UNIVERSITY OF SAN CARLOS

P. del Rosario St., Cebu City

An Economic Research Project on ASIAN Nations:

Republic of Korea

____________________________________

A Research Project

Presented to the

Faculty of the Department of Accountancy

School of Business and Economics

University of San Carlos

Cebu City, Philippines

____________________________________

In Partial Fulfillment

of the Requirements for the course

Economic Development (AC 2203)

____________________________________

By

GROUP 11 MW 7:30-9:00 AM

Malaya, Geraldine F.
Tiu, Richard S.
Yomo, Grace Socorro L.
Yu, Jovelyn Q.

May 2020
i
 ACKNOWLEDGMENT

This paper could not have been possible without those who supported and aided the

researchers in this undertaking. Those mentioned have accompanied the researchers in this

journey and supplemented them with the tools for this work. For that, they are eternally grateful.

To Dr. Marissa M. Baldecir, CPA, DCM, thank you for providing invaluable guidance

throughout the course in making this project, thank you for your time and comments that has

helped with the construction of this project.

To our families, friends, and colleagues, thank you for unselfishly sharing your insights,

knowledge and good cheers that has made this whole experience not only informative but also

enjoyable.

To the University of San Carlos, thank you for the opportunity to take on this challenge

and for equipping the researchers with the facilities, gear, and the right education.

Most especially, to the Almighty God, thank You for the continued and endless blessings

and for delivering us from the corona virus. Your grace has inspired the spirit of this project,

and without You, we are nothing.

Lastly, the researchers would like to extend their gratitude to those persons who are not

mentioned above but helped to make this project a success.

ii
 PRECIS / ABSTRACT

This economic research project on the Republic of Korea aimed to study the country by
looking into its demographics, examining its economic profile, and identifying the economic
problems that the country is facing. The research determined that the country faces issues such
as relative poverty and inequality among the elderly, gender disparity particularly in economic
and labor force participation, opportunities, and political empowerment.

Based on these findings, the researchers offered the following recommendations on how
these issues can be resolved. (1) To ease the financial burden and inequality faced by the elderly,
the country should adopt stronger floating pension systems, require companies to offer jobs to
the elderly, mandate forced savings, and enact filial responsibility laws. (2) To reduce gender
disparity, schools must educate students about gender equality, tuition subsidies and
scholarships can be offered to female students, government must enact laws against gender
discrimination, and companies should be encouraged to reinforce gender equality as part of its
corporate culture.

(3) To alleviate the problems of urbanization, the country can allocate some of its
resources to build infrastructures and facilities in rural areas and promote the products of local
farmers and fishermen and give them subsidies. Finally, (4) to protect the environment, the
researchers recommend that policies should be established to reduce harmful gas emissions by
setting a limit on pollution per company or industry, invest in and encourage the use of
sustainable and green sources of power, and require certain companies to be ISO 14001
Certified.

iii
 TABLE OF CONTENTS

Cover Page i
Acknowledgment ii
Précis / Abstract iii
List of Tables vi
List of Figures vii

CHAPTER
I INTRODUCTION / COUNTRY DEMOGRAPHICS 1
Location 1
Land Area 1
Land Division 2
Population and Gender Profile 2
National Capital 5
Currency 6
Political / Government System 7
Sector Distribution 9

II ECONOMIC PROFILE 10
Gross Domestic Product and Gross National Income 10
Disposable Personal Income 14
Inflation 17
Unemployment 19
Monetary Authority 22
Fiscal Spending 24
Exports and Imports of Goods and Services 25
Current Account Balance 28

III ECONOMIC PROBLEMS AND ISSUES 31

Poverty and Inequality 36
Gender Disparity 39
Urbanization and Rural-Urban Migration 45
Environment and Climate Change 47

iv
 IV SUMMARY, CONCLUSION, AND RECOMMENDATIONS 50
Summary 50
Conclusion 53
Recommendations 53

