Presentation is loading. Please wait.

Presentation is loading. Please wait.

The Korean Economy and Future Opportunities for New Zealand June, 2006 Jung Taik HYUN President Korea Development Institute.

Similar presentations


Presentation on theme: "The Korean Economy and Future Opportunities for New Zealand June, 2006 Jung Taik HYUN President Korea Development Institute."— Presentation transcript:

1 The Korean Economy and Future Opportunities for New Zealand June, 2006 Jung Taik HYUN President Korea Development Institute

2 1. Transformation of the Korean Economy ( ) 2. The Current Status of the Korean Economy Contents 3. Challenges Ahead 5. Korea and New Zealand – Economic Opportunities 4. Koreas Efforts for Globalization

3 1. Transformation of the Korean Economy ( )

4 4 1.1 Overview - Per Capita Income Liberation from Japanese Colonial Rule Six 5-Year-Economic- Development Plans Financial Crisis ,000 10, ,432 7, Per Capita Income (US$) ,193 OECD Member 100(1964) 1,000(1977) ,291

5 5 Agriculture, fisheries, and mining 45% Manufacturing 15% Services 40% Services 29% Agriculture, fisheries, and mining 63% Manufacturing 8% 1963 Agriculture, fisheries, and mining 6% Manufacturing 19% Services 75% 2005 Agriculture, fisheries, and mining 4% Manufacturing 28% Services 68% Overview - GDP Structure & Employment Structure

6 6 Capital Shortage Weak Technology Base Underdeveloped Private Sector Abundant Labor Strong Economic will High Level of Education ? 1.2 Economic Take-Off with Outward-looking Development Strategy (1/5)

7 7 Economic Growth Reproduction Export Promotion Manufacturing Processing Private Enterprises Governmen t Technology Development Financial Tax Support Well-educated Labor force Foreign Technology Imports Capital Good Imports Raw Material Imports Foreign Capital Inducement (Economic Aids External Debt) 1.2 Economic Take-Off with Outward-looking Development Strategy (2/5)

8 8 Imports Exports Trade balance 1.2 Economic Take-Off with Outward-looking Development Strategy (3/5)

9 9 Policy Change Toward HCI Development Iron and Steel Electronics Petro-Chemical Products Automobile Ship-building Machinery Mobilizing Financial Resources Selecting National Champions(Chaebol) 1.2 Economic Take-Off with Outward-looking Development Strategy (4/5)

10 10 Export Commodity Profile HCI Product Agricultural Product Light Industry Product 50% Wig AutomobileSemiconductorTextile 2003 Semiconductor, Mobile Phone, DTV, Display, Automobile, Ship-building, etc % 14.1 % 6.1% < Changes in Export Commodity Profile: From Light Industry to Heavy Industry > 1.2 Economic Take-Off with Outward-looking Development Strategy (5/5)

11 11 Financial repression due to prolonged government intervention High inflation and large fiscal deficits Over-investment in HCIs Negative economic growth (-3.9%) and political crisis in 1980 Inefficient resource allocation Macroeconomic instability Rising inequality Change in policy stance: Liberalization and Stabilization 1.3 Changes in the Development Strategy ( )

12 12 Increased vulnerability to external shocks IMF rescue package Massive capital outflow Denied rollover of short- term external debt Continued government intervention/ Weak prudential regulation Large NPLs in the financial sector South-east Asian crisis High corporate debt leverage Widesprea d moral hazard 1.4 Delayed Economic Reforms and the Financial Crisis (1/2)

