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Performance Management in the Public Sector Weak 6-2: Program Evaluation -- Overview 2

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Title: Performance Management in the Public Sector Weak 6-2: Program Evaluation -- Overview 2


1
The Korean Economy Past, Present, Future
Challenges and Lessons from its Experiences
April 2013 Hyun-Hoon LEE (Kangwon National
University)
2
Hyun-Hoon LEE
  • Professor, Department of International Trade and
    Business, Kangwon National University, Korea -
    Current
  • Dean, Asia-Pacific Cooperation Academy, Kangwon
    National University, Korea
  • Senior Analyst, Asia-Pacific Economic Cooperation
    (APEC) Secretariat
  • Senior Environmental Affairs Officer, United
    Nations Economic and Social Commission for Asia
    and the Pacific (UNESCAP)
  • Visiting Professor, Keio University, University
    Melbourne, Bank of Korea, etc.
  • Ph.D. in Economics, University of Oregon, U.S.

3
(No Transcript)
4
Contents
1. Transformation of the Korean Economy
(1945-2011)
2. The Current Status of the Korean Economy
3. Challenges Ahead
4. Lessons from the Korean Experiences
5
1. Transformation of the Korean Economy
(1945-2011)
6
1.1 Overview - summary
Korea in 1962 and in 2011
1962 (a) 2011 (b) b/a
GDP per capita (in US) 103 22,424 218
GDP (in billion US) 2.7 1,116.2 413
Exports (in billion US) 0.55 555.2 1,009
7
1.1 Overview - Per Capita Income
20,045

Per Capita Income (US)
16,413
11,432
10,000
Six 5-Year-Economic- Development Plans
7,355
Financial Crisis
5,000
Liberation from Japanese Colonial Rule
1,000(1977)
OECD Member
100(1964)
89
67
1953
1945
1995
2005
1980
1961
1970
1990
1998
2007
8
1.1 Overview - GDP Structure Employment
Structure
lt GDP Structure gt
Agriculture, fisheries, and mining 2.6
Agriculture, fisheries, and mining 45
Services 40
Manufacturing 28.0
2009
1963
Services 69.4
Manufacturing 15
lt Employment Structure gt
Agriculture, fisheries, and mining 5.3
Manufacturing 16.8
2009
1963
Services 77.9
9
1.1 Overview Status in the World
  • 12th largest trading nation
  • 14th largest economy
  • No 1 shipbuilder
  • No 5 producer of automobiles
  • No 4 producer of electronics
  • No 1 producer of semiconductors
  • No 5 producer of textiles
  • And perhaps one of the most dynamic countries.
  • Nassassinated in 1979 by the head of KCIA

10
1.1 Overview Status in the World
20 largest economies in the world in terms of GDP
(2010)
 Rank Country GDP(US Billion) 
11 Russia 1,727
12 Spain 1,407
13 Mexico 1,035
14 Korea 1,015
15 Netherlands 779
16 Turkey 734
17 Indonesia 707
18 Switzerland 528
19 Poland 469
20 Belgium 469
41 Singapore 209
 Rank  Country GDP(US Billion) 
1 U.S. 14,587
2 China 5,927
3 Japan 5,459
4 Germany 3,281
5 France 2,560
6 U.K. 2,249
7 Brazil 2,088
8 Italy 2,051
9 India 1,727
10 Canada 1,527
11
1.1 Overview Status in the World
12
1.1 Overview Status in the World
13
1.2 Park Chung Hee (President during 1963 1979)
  • led a bloodless military coup in 1961
  • launched the first Five-Year Economic Development
    Plan in 1962
  • became president after 1963 election
  • imposed martial law in 1972
  • assassinated in 1979 by the head of KCIA

14
1.2 Parks strategies
  • Prosperity and independence by pursuit of a
    high-growth economic strategy
  • Export-led industrialization strategy
  • Market economy, but strong government
    intervention

15
1.3 Economic Take-Off with Export-led Growth
Strategy (1/8)
lt Economic Conditions of the Early 1960s gt
Capital Shortage
Abundant Labor
High Level of Education
?
Weak Technology Base
Strong Economic will
Underdeveloped Private Sector
16
1.3 Economic Take-Off with Export-led Growth
Strategy (2/8)
lt Working Mechanism of Outward-looking
Development Strategy gt
Foreign Capital Inducement (Economic Aids?
External Debt)
Capital Good Imports
Raw Material Imports
Government
Foreign Technology Imports
17
1.3 Economic Take-Off with Export-led Growth
Strategy (3/8)
  • export targets set by the government.
  • financial support for exporters at preferential
    rates.
  • tax concessions.
  • allowance for retaining foreign exchange
    earnings.
  • exempted from import controls and tariffs.
  • fiscal policy in favor of key industrial firms.
  • a sliding-peg system of exchange rate
    adjustment.
  • awards from the president.