BIBLIOGRAPHY 56

v
 LIST OF TABLES

Table Page

2.1 Reserve Requirement Ratio by Deposit Type as mandated

by the BOK 24

3.1 List of Plans and Policies Corresponding to the 17 Goals of

the SDGs 34

3.2 Policy Goals of the Ministry of Gender Equality and Family 41

3.3 Gender Inequality Index in 2018 for the Top 30 Countries

according to HDI 42

3.4 Structure of the Global Gender Gap Index 43

3.5 Issues and Conditions of Seoul’s rapid urbanization in the 1960s 46

vi
 LIST OF FIGURES

Figure Page

1.1 Map of the Korean Peninsula 1

1.2 Administrative Divisions of the Republic of Korea 2

1.3 Population of the Republic of Korea by Gender in 2018 3

1.4 Total Population and Annual Population Growth Rate of the

Republic of Korea from 1960-2018 3

1.5 Percentage of Population according to Age Group of the

Republic of Korea from 1960-2018 4

1.6 Districts of Seoul 5

1.7 Exchange Rate of US Dollar vs South Korean Won from

March 2019 to March 2020 7

1.8 Sector Distribution of the Republic of Korea based on

GDP in 2018 9

1.9 Sector Distribution of the Republic of Korea based on

Employment in 2018 9

2.1 GDP (in current US$) of the countries with the highest GDPs
in the World in 2018 10

2.2 GDP (in current US$) of Selected Asian Countries in 2018 11

2.3 GDP per capita (in current US$) of the Republic of Korea and
the World from 1960-2018 12

2.4 GDP per capita (in current US$) of Selected Asian Countries
in 2018 12

2.5 GDP (in current US$) of the Republic of Korea from 1960-2018 13

2.6 GDP per capita (in current US$) of the Republic of Korea from
1960-2018 13

2.7 GNI (in current US$) of the Republic of Korea from 1960-2018 14

2.8 Net Disposable Income per capita (in SK Won) of the Republic
of Korea from 1975-2018 15

2.9 Annual Growth Rate (in percent) of Household Disposable

Income of Selected OECD Countries in 2018 15
vii
2.10 Average Monthly Disposable Personal Income in Asia and
he Middle East in 2014 16

2.11 Average Monthly Disposable Personal Income in Southeast

Asia, Australia, and New Zealand in 2014 17

2.12 Annual Consumer Price Inflation Rate (in percent) of the

Republic of Korea from 1960-2018 18

2.13 Annual Consumer Price Inflation Rate (in percent) of Selected

Asian Countries in 2018 19

2.14 Total Unemployment Rate (percent of total labor force) based

on national estimate of the Republic of Korea from 1970-2018 20

2.15 Comparison of Unemployment Rates for different educational

levels in the Republic of Korea for 1995-1998 and 2015-2018 21

2.16 Total Unemployment Rates (percent of total labor force) based

on modeled International Labor Organization estimate for
Selected Asian Countries in 2018 22

2.17 Inflation Target and Inflation Rates of the Republic of Korea

from 2000-2020 23

2.18 IMF Forecast: General Government Total Expenditure of the

Republic of Korea (in billions of SK Won) from 1995-2024 25

2.19 Exports and Imports of Goods and Services (Balance of Payments,

in current US$) of the Republic of Korea from 1976-2018 26

2.20 Percentage of Exports by Category in the Republic of Korea

in 2017 27

2.21 Percentage of Imports by Category in the Republic of Korea

in 2017 28

2.22 Current Account Balance (Balance of Payments, in current US$)

of the Republic of Korea from 1976-2018 29

2.23 Current Account Balance (Balance of Payments, in current US$)

of Selected Asian Countries in 2018 30

3.1 Key Dimensions of Human Development Index 31

3.2 Human Development Index of Selected Asian Countries in 2018 32

3.3 Human Development Index Trend of the Republic of Korea

from 1990-2019 32

3.4 The 17 Sustainable Development Goals of the UNDP 33

viii
3.5 Poverty Rate of 66 year-olds and up of Selected OECD
Countries in 2019 37

3.6 Poverty Gap of Selected OECD Countries of People Aged 66

and up in 2019 38

3.7 Income Inequality using Gini Coefficient of Selected OECD

Countries in 2019 39

3.8 Vision and Objectives of the Ministry of Gender Equality

and Family 40

3.9 Gender Inequality Index 41

3.10 Overall Global Gender Gap Index for 2018 43

3.11 Gender Gap Index of Yemen, Republic of Korea, Overall

Global, and Iceland for 2018 44

3.12 Rostow’s Stages of Economic Growth 48

3.13 CO2 emission per capita (in metric tons) vis-à-vis GDP
per capita of the Republic of Korea from 1970-2018 48

3.14 CO2 emission per capita (in metric tons) of Selected Asian
Countries in 2018 49

ix
 CHAPTER 1

INTRODUCTION / COUNTRY DEMOGRAPHICS

Location

The Republic of Korea, also known as Taehan Min’guk or South Korea, is a country in

East Asia. It shares its border with only one country, the Democratic People’s Republic of

Korea (also known as North Korea), and is located in the southern part of the Korean peninsula.

Located at the Northwest of Japan, the Republic of Korea lies to the West of the Sea of Japan,

to the North of the Korean Strait, and to the East of the Yellow Sea.