13 13 Cleaning up non-performing loans Accelerating liberalization Improving corporate governance Expanding social safety net - Early graduation from the IMF program - Foreign reserves of more than USD 200bn in Early graduation from the IMF program - Foreign reserves of more than USD 200bn in 2005 Improved external positions Improved external positions - GDP growth: -6.7% (1998) 10.7% (1999) - Unemployment: 6.8% (1998) 3.7% (2005) - GDP growth: -6.7% (1998) 10.7% (1999) - Unemployment: 6.8% (1998) 3.7% (2005) Rapid economic recovery Rapid economic recovery - Debt-equity ratio: 396% (1997) 182 (2002) - No. of banks: 33 (1997) 20 (2001) - Debt-equity ratio: 396% (1997) 182 (2002) - No. of banks: 33 (1997) 20 (2001) Stronger corporate and financial sector Stronger corporate and financial sector 1.4 Delayed Economic Reforms and the Financial Crisis (2/2)

14 2. The Current Status of the Korean Economy

15 15 KDI Note: P denotes Preliminary. Source: KDI 2005p2006 Yearly1/4p2/43/44/4Yearly GDP Private Consumption Facility Investment Merchandise Exports (y-o-y, %) I. / The Current Status of the Korean Economy

16 16 - I. / 16 Possibility of further increase in petroleum price Low production capacity of petroleum producing countries Geo-political risks such as Iranian nuclear crisis - WTI ($/bbl): (Dec. 2005) (June 14, 2006) … 14.7% - Dubai ($/bbl): (Dec. 2005) (June 14, 2006) … 24.8% Low production capacity of petroleum producing countries Geo-political risks such as Iranian nuclear crisis - WTI ($/bbl): (Dec. 2005) (June 14, 2006) … 14.7% - Dubai ($/bbl): (Dec. 2005) (June 14, 2006) … 24.8% Further decrease in exchange rate (Korean Won/US$) Sustaining Current account imbalance of the US Expansion of the Korean economy - Won/Dollar: (Dec. 2005) (June 13, 2006) … 6.1% Sustaining Current account imbalance of the US Expansion of the Korean economy - Won/Dollar: (Dec. 2005) (June 13, 2006) … 6.1% 2.2 Risk Factors of the Korean Economy

17 3. Challenges Ahead

18 Potential Growth Rate and Productivity (1/2) Economic growth of Korea depended on resources such as capital and labor. Korea has shown one of the highest saving ratio. It is well endowed with highly educated and well trained labor. Korea has shown one of the highest saving ratio. It is well endowed with highly educated and well trained labor KindergartenElementaryMiddleHighCollege (%) the number of enrollments in a specified age range Note: Enrollment rate = the whole population in the same age range

19 19 (%) (before economic crisis) (after economic crisis) Productivity Labor Capital III. / 19 Source: KDI 3.1 Potential Growth Rate and Productivity (2/2) Growth depending on factor accumulation ran its course, and productivity should lead further growth. Education and training system toward the knowledge-based economy Promoting public and private R&D activities Creating an investment-friendly environment Upgrading the institutional quality Education and training system toward the knowledge-based economy Promoting public and private R&D activities Creating an investment-friendly environment Upgrading the institutional quality

20 Payroll, Urban Employees Total Income, Urban Employee Total income, Entire Workforce Income Disparity 3.2 Income Disparity Income disparity increased, reflecting structural changes in industries and labor markets. Income disparity increased, reflecting structural changes in industries and labor markets. Income gap widened among wage earners (66% of workforce) & among the whole households including self-employed & unpaid workers (33% of workforce). However, the disparity shows the sign of decline since early 2000s. Income gap widened among wage earners (66% of workforce) & among the whole households including self-employed & unpaid workers (33% of workforce). However, the disparity shows the sign of decline since early 2000s.

21 21 Positive correlation between RCA (or profitability) and the share of value added by technological level. Positive correlation between RCA (or profitability) and the share of value added by technological level. 1 < Korea : Share of Employment by Technological Level > 3.3 Industrial Restructuring and Challenges from China (1/5) High tech Low tech Medium-high tech Medium-low tech High tech Low tech Medium-high tech Medium-low tech Employment share in low tech continues to decrease, while employment share remains unchanged in high tech despite its increase in the share of value added. Employment share in low tech continues to decrease, while employment share remains unchanged in high tech despite its increase in the share of value added. Source: Korea National Statistical Office, Mining and Manufacturing Survey < Korea : Share of Value Added by Technological Level >

22 Industrial Restructuring and Challenges from China (2/5) During , Korea gained a CA in high-tech products and improved medium-high tech, while CA declined in medium-low tech and Low tech products. China showed similar phases of restructuring and became challenges to the Korean economy. China showed similar phases of restructuring and became challenges to the Korean economy.