18
1.3 Economic Take-Off with Export-led Growth
Strategy (4/8)
lt Growth in Imports and Exports gt
Imports
Exports
Trade balance
19
1.3 Economic Take-Off with Export-led Growth
Strategy (4/8)
lt Growth in Imports and Exports gt
20
1.2 Economic Take-Off with Export-led Growth
Strategy (5/8)
  • ? Iron and Steel
  • ? Electronics
  • ? Petro-Chemical Products
  • ? Automobile
  • ? Ship-building
  • ? Machinery

Policy Change Toward HCI Development
  • Mobilizing Financial Resources
  • Selecting National Champions(Chaebol)

21
1.2 Economic Take-Off with Export-led Growth
Strategy (6/8)
lt Changes in Export Commodity Profile From
Light Industry to Heavy Industry gt
Semiconductor, Mobile Phone, DTV, Display,
Automobile, Ship-building, etc.
Export Commodity Profile
HCI Product
83.7
50
Agricultural Product
8.9
Light Industry Product
7.4.
1980
1990
2007
1960
1970
2000
22
1.2 Economic Take-Off with Export-led Growth
Strategy (7/8)
? Top 10 export items of Korea () ?
Rank 1970 1970 1980 1980 1990 1990 2000 2000 2010 2010
Rank Item Share Item Share Item Share Item Share Item Share
1 Textiles 40.8 Garments 16.0 Garments 11.7 Semiconductor 15.1 Semiconductor 10.8
2 Plywood 11.0 Steel Plate-rolled Products 5.4 Semiconductor 7.0 Computer 8.5 Vessel 10.5
3 Wigs 10.8 Footwear 5.2 Footwear 6.6 Automobile 7.7 Automobile 7.5
4 Iron ores 5.9 Vessel 3.6 Video Apparatus 5.6 Petrochemical products 5.3 Flat penal display 6.9
5 Electronic goods 3.5 Audio Apparatus 3.4 Vessel 4.4 Vessel 4.9 Petrochemical products 6.7
6 Confectionery 2.3 Man made filament fabrics 3.2 Computer 3.9 Wireless telecom 4.6 Wireless telecom 5.9
7 Footwears 2.1 Rubber Products 2.9 Audio Apparatus 3.8 Synthetic Resin 2.9 Parts of Automobile 4.0
8 Tobaccos 1.6 Woods Wood items 2.8 Steel Plate-rolled Products 3.8 Steel Plate-rolled Products 2.8 Synthetic Resin 3.6
9 Iron products 1.5 Video Apparatus 2.6 Man made filament fabrics 3.6 Garments 2.7 Steel Plate-rolled Products 3.5
10 Metal products 1.5 Semiconductor 2.5 Automobile 3.0 Video Apparatus 2.1 Computer 1.9
Total 81.1 47.6 53.4 56.6 62.0
Source KOTIS, MTI
23
1.2 Economic Take-Off with Export-led Growth
Strategy (8/8)
? Top 10 export markets for Korea () ?
Rank 1970 1970 1980 1980 1990 1990 2000 2000 2010 2010
Rank Country Country Country Country Country
1 2 3 4 5 6 7 8 9 10 U.S. Japan Hong Kong Germany Canada Netherlands U.K. Vietnam Singapore Sweden 47.3 28.1 3.3 3.3 2.3 1.6 1.6 1.5 1.3 0.9 U.S. Japan Saudi Arabia Germany Hong Kong Iran U.K. Indonesia Netherlands Canada 26.3 17.4 5.4 5.0 4.7 3.5 3.3 2.1 2.0 2.0 U.S. Japan Hong Kong Germany Singapore U.K. Canada Taiwan France Indonesia 29.8 19.4 5.8 4.4 2.8 2.7 2.7 1.9 1.7 1.7 U.S. Japan China Hong Kong Taiwan Singapore U.K. Germany Malaysia Indonesia 21.8 11.9 10.7 6.2 4.7 3.3 3.1 3.0 2.0 2.0 China U.S. Japan Hong Kong Singapore Taiwan Germany India Mexico Indonesia 25.1 10.7 6.0 5.4 3.3 3.2 2.5 2.3 2.1 1.9
Total 91.4 71.6 72.9 68.8 62.4
Source KOTIS
24
1.2
? Top 5 export items from Algeria to Korea in
2010?
Rank Items Trade Value Share()
1 Mineral fuels 285,019,319 99.5
2 Fish and crustaceans 979,694 0.3
3 Aluminum and articles thereof 222,853 0.1
4 Nuclear reactors, boilers, machinery and mechanical appliances 67,613 0.0
5 Residues and waste from the food industries 67,261 0.0
Total All Items 286,467,916 100
? Top 5 export items from Korea to Algeria in
2010?
Rank Items Trade Value Share()
1 Vehicles other than railway or tramway rolling-stock 554,802,650 36.6
2 Nuclear reactors, boilers, machinery and mechanical appliances 344,371,878 22.7
3 Articles of iron or steel 188,381,683 12.4
4 Ships, boats and floating structures 145,183,471 9.6
5 Plastics and articles 99,157,812 6.5
Total All Items 1,514,111,937 100
Source UN Comtrade, HS2007
25
1.3 Pitfalls of the Government-led Development
(1980-97)
Financial repression due to prolonged government
intervention
High inflation and large fiscal deficits
Over-investment in HCIs
  • Inefficient resource allocation
  • Macroeconomic instability
  • Rising inequality