Figure 1.1. Map of the Korean Peninsula

Land Area

The Republic of Korea takes up about 45% of the entire Korean Peninsula’s land area.1

It has a total area of 99,720 square kilometers, 96,920 of which comprise of the land area and

1,081 comprise of water. Its coastline spans a total of 2,413 square kilometers.

1
South Korea, Encyclopædia Britannica, 2020, www.britannica.com/place/South-Korea (accessed 20 March
2020).
1
Land Division

The Republic of Korea comprises of nine provinces, namely Jeju-do, Jeollabuk-Do,

Jeollanam-Do, Chungcheongbuk-Do, Chungcheongnam-Do, Gangwon-Do, Gyeonggi-Do,

Gyeongsangbuk-Do, and Gyeongsangnam-Do. Further, it has one special city, Seoul, six

metropolitan cities, namely, Busan, Incheon, Daegu, Daejeon, Gwangju, and Ulsan, and one

special autonomous city, Sejong, as shown in the Figure below. In addition, it has seventy-

seven municipal cities.

Figure 1.2. Administrative Divisions of the Republic of Korea

Population and Gender Profile

The population of the Republic of Korea is highly homogeneous with 97.7% of the

population being ethnic Korean as of 2000.2 As shown in the following Figure, in 2018, the

total population of the Republic of Korea is 51,635,256. The male population comprise of

25,860,546, and the female population comprise of 25,774,710.

2
South Korea, Encyclopædia Britannica, 2020, www.britannica.com/place/South-Korea (accessed 20 March
2020).
2
 Figure 1.3. Population of the Republic of Korea by Gender in 2018

Source: The World Bank

As shown in the Figure below, the population of the Republic of Korea has been

increasing since 1960 to 2018. However, the country has been experiencing a downward trend

on its population growth rate. In 1960, the annual population growth rate in the country was

2.91%, however the annual population growth rate in 2018 is only 0.33%.

Figure 1.4. Total Population and Annual Population Growth Rate of the Republic of

Korea from 1960-2018

Source: The World Bank

3
 Population can be further subdivided into three groups, namely populations ages 0-14,

population ages 15-64, and population ages 65 and above. According to the Figure below, there

is a general decreasing trend for the percentage of population that belongs to ages 0-14, a

generally increasing trend and levelling off from year 2010 and onwards for the percentage of

population that belong to ages 15-64 and 65 and above. In 1960, 43.24%, 53.39% and 3.37%

of the total population belong to the 0-14, 15-64, and 65 and above age group, respectively.

However, in 2018, 12.97%, 72.61% and 14.42% of the total population belong to the 0-14, 15-

64, and 65 and above age group, respectively.

Figure 1.5. Percentage of Population according to Age Group of the Republic of Korea

from 1960-2018

Source: The World Bank

4
National Capital

The national capital of the Republic of Korea is Seoul. Seoul has a very rich and lengthy

history that has spanned over several centuries. Myeonmok-dong, a neighborhood in Jungnang-

gu in Seoul was formed as early as 30,000 BC. Used to be called Hanseong, Hanyang, and

Gyeongseong, it was renamed as Seoul in 1945.3 Seoul became the official name of the city

with the founding of the Republic of Korea in 1948.

Seoul is subdivided into 25 districts, as shown in the Figure below. Each district (gu) is

further subdivided into “dong” or neighborhoods. Among the districts, Songpa-gu is the most

populous while Seocho-gu has the largest land area.

Figure 1.6. Districts of Seoul

3
City of Seoul, Seoul Metropolitan Government, 2020, http://english.seoul.go.kr/get-to-know-us/seoul-
views/meaning-of-seoul/1-history/ (accessed 20 March 2020).

5
 In 2018, Seoul boasts being the 8th Largest Metropolitan City in the World 4, 12th Most

Innovative City in the World 5 and the 13th Most Influential City in the World. 6 It is the

economic, political, and cultural hub of the Republic of Korea and serves as the headquarters

of several of the most successful business giants in various industries such as Samsung, Korean

Air, Hyundai, LG, SK Holdings, Kia, Lotte, among others. The headquarters of government

offices, including the executive office and official residence of the country’s head of state called

the “Blue House” and the Gyeongbokgung Palace, the largest of the country’s Five Grand

Palace are located in Seoul. Moreover, Seoul is home to the National Museum of Korea, and

114 others which showcase the country’s rich culture and tradition.

Currency

The official currency of the Republic of Korea is the South Korean Won. Before the

Year 1910, Won was the official currency. However, while the country was under the Japanese

rule from 1910 to 1945, the Won was replaced by the Korean Yen, and when Korea was divided

into the North and the South, two separate currencies that replaced the Korean Yen emerged:

the Northern Won and the Southern Won.