23 23 Chinas export structure is rapidly converging with that of Korea. Chinas export structure is rapidly converging with that of Korea. Source: UNCOMTRADE 0% 20% 40% 60% 80% 100% Medium-high tech High tech Low tech Medium-low tech Non-manufacturing 2 Particularly, China achieved a large increase in the export of IT products. 0% 20% 40% 60% 80% 100% Medium-high tech High tech Low tech Medium-low tech Non-manufacturing 3.3 Industrial Restructuring and Challenges from China (3/5)

24 24 Korea maintained CA in some high-tech products such as radio, TV and communication products. Korea maintained CA in some high-tech products such as radio, TV and communication products Japan US Korea China 3.3 Industrial Restructuring and Challenges from China (4/5) China Korea US Japan US Korea China Although China gained CA in some high-tech products, technology level involved in the production process of these products differs greatly in China. * Production of some products only needs simple labor-intensive process. While Koreas CA in semiconductors and elec.valves decreased, it is still higher than other major developed economies. Although China gained CA in some high-tech products, technology level involved in the production process of these products differs greatly in China. * Production of some products only needs simple labor-intensive process. While Koreas CA in semiconductors and elec.valves decreased, it is still higher than other major developed economies.

25 Japan US Korea China 3.3 Industrial Restructuring and Challenges from China (5/5) Among major Medium-high tech products,Korea has achieved CA in auto products since Among major Medium-high tech products,Korea has achieved CA in auto products since China Korea US Japan Korea still has CDA in machines and equipment, however, CA index improved rapidly.

26 Aging Society (% of total population) EU Korea Japan US Australia and New Zealand The speed of population aging is far higher in Korea than other major developed countries. The speed of population aging is far higher in Korea than other major developed countries. Reforming the public pension and health insurance program Extending employment opportunities for female, elderly and disadvantaged groups Reforming the public pension and health insurance program Extending employment opportunities for female, elderly and disadvantaged groups

27 4. Koreas Efforts for Globalization

28 (1/2) 4.1 Koreas Efforts for Globalization (1/2) Korea pursues to be a global leader, through FTA and the plan to be a Northeast Asian Economic Hub. Korea aims to enhance regional cooperation and to be a center of R&D, logistics and financial services in Asia. It also endeavors to transform into an open and globalized economy, promoting FTA with a variety of economies. Korea aims to enhance regional cooperation and to be a center of R&D, logistics and financial services in Asia. It also endeavors to transform into an open and globalized economy, promoting FTA with a variety of economies. Chile, Singapore, EFTA, ASEAN USA, Canada, Japan, Mexico China, EAFTA, India, MERCOSUR, EU FTA completed Negotiation in progress or to be started FTA under consideration

29 Koreas Efforts for Globalization (2/2) Korea takes initiatives to improve political stability and economic welfare in the region and in the world. Korea takes initiatives to improve political stability and economic welfare in the region and in the world. Korea completed FTA talks with Chile, Singapore, EFTA and ASEAN. It started FTA talks with the USA. It opens new era of peace and prosperity in the region through regional cooperation and freer trade. Korea completed FTA talks with Chile, Singapore, EFTA and ASEAN. It started FTA talks with the USA. It opens new era of peace and prosperity in the region through regional cooperation and freer trade. Korea-US FTA will contribute to upgrading Korea for further prosperity. Korea-US FTA will contribute to upgrading Korea for further prosperity. The increased trade, FDI and welfare due to FTA will consolidate its momentum for sustained economic growth. More active participation into global production network will improve efficiency and competitiveness of its industries. Upgrading social system and institutions to meet global standard will provide new opportunities for future development. The increased trade, FDI and welfare due to FTA will consolidate its momentum for sustained economic growth. More active participation into global production network will improve efficiency and competitiveness of its industries. Upgrading social system and institutions to meet global standard will provide new opportunities for future development.

