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The Importance Of Exporting Policy In South Korea: The Creation Of The Chaebol

2104 words - 8 pages

In Korea the term Hangangeui Kijeok, or in English the miracle of the Han River, is what the Korean citizens refer to when speaking about the fast development of the Korean economy from the 1960s to through the 1980s. The miracle of the Han River saw Korea going from one of the poorest countries in the world to an exporting giant and becoming one of the four Asian tigers alongside with Hong Kong, Taiwan and Singapore.The exporting industries are the leading force to South Korean economical development. For example, South Korea has succeeded in such industries as Information technology, automotive, computer science and heavy industries such as shipbuilding and steel, which are all led by such homegrown large corporations as Samsung, LG, Hyundai, Daewoo and Posco.Just as the other Asian Tigers, the Korean government played a major role by creating industrial and exporting policies that helped the development of its exporting sectors. The government as well created enormous advantages for those companies that excelled at exporting. These small companies turned into the Chaebol mentioned above and have been driving the Korean economy. The government bequeathed these companies tax breaks and other subsidies to gain advantage nationally and internationally. In this paper, I will discuss how the export and industrial policies helped develop and support the large corporations. In my examples, I will demonstrate the creation of Samsung and Hyundai.One of the major export policies that helped to develop the export sector was the currency undervaluation. With the effective exchange rate kept in the exporter's favour, this helps the exporters by having cheaper goods available to other countries such as the United States, Japan and Europe. The cheaper goods could enter the market in an undervalued position to gain acceptance much like what Japan did during their export expansion. With the acceptance of products, the Korean companies had the financial resources for product investment, thus creating more products at higher quality. Therefore, the effective exchange rate was very important for Korean exports to gain entry-level positions in developed countries' marketplace, which provided the funding for product improvement and innovation.In addition, the protection of infant industries helped with launching new industries for export. The government gave protection to industries that were new and developing. The way they did this was by blocking other countries' entry into this market in Korea. They developed the product or technology within Korea first. Then after the local market could support the product of technology, they exported the product overseas. A clear example of this is within the auto industry. Korea set very high tariffs on import automobiles to limit the competition within Korea. Consequently, this policy is still in effect to where a foreign car will have tariffs of fifty to seventy percent (Sung, 2002). This helps maintain local dominance...

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