Economic Growth and Development in South Korea Key Macro Data (2015) Latest annual GDP Growth (%) 3.7% GDP or GNI per capita (US $, PPP) $33K Inflation (%) 2 Unemployment rate (% of labour force) 3.6% Fiscal balance (% of GDP) 0.5 Govt debt (% of GDP) 53% Yield on 10-Yr Govt Bonds (Per Cent) Investment 31% Gross national savings (% of GDP) 35% Background Information Currency unit Won Exchange rate system Float Policy interest rate 1.5% Member of a Regional Trade Agreement Many FTAs Current account balance (% of GDP) +6% Main corporate tax rate (Per Cent) 24% Competitiveness rank 26/144 Corruption Perception Ranking 43/175 Ease of Doing Business Ranking 5/189 External Debt (% of GDP) 27% Aspects of Development Latest HDI ranking 15/187 Income inequality HDI ranking 19/187 Gender inequality HDI ranking 17/187 % of population living in extreme poverty < 2% Life Expectancy at birth (years) 81 Gini coefficient (Latest published estimate) 0.32 Inward FDI (% of GDP) 0.9% Remittances (% of GDP) 0.5% Aid (% of GDP) Donor

Contextual Background on South Korean Economy Economic Structure Share of GDP by value added (% of GDP) Primary: 2% Industrial: 39% (strong manufacturing sector) Services: 59% Main export industries (+ major firms) 1/ Machinery / transport equipment 2/ Electronic / computing manufactures 3/ Chemicals and related products Key risks to sustainable growth 1/ Chinese slowdown & falling Japanese Yen 2/ High household debt & youth jobless rate 3/ Low labour market participation (just 55%) Development and Growth Issues / Policies 3 factors limiting development progress 1/ Subjective well-being low – many suicides 2/ Ageing population + many are poor 3/ Workforce = 18m of pop of > 50 million 3 policies used to improve the supply-side 1/ Attempts to stimulate SMEs/start-ups 2/ FTAs with EU + USA + China + Vietnam 3/ Reforms to improve lab market flexibility Long term challenges facing this country Challenge 1: Shift to a new style of growth Challenge 2: Costs of possible reunification Challenge 3: Reform of corporate oligopolies

Main Strengths and Weaknesses for South Korea Competitive Strengths 1/ High income and diversified economy 2/ Structural trade (external) surplus 3/ Low unemployment + low stable inflation 4/ High ranking for ease of doing business 5/ 6th largest export economy in the world Other Notes It is 7th most complex economy in the world Heavily urbanized (80% plus and rising) Successfully navigated “middle income trap” Strong & scaled manufacturing industries Has avoided a full-blown recession since 1997 – one of few countries to do so since 2007 Rich enough now to be an overseas aid donor Tremendously high rankings on Science and Maths scores in educational tests (PISA) Main Weaknesses in their Economy 1/ Corporate oligopolies – too powerful? 2/ Relative weaknesses in creative services 3/ Exposed to events in China and Japan 4/ SMEs not as dynamic as western nations 5/ Polarized lab market + long working hours Other Useful Contextual Knowledge Labour market is widely regarded as too inflexible – firms find it hard to get rid of older workers, growing dissatisfaction among the young – rising social tensions Service sector productivity is only half that of manufacturing industry South Korea has agreed a number of free trade agreements including China, Vietnam and New Zealand, the EU and the USA