30 5. Korea and New Zealand – Economic Opportunities

31 K-NZ Bilateral Relationship in Merchandise Trade (1/3) Korea was the 7 th largest trade partner of New Zealand in One of the most striking findings from the two nations trade relationship is the complementarity. Comparing the trade relationship between the two countries ten years ago, the importance of Korea to NZ increased. One of the most striking findings from the two nations trade relationship is the complementarity. Comparing the trade relationship between the two countries ten years ago, the importance of Korea to NZ increased. $265 bil $248 bil export import Korea New Zealand $22 bil $25 bil export import $595 mil $890 mil K to NZ NZ to K Year: 2005 Source: UN Trade Data, 2005

32 K-NZ Bilateral Relationship in Merchandise Trade (2/3) Chemical Products 17% Automobiles 15% IT Equipment 18% Basic Metals 13% Food, Products & Beverages 12% other 15% General Machinery 10% Korea has build up comparative advantage in high tech manufacturing product. Korea has build up comparative advantage in high tech manufacturing product. While Korea exported semiconductors, IT equipment and electronic parts, the nation possessed disadvantage in natural resource. While Korea exported semiconductors, IT equipment and electronic parts, the nation possessed disadvantage in natural resource. Source: UN Trade Data, 2005 Year: 2005

33 K-NZ Bilateral Relationship in Merchandise Trade (3/3) other 8% Printing, Paper Products, Publishing 6% Chemical Products 5% Basic Metals 5% Agriculture Forestry, Fishery 37% Food, Products & Beverages 39% (million) Wood of coniferous species Fruit Bovine meat Other cheese vegetable Food preparations Major imports of Korea from NZ included wood and bovine meats. Major imports of Korea from NZ included wood and bovine meats. Koreas total imports to NZ was explained by food, beverage and Agriculture, Forestry & Fishery. Primary ferrous metal products and paper products also explained about 6% of exports to Korea respectively. Koreas total imports to NZ was explained by food, beverage and Agriculture, Forestry & Fishery. Primary ferrous metal products and paper products also explained about 6% of exports to Korea respectively. Year: 2005

34 Market Share of NZ in Korea Wood of coniferous species New Zealand 45.2 U.S Korea Market Fruit, fresh,dried, nes New Zealand 35.9 U.S Korea Market Sheepskins and lambskins New Zealand 99.8 England Korea Market Bovine meat, frozen New Zealand 30.3 Australia Korea Market The share of NZ in Korea market soared up in In Wood, Fruit, Sheepskins and Bovine, the share of NZ in the Korea market took more comparative advantages than other competitors. In Wood, Fruit, Sheepskins and Bovine, the share of NZ in the Korea market took more comparative advantages than other competitors.

35 Korea-NZ Relationship in Service Sector 5.3 Korea-NZ Bilateral Relationship in Service Sector There should be large opportunities of the expansion of relationship between Korea and NZ in a variety of service sectors. In 2004, it was estimated that overseas expenditure for education reasons reached as much as $5.1 billion. In 2005, 10 million Koreans visited foreign countries and spent $1,239 for their trips. In 2004, it was estimated that overseas expenditure for education reasons reached as much as $5.1 billion. In 2005, 10 million Koreans visited foreign countries and spent $1,239 for their trips. Overseas Expenditure - Korea $1,770 Training abroad $3,378 studying abroad Year: 2004 Unit: $mil 10,077,619 $1,239 8,825,585 $1,169 Tourists Expenditure per Capita Year: 2004, 2005 Unit: person, $

36 THANK YOU !


Download ppt "The Korean Economy and Future Opportunities for New Zealand June, 2006 Jung Taik HYUN President Korea Development Institute."

Similar presentations


Ads by Google