatization and internationalization reform. The enterprises began to carry out structural adjustment and substantially to increase foreign investment. Although such an adjustment was painful, South Korea was successful. The fourth stride was to promote innovation, strengthen internationalization strategies and step into the ranks of developed countries. The South Korean economy entered a new period of development on the basis of marketability, privatization and internationalization adjustment from the 1990s. South Korean Enterprises increased the innovation dynamics in electronics and telecommunications, while large scale development of foreign investment, industrial restructuring and transfer was carried out to open up new space for development. During this period, South Korea realized its dream of being a powerful nation. The gross national product ranks the 11th in the world. The per capita gross national product surpassed 10,000 U.S. dollars. South Korea joined OECD and became a member of the developed countries club. South Korea's economic modernization is a success and its rapid economic growth has been described as "the Han River miracle". As a rising leader in the emerging economies, South Korea helped formed Asia's "four little dragons" together with Singapore, China's Hong Kong and Taiwan. Today, the Korean people are ambitious and want to be ranked among the developed economies in the world. The experiences and lessons South Korea, once a backward country which obtained such a great success in a short time, has had a lot of experiences and has learned some important lessons during the development process. The major experience is its scientific planning and its determination to stick to economic modernization. Outsiders thought that South Koreas political situation was too unstable for its economy to take off. The coup, the murdering of leaders, large-scale mass demonstrations and so on took place during this period. However, one thing is very clear. Despite the changing of regimes, each Korean government regarded the realization of modernization and national rejuvenation as its goal. The government carried out its five-year plan from the 1960s up to the mid-1990s, when the industrialization was completed. The early 60s to the late 70s was a period of industrialization and the establishment of a modern industrial foundation. Park Chung Hee was in power during this period and political stability was easily maintained.

A coup took place in the early 1980s. The political situation was basically stable for more than 10 years thereafter. So South Korea could develop large-scale industries that were more competitive. During this period, South Korea pursued a government-led economic model and the government played an important role in the entire process. The government's scientific planning and a strong organization were a vital guarantee for the establishment of a modern industrial system within a very short period of time. The second experience of South Korea's development is to develop a major strategy and to form large industrial groups. There are two pillars of modern industry. The first is the large enterprise groups and the second is the small and medium enterprises. Large enterprise groups are the backbones of developing large-scale industries and major products. But the development of large enterprise groups is not an easy thing. It needs capital, technology and time. Without direct and strong government support, the large enterprise groups are very difficult to develop in developing countries like South Korea which began from a very low starting point. There would be no South Korean rapid take-off of steel, shipbuilding, automobile, electric appliance and electronics industry if there were no large enterprises like aircraft carriers". These large "aircraft carriers" became the backbone industries in upgrading the level of South Korean industries and made South Korea stand in the front row in the world in the areas of steel production, shipbuilding, telecommunications and electronic products. The third experience of South Korea's economic development is vigorously promoting technological innovation. Business vitality and competitiveness come from constant innovation. South Korea is successful in promoting economic innovation. The most important in enterprise innovation is the people. A backward country usually has less talent. In order to produce and introduce innovative talent, South Korea has taken a strategy of attracting overseas personnel. From the beginning of the 1960s, the government has adopted preferential policies to the introduction of modern technology professionals, and management personnel. Due to a series of comprehensive measures, a large number of South Koreans studying abroad returned home. They were given important positions and assigned to important posts in the government and companies. These people brought South Korea advanced technical knowledge and new management concepts and methods, which played a key role in the promotion of South Korean scientific technology and management. At the same time, the South Korean government formulated preferential policies to raise large amounts of money, and actively supported the government and university research institutions, and the group of companies engaged in researching and developing. The government encouraged companies to promote new technology innovation through the development of scientific and technological innovation and take the innovation as the core method to enhance the international competitiveness of Korean products. Through unremitting efforts, South Korea has become a powerful scientific and technological country from a country which mainly depended on production of low-end products. South Korea seized the opportunities of the world electronics industry and became a major provider of semiconductors, storages, flat-panel TVs and network mobile phones. South Korea produced

competitive cars, high-speed trains and so on by importing technology and by becoming independent. Up to the late 1990s, South Korea's research and development accounted for 3 percent of its gross domestic product, reaching the level of developed countries. Of course, the scientific and technological innovation system led by the government and large groups has some shortcomings, i.e. large investment, low efficiency, quick success, false research results, big group monopoly and a lack of innovation. South Korea's experience indicated that although the government played the vital role in the support of research innovation organization, the government's support must be able to encourage open competition and build a vigorous innovation system. Large groups are the core forces in innovation, especially for high-tech, which needs huge investment and research forces. However, innovation is stifled if it is monopolized by large groups. SMEs are the most dynamic components in technological innovation and reform. The innovation of small and medium enterprises will be suppressed and the economy will lack inflexibility if there is no competition or open markets Conclusion Koreas economy weathered the global financial crisis favorably, but it is facing a new hurdle, the fiscal crisis in advanced countries, as it tries to return to its pre-crisis growth track. The fiscal crises cannot be resolved in the short term, which raises the possibility that both the Korean and global economy will experience low growth for a prolonged period. In Korea, resilient recovery in the private sector has yet to surface while the governments policies have largely been exhausted, making it difficult to find a new relief remedy. Against this backdrop, the government will have to put priority on stabilizing the economy. First and foremost, it should concentrate on stabilizing inflation to boost households purchasing power and consumer confidence. Stabilizing financial markets that are especially vulnerable to external shocks is also crucial. On the corporate front, businesses should focus strategies on overcoming uncertainties. With the global financial crisis transitioning into a fiscal crisis in advanced countries, companies need to set up a response system for any recurrence of a crisis, and reform their business structure so that it enables sustainable growth in a low-growth economy.