Negative economic growth (-3.9) and political
crisis in 1980
Change in policy stance Liberalization and
Stabilization
26

1.3 Pitfalls of the Government-led Development
(1980-97)
lt The Crisis of 1997 gt
27
1.4 The Financial Crisis and Economic Reform
Cleaning up non-performing loans
- GDP growth -6.7 (1998) ? 10.7 (1999) -
Unemployment 6.8 (1998) ? 3.2 (Sept 2007)
Rapid economic recovery
Accelerating liberalization
Improving corporate governance
  • - Early graduation from
  • the IMF program
  • - Foreign reserves of more than
  • USD 258bn in May 2008

Improved external positions
Expanding social safety net
- Debt-equity ratio 396 (1997) ? 182 (2002)
- No. of banks 33 (1997) ? 20 (2001)
Stronger corporate and financial sector
28
2. The Current Status of the Korean Economy
29
2.1a Real GDP Growth Rate year on year
Percent
Source Bank of Korea
30
2.2 Business Condition Index Prospects, All
Industries
Percent
Source Bank of Korea
31
2.3 Unemployment Rate
Source National Statistical
Office

32
2.4 Stock Market Korea Composite Stock Price
Index
33
2.5 Consumer Prices (year-on-year, change)
Source Bank of Korea
34
2.6 Won/US Dollar Exchange Rate
Source Bank of Korea
35
2.7 Current Account Balance
36
2.8 International Reserves
37
3. Challenges Ahead
38
3.1 Potential Growth Rate and Productivity (1/2)
Economic growth of Korea depended on accumulation
of 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.

39
? ????? ????? ??
III. ??? ?? ?????? ? ???? / 39
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 RD activities
  • Creating an investment-friendly environment
  • Upgrading the institutional quality

lt Potential Growth Rate and Contributing Factors
gt
()
6.9
6.1
1.8
1.8
Productivity
4.8
3.9
3.3
1.6
Capital
2.3
1.2
1.0
0.9
Labor
19912000
19911997 (before economic crisis)
20032012 (after economic crisis)
Source KDI
40
3.2 Income Disparity (1/3)
Income disparity has recently increased,
reflecting structural changes in industries and
labor markets.
  • The Government has pursued shared growth,
    fare society, and symbiosis society.
  • But there has been growing discontent among
    people.

41
3.2 Income Disparity (2/3)
Different regimes have pursued different welfare
policies.
41
42
3.2 Income Disparity (3/3)
  • Three major problems in employment
  • (1) high degree of dualism between regular
    workers and non-regular workers
  • (2) high unemployment rate of the youth and
  • (3) low employment rate of women.