As the international monetary system after the end of World War II was fixed, the South

Korean Won was pegged to the US Dollar at 1 US Dollar to 15 South Korean Won in 1945. A

series of devaluations resulted to a fixed exchange rate of 1 US Dollar to 6,000 South Korean

Won in 1951, due to events such as the Korean War.

4
Top 10 Largest Metropolitan Cities in the World, The Daily Records, www.thedailyrecords.com/2018-2019-
2020-2021/world-famous-top-10-list/world/metropolitan-cities-world-largest-most-populated/10258/ (accessed
20 March 2020).
5
The 50 most high-tech cities in the world, Business Insider, www.businessinsider.com/most-innovative-cities-
in-the-world-in-2018-2018-11 (accessed 20 March 2020).
6
The 21 most influential cities in the world, Business Insider, www.businessinsider.com/most-influential-cities-
in-the-world-2018-5#13-seoul-south-korea-9 (accessed 20 March 2020).

6
 Nowadays, as the World adopts the floating exchange rate system, the South Korean

Won currently trades at 1 US Dollar = 1,248.53 South Korean Won as of March 20, 2020 as

shown in the Figure below. Recently, the South Korean Won has substantially depreciated as

a result of the COVID-19 pandemic, wherein the country has 8,652 cases to date (as of March

20, 2020), with 94 deaths and 2,233 recoveries.

Figure 1.7. Exchange Rate of US Dollar vs South Korean Won from March 2019 to

March 2020

Political / Government System

The Republic of Korea adopts a Centralized Democratic Republic form of Government

where the President is the Chief Executive and the Commander-in-Chief of the South Korean

Armed Forces. The country also has a Prime Minister who acts as the de jure Head of the

Government and functions as the Vice-President. The President is elected by the citizens who

serves for a term of five years without reelection, while the Prime Minister is appointed by the

President with the approval of the National Assembly. Currently, the President of the Republic

of Korea is Moon Jae-in and the Prime Minister of the Republic of Korea is Chung Sye-kyun.

7
 The Government of South Korea has three branches, the Executive, Legislative, and

Judicial to ensure a check and balance system. The Head of the Executive Branch is the

President and he is assisted by the Prime Minister and the Presidential Secretariat. In addition,

the President also appoints 18 ministers who report to the Prime Minster to head the 18

ministries in the Government. These ministries are: (1) Ministry of Economy and Finance, (2)

Ministry of Education, (3) Ministry of Science and ICT, (4) Ministry of Foreign Affairs, (5)

Ministry of Unification, (6) Ministry of Justice, (7) Ministry of National Defense, (8) Ministry

of Interior and Safety, (9) Ministry of Culture, Sports, and Tourism, (10) Ministry of

Agriculture, Food, and Rural Affairs, (11) Ministry of Trade, Industry, and Energy, (12)

Ministry of Health and Welfare, (13) Ministry of Environment, (14) Ministry of Employment

and Labor, (15) Ministry of Gender Equality and Family, (16) Ministry of Land, Infrastructure,

and Transport, (17) Ministry of Oceans and Fisheries, and (18) Ministry of SMEs and Startups.

The Legislative Branch of the Republic of Korea consists of the National Assembly of

South Korea – a 300-member unicameral national legislature where elections are held every

four years from single-member constituencies or proportional representations. The Judicial

Branch is lead by the Supreme Court – the highest court of the land consisting of a Chief Justice

and 13 justices. The Chief Justice is appointed by the President with the consent of National

Assembly. The Judicial Branch also comprise the Constitutional Court, Regional Appellate

Courts, and local district, branch, municipal, and other specialized counts.

8
Sector Distribution

As shown in the Figure below, as of 2018, the Sector Distribution of the Republic of

Korea is skewed towards the Service and Industry Sector. The Service Sector comprise of

53.56% of the country’s Gross Domestic Product (GDP), followed by the Industry Sector, which

takes up 35.12% of GDP, while the Agriculture Sector only covers 1.98% of the entire GDP.

This is consistent with the Structural Theory, which asserts that as an economy grows, there

will be a shift from the Agricultural Sector to the Industry and Service Sector.

Figure 1.8. Sector Distribution of the Republic of Korea based on GDP in 2018

Meanwhile, the Sector Distribution of the Republic of Korea based on employment is

4.73%, 24.96%, and 70.31% for Agriculture, Industry, and Services, respectively. This means

that among the three sectors, Industry provides the most value-added to the economy because

although it only accounts for 24.96% of employment, it contributes 35.12% of GDP.

Figure 1.9. Sector Distribution of the Republic of Korea based on Employment in 2018
9
 CHAPTER II

ECONOMIC PROFILE

Gross Domestic Product (GDP) and Gross National Income (GNI)

Classified as one of the wealthiest nations of the World, the Republic of Korea has a

GDP of 1.619 Trillion US Dollars as of 2018. It is presently the World’s 12th largest economy

and Asia’s 4th largest economy by Total GDP as shown in Figure 2.1 and Figure 2.2,

respectively.

Figure 2.1. GDP (in current US$) of the Countries with the highest GDPs in the World

in 2018

Source: The World Bank

10
 Figure 2.2. GDP (in current US$) of Selected Asian Countries in 2018

Source: The World Bank

In terms of GDP per capita, the country has been showing a lot of promise since 1960s

to the present time. As shown in Figure 2.3, in 1960, the GDP of the Republic of Korea was

158.21 US Dollars, compared to the World GDP per capita of 452.75 US Dollars. However, in

1987, the country has surpassed the World GDP per capita and the gap has widened ever since.

The GDP per capita of the Republic of Korea as of 2018 is 31,362.75 US Dollars while that of

the World is 11,312.44 US Dollars. Although there were a few hiccups along the way owing

to the Asian Financial Crisis in 1997, the effects of which were evident in 1998. In 2009.

although the country was able to avert a recession which affected several countries at that time,

its GDP still dropped considerably because it is export-dependent.7

7
S. Korea averts recession, but 2009 GDP seen down, Thomson Reuters, https://www.reuters.com/article/us-
korea-economy-idUSTRE53900220090410 (accessed 23 March 2020).
11
 Figure 2.3. GDP per capita (in current US$) of the Republic of Korea and the World

from 1960-2018

Source: The World Bank

In terms of GDP per capita, the Republic of Korea ranks 5th, behind that of Singapore,

Hongkong, Japan, and Brunei Darussalam. This is evident in the Figure 2.4 below.

Figure 2.4. GDP per capita (in current US$) of Selected Asian Countries in 2018

Source: The World Bank

12
 Like its Total GDP as shown in Figure 2.5, the GDP per capita, as shown in Figure 2.6,

of the Republic of Korea grew steadily from the 1960s to the first half of the 1990s before

experiencing a dive in 1998. It slowly picked up until GDP dropped again in 2009. This was

due to the aforementioned after-effects of the Asian Financial Crisis and the recession.

Succeeding years show a relatively stable increase in the GDP per capita.

Figure 2.5. GDP (in current US$) of the Republic of Korea from 1960-2018

Source: The World Bank

Figure 2.6. GDP per capita (in current US$) of the Republic of Korea from 1960-2018

Source: The World Bank

13
 The movement of the GNI of the Republic of Korea mirrors the image of its GDP. The

GNI of the country stands at 1.618 Trillion US Dollars as of 2018, as shown in Figure 2.7. The

difference between GDP and GNI of the country is negligible, wherein the GDP surpasses the

GNI only by 1.07 Billion US Dollars, or by 0.067% in percentage.

Figure 2.7. GNI (in current US$) of the Republic of Korea from 1960-2018

Source: The World Bank

Disposable Personal Income

As of 2018, the Net Disposable Personal Income of the Republic of Korea is 19.11

million SK Won. This is roughly estimated to be 17,200 US Dollars as at the close of the US

Dollar to SK Won as of December 31, 2018.8 Figure 2.8 below shows that the net disposable

personal income of the country has experienced a rising trend, although the increase seemed to

slow down as the years progressed. It is notable that the sharpest rise of the Disposable Personal

Income per capita of the Republic of Korea is from 1985 to 1995.

8
Table of 1 U.S. Dollar to South Korean Won Exchange Rate for 2018, PoundSterling Live,
www.poundsterlinglive.com/best-exchange-rates/best-us-dollar-to-south-korean-won-history-2018 (accessed 24
March 2020).
14
 Figure 2.8. Net Disposable Income per capita (in SK Won) of the Republic of Korea

from 1975-2018

Source: Statista

As shown in Figure 2.9, the annual growth rate of household disposable income of the

Republic of Korea is 1.8% in 2018. It is relatively lower than that of other countries like Slovak

Republic and Costa Rica. However, it has a higher growth rate than Japan.

Figure 2.9. Annual Growth Rate (in percent) of Household Disposable Income of

Selected OECD Countries in 2018

Source: OECD
15
 In a 2014 data compiled by S. George and J. Desjardins, 9 compared to other countries

in Asia and South East Asia as shown in Figures 2.10 and 2.11, the Republic of Korea is faring

relatively well in terms of Disposable Personal Income. While most of the region has monthly

disposal income between less than 400 US Dollars to 1,000 US Dollars, the country’s monthly

disposable income is 2,174 US Dollars.