42
43
3.3 Challenges from China (1/2)
During the period of 1990s and 2000s, 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 pattern and became
challenges to Korea in the World market.
44
3.3 Challenges from China (2/2)
China is now number on trading partner for Korea,
thus is providing the largest market for Korea.
Yet, Korea is becoming overly dependant on China.
? Top 10 export markets for Korea () ?
Rank 1970 1970 1980 1980 1990 1990 2000 2000 2010 2010
Rank Country Country Country Country Country
1 2 3 4 5 6 7 8 9 10 U.S. Japan Hong Kong Germany Canada Netherlands U.K. Vietnam Singapore Sweden 47.3 28.1 3.3 3.3 2.3 1.6 1.6 1.5 1.3 0.9 U.S. Japan Saudi Arabia Germany Hong Kong Iran U.K. Indonesia Netherlands Canada 26.3 17.4 5.4 5.0 4.7 3.5 3.3 2.1 2.0 2.0 U.S. Japan Hong Kong Germany Singapore U.K. Canada Taiwan France Indonesia 29.8 19.4 5.8 4.4 2.8 2.7 2.7 1.9 1.7 1.7 U.S. Japan China Hong Kong Taiwan Singapore U.K. Germany Malaysia Indonesia 21.8 11.9 10.7 6.2 4.7 3.3 3.1 3.0 2.0 2.0 China U.S. Japan Hong Kong Singapore Taiwan Germany India Mexico Indonesia 25.1 10.7 6.0 5.4 3.3 3.2 2.5 2.3 2.1 1.9
Total 91.4 71.6 72.9 68.8 62.4
45
3.4 Aging Society
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

lt Share of the old (65) gt
46
3.5 Challenges of Regionalism
Major economies of the world have pursued
regionalism, while multilateralism under the WTO
has been staggering.
  • Through FTA, Korea aims to enhance regional
    cooperation and to be a center of RD, logistics
    and financial services in Asia.
  • It also endeavors to transform into an open and
    globalised economy, promoting FTA with a variety
    of economies.

lt Koreas Promotion of FTA gt
FTA completed Negotiation in progress
FTA under consideration
Chile, Singapore, EFTA, ASEAN, USA, EU, India,
Peru, Turkey, Columbia
Canada, Indonesia, China, CJK , Vietnam, RCEP
Japan, Mexico, GCC, Australia, New Zealand,
MERCOSUR, Malaysia, etc.
47
3.5 Worsening Environment (1/2)
Koreas Environment has worsened at a very rapid
rate during its course of rapid industrialisation.
  • Koreas environmental sustainability
    (Environmental Sustainability Index) ranked 122
    out of 146 countries in 2005.
  • Koreas ecological footprint has exceeded its
    environmental carrying capacity.
  • Koreas Ecological Footprint and Biocapacity per
    person

48
3.5 Worsening Environment (2/2)
A special attention needs to be given to
environmental sustainability during the course of
economic growth.
Korea has adopted a new paradigm of economic
growth, namely the paradigm of Green Growth or
environmentally sustainable economic growth.
  • Two Principles of Green Growth
  • Creation of synergy between growth and
    environmental sustainability
  • Many policy makers and businesses tend to
    believe that investment in the environment is a
    sunken cost, but the environment and the economy
    can be integrated to create synergy.
  • (2) Improving eco-efficiency
  • To enhance the environmental sustainability,
    countries need to reduce not only relative
    environmental impact per unit of production, but
    also the absolute size of environmental impact
    per person.

49
4. Lessons from the Korean Experiences
50
4.1 Strong political leadership and stability
Presidents strong leadership and political
stability are a precondition.
  • Presidents strong commitment to economic growth
    led Korean peoples willingness to work hard,
    save more, and sacrifice.
  • Long-term goals were set and policies were
    consistently implemented.

51
4.2 Market economy
Market economy is always more efficient than
planned economy.
  • Capitalistic market economy was put in place
    after the liberalization in 1945.
  • In the early stage of development, the Government
    intervened in the market .
  • Because the Governments intervention continued
    even in the later stage, the Korean economy faced
    the financial crisis in 1997.
  • Since 1998, economic reform toward more
    liberalization and lesser government
    intervention has helped the Korean economy
    revive its growth engine .

52
4.3 Outward orientation
Outward orientation with strong incentives for
exports is better than Inward orientation with
the policy of import substitution.
  • Korean firms were forced to meet the global
    standard.
  • Korean firms were able to enjoy the economies of
    scale.
  • Korea was able to secure which was used to
    purchase raw materials, technology and build new
    factories..

53
4.4 Human capital through good education
Human capital is the key to economic growth and
it can be build up only through good education
  • Korea was relatively well endowed with relatively
    well educated labor.
  • Korean people consider investment in education
    yields more return than any other kinds of
    investment.
  • Various RD centers were established and Korean
    scientists and engineers were recruited from
    abroad

54
4.5 A New Growth Paradigm of Sustainable
Development is Need
A special attention needs to be given to
environmental sustainability during the course of
economic growth.
55
(No Transcript)
56
Hyun-Hoon Lee hhlee_at_kangwon.ac.kr
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