Figure 2.10. Average Monthly Disposable Personal Income in Asia and the Middle East

in 2014

9
Mapping Monthly Disposable Income Around the World, Visual Capitalist,
https://www.visualcapitalist.com/mapping-monthly-disposable-income-around-the-world/ (accessed 24 March
2020) and MAP: Monthly Personal Disposable Income Around the World, Movehub,
https://www.movehub.com/blog/disposable-income-world-map/ (accessed 24 March 2020).
16
Figure 2.11. Average Monthly Disposable Personal Income in Southeast Asia, Australia,

and New Zealand in 2014

Inflation

The figure below shows the Annual Inflation Rate of the Republic of Korea from 1960

to 2018. During the early years, the inflation rate was quite unstable and unpredictable, with

sizeable peaks in 1964, 1975 and 1980 at annual inflation rates of 29.46%, 25.25%, and 28.70%,

respectively. The rates then stabilized during the later years as it consistently fell below 5%

from 1999 onwards. As of 2018, the inflation rate of the Republic of Korea is 1.48%.

17
 Figure 2.12. Annual Consumer Price Inflation Rate (in percent) of the Republic of

Korea from 1960-2018

Source: The World Bank

Figure 2.13 shows the Annual Consumer Price Inflation Rate of selected Asian countries

in 2018. The Figure shows that compared to other countries in Asia, the Republic of Korea has

a relatively low inflation rate at less than 2%. Among the countries in the Figure below,

Singapore has the lowest inflation rate at 0.44% while Myanmar has the highest inflation rate

at 6.87%.

18
 Figure 2.13. Annual Consumer Price Inflation Rate (in percent) of Selected Asian

Countries in 2018

Source: The World Bank

Unemployment

The World Bank defines unemployment as the share of the labor force that is without

work but available for and seeking for employment. As of 2018, the total unemployment rate

of the Republic of Korea is 3.8%. As shown in Figure 2.14, the unemployment rate peaked in

1998, which coincided with the Asian Financial Crisis in 1997-1998. The rate started to fall

sharply in 2000 and achieve normalcy in 2002 where it has not exceeded 4% ever since.

19
 Figure 2.14. Total Unemployment Rate (percent of total labor force) based on national

estimate of the Republic of Korea from 1970-2018

Source: The World Bank

When the Republic of Korea was experiencing the Asian Financial Crisis, the labor force

with basic education were most affected with unemployment, while the labor force with

advanced education were the least affected, as shown in Figure 2.15. This is seemingly because

the skills required of the labor force with basic education were more dispensable than those with

intermediate and advanced education. During economic normalcy, it is interesting to note that

there is a complete shift in the unemployment statistics. Those who belong to the labor force

with advanced education were the most affected by unemployment. This is presumably because

salaries and wages would be higher for those who have attained higher education and the labor

market would rather employ those with only basic or intermediate education for jobs that do not

require advanced or specialized skills.

20
 Figure 2.15. Comparison of Unemployment Rates for different educational levels 10 in

the Republic of Korea for 1998-1999 and 2015-2018

Source: The World Bank

Compared to other Asian countries, the Republic of Korea has a relatively high

unemployment rate in 2018, as depicted in Figure 2.16. Among the countries studied, Lao PDR

has the lowest unemployment rate at 0.609% while Brunei Darussalam has the highest

unemployment rate at 9.22%.

10
The World Bank, www.worldbank.org (accessed 24 March 2020) defines the following:
1. Basic education comprises primary education or lower secondary education according to the
International Standard Classification of Education 2011 (ISCED 2011).
2. Intermediate education comprises upper secondary or post-secondary non tertiary education
according to the International Standard Classification of Education 2011 (ISCED 2011).
3. Advanced Education comprises short-cycle tertiary education, a bachelor’s degree or equivalent
education level, a master’s degree or equivalent educational level, or doctoral degree or equivalent
education level according to the International Standard Classification of Education 2011 (ISCED
2011).
21
Figure 2.16. Total Unemployment Rates (percent of total labor force) based on modeled

International Labor Organization (ILO) estimate for Selected Asian Countries in 2018

Source: The World Bank

Monetary Authority

The Bank of Korea (BOK)11 is the Central Bank of the Republic of Korea and monetary

policy decisions are made by the Monetary Policy Board, which is the top decision-making

body of the BOK, and the Governor of the BOK is Lee Ju-yeol, an economist and technocrat.

Established in June 12, 1950, the BOK’s mandate is to keep price stable by keeping inflation

low, with 2% as its 2019 target consumer price inflation rate in the medium term, as measured

by the year-on-year change in the Consumer Price Index (CPI). It has the exclusive right to

issue its own currency and maintains the value of that currency. Moreover, it strives to achieve

sustainable economic growth by managing the amount of money and the interest rate in the

economy. Figure 2.17 shows the inflation target and inflation rates from 2000 to 2020.

11
Bank of Korea, http://www.bok.or.kr/eng/main/main.do (accessed 24 March 2020).
22
Figure 2.17. Inflation target and inflation rates of the Republic of Korea from 2000-2020

Source: Bank of Korea

As in Figure 2.12, the annual inflation rate was very unstable from 1960 to 1998.

However, the country decided to adopt inflation targeting as the foundation for its monetary

policy in 1998, bringing inflation down to only 0.81% in 1999. The decision to target inflation

was in response to the 1997-1998 Asian Financial Crisis.

The BOK uses three monetary policy instruments to control money supply and/or

interest rates. First is through open market operations, second is through lending and deposit

facilities, and third is through reserve requirements. The main monetary policy instrument of

the BOK is through open market operations, where it buys or sells securities with financial

institutions in the open market. The BOK also utilizes lending and deposit facilities through

which it supplies loans to or receives deposits from individual financial institutions. Finally,

the BOK adjusts the liquidity in the markets and promote financial stability by changing

financial institutions’ funding situation through adjustment of the reserve requirement ratios.

23
 Table 2.1 shows that the BOK does not require any reserve requirements for long-term

savings deposits for housing and property formation savings, but requires a 2% reserve

requirement deposit from time deposits, installment savings, mutual installments, housing

installments and cash deposits, and a 7% reserve requirement deposit for other deposits.

Table 2.1. Reserve Requirement Ratio by Deposit Type as mandated by the BOK

Source: Bank of Korea

Fiscal Spending

The fiscal spending of the Republic of Korea has experienced a steady climb over the

years and is expected to continually increase in the coming years, as shown in Figure 2.18.

Although the fiscal spending for 2020 is predicted to be 447.3 Trillion SK Won, the government

has approved 2020’s budget to be 512.3 Trillion SK Won, which is a 9.1% from the budget in

2019 of 469.6 Trillion SK Won. 12

12
South Korean parliament approves 2020 government budget, Thomson Reuters, www.reuters.com/article/us-
southkorea-economy-budget/south-korean-parliament-approves-2020-government-budget-idUSKBN1YE1G8
(accessed 24 March 2020).
24
 Figure 2.18. IMF Forecast: General Government Total Expenditure of the Republic of

Korea (in billions of SK Won) from 1995-2024

Source: CEIC Global Economic Data, Indicators, Charts & Forecasts

However, because of the recent and ongoing COVID-19 virus pandemic, the actual

fiscal spending is expected to be more than forecasted in 2021. In fact, the Government of the

Republic of Korea has already stressed about the role of fiscal spending in 2021 to support the

country’s economic growth. In spite of the fact that Ahn Il-hwan, the head of the budget

planning office at the finance ministry, asserted that “fiscal spending is the last defense for the

country’s economy”, he also mentioned that “an active role for fiscal spending will be inevitable

for the revitalization of the economy”. 13

Exports and Imports of Goods and Services

In 2018, the exports of goods and services of the Republic of Korea total 724.5 Billion

US Dollars while its imports total 642.4 Billion US Dollars, as shown in Figure 2.19, resulting

to Net Exports worth 82.1 Billion US Dollars. In general, both exports and imports have been

moving in the same direction and both have been experiencing a rising trend expect for a sharp

13
Govt. stresses role of fiscal spending for growth in 2021, The Korea Herald,
http://www.koreaherald.com/view.php?ud=20200324000414 (accessed 24 March 2020).
25
decline in the years 2009, 2015, and 2016. Exports and imports have reached a peak of 725.3

Billion US Dollars in 2014 and 663.6 Billion US Dollars in 2012, respectively.

Figure 2.19. Exports and Imports of Goods and Services (Balance of Payments, in

current US$) of the Republic of Korea from 1976-2018

Source: The World Bank

According to the Observatory of Economic Complexity (OEC), the Republic of Korea

is the 5th largest exporter of goods in the world as of 2017. The bulk of its exports comprise of

Integrated Circuits with an export value of 104 Billion US Dollars, followed by Cars with an

export value of 40.1 Billion US Dollars, and by Refined Petroleum with an export value of 32.6

Billion US Dollars. 14 On a per category basis, Machines take up 42% of Exports followed by

Transportation, which take up 18% of Exports, as shown in Figure 2.20.

14
What does South Korea export? (2017), OEC,
https://oec.world/en/visualize/tree_map/hs92/export/kor/all/show/2017/ (accessed 25 March 2020).
26
 Figure 2.20. Percentage of Exports by Category in the Republic of Korea in 2017

Source: OEC Data

OEC further stated that the Republic of Korea is the 9th largest importer of goods in the

world as of 2017. The bulk of its imports comprise of Crude Petroleum with an import value

of 56 Billion US Dollars, followed by Integrated Circuits with an import value of 38.6 Billion

US Dollars, and by Photo Lab Equipment with an import value of 13.7 Billion US Dollars. 15

On a per category basis, Machines take up 28% of Imports followed by Mineral Products, which

take up 25% of Imports, as shown in Figure 2.21.

15
What does South Korea import? (2017), OEC,
https://oec.world/en/visualize/tree_map/hs92/import/kor/all/show/2017/ (accessed 25 March 2020).
27
 Figure 2.21. Percentage of Imports by Category in the Republic of Korea in 2017

Source: OEC Data

Current Account Balance

As of 2018, the Current Account Balance of the Republic of Korea is a Surplus of 76.4

Billion US Dollars. The later years of the 1970s and the first half of the 1980s saw a Current

Account Deficit. Most of the 1990s also experienced a deficit with the largest deficit in 1996,

as shown in Figure 2.22. This was because of the fall of exports, the deficit of which was

reflected most notably by the slumping sales of computer chip manufacturers which accounted

for 18% of all exports. Moreover, the deficit was also aggravated by widespread labor strikes

which halted production at steel, auto, and other industrial companies. 16

16
Current Account Deficit Soars in South Korea, The New York Times,
https://www.nytimes.com/1996/12/31/business/current-account-deficit-soars-in-south-korea.html (accessed 25
March 2020).
28
 On the other hand, the country has seen its largest current account surplus in 2015 at

105.12 Billion US Dollars. This was mainly due to plunging oil prices, causing overall imports

to fall. 17

Figure 2.22. Current Account Balance (Balance of Payments, in current US$) of the

Republic of Korea from 1976-2018

Source: The World Bank

Figure 2.23 shows the current account balances of the selected Asian nations. It is

interesting to note that the forerunners of economic growth and development in the region such

as Japan, Republic of Korea, and Singapore have the highest current account surpluses in 2018,

with balances of 174.72 Billion US Dollars, 76.4 Billion US Dollars, and 65.1 Billion US

Dollars, respectively.

17
Study: S. Korea’s account surplus increase caused by plunging oil prices, Hankyoreh,
http://english.hani.co.kr/arti/english_edition/e_business/748818.html (accessed 25 March 2020).
29
Figure 2.23. Current Account Balance (Balance of Payments, in current US$) of

Selected Asian Countries in 2018

Source: The World Bank

30
 CHAPTER III

ECONOMIC PROBLEMS AND ISSUES

The Republic of Korea is one of the most developed nations in the World. The United

Nations Development Programme (UNDP) has developed an indicator called Human

Development Index (HDI) which is a summary measure of average achievements in key

dimensions of human development, that is, a long and healthy life, being knowledgeable, and

having a decent standard of living.18 In other words, the HDI is a geometric mean of normalized

indices for each dimension index, namely, life expectancy index, education index, and GNI

Index, as shown in Figure 3.1.

Figure 3.1. Key Dimensions of Human Development Index

Source: UNDP

As of 2018, the HDI of the Republic of Korea is 0.906 and ranks 22 nd in the World and

4th in Asia, behind Hong Kong, Singapore, and Japan, as shown in Figure 3.2. It is significantly

higher than the World HDI of 0.731. The country’s HDI has been steadily climbing since 1990,

as shown in Figure 3.3.

18
Human Development Index, UNDP, http://hdr.undp.org/en/content/human-development-index-hdi (accessed
26 March 2020).
31
 Figure 3.2. Human Development Index of Selected Asian Countries in 2018

Source: UNDP

Figure 3.3. Human Development Index Trend of the Republic of Korea from 1990-2019

Source: UNDP

32
 In addition, the UNDP has established 17 Sustainable Development Goals (SDGs) with

169 targets which act as the “blueprint to achieve a better and more sustainable future for all,”19

as shown in Figure 3.4. These goals are all interconnected and are developed to address the

relevant global challenges faced by the world today, with the purpose of achieving them all by

2030.

Figure 3.4. The 17 Sustainable Development Goals of the UNDP

Source: UNDP

As one of Asia’s Economic Tigers, the Republic of Korea has often been emulated by

developing countries especially in Asia because once in the brink of economic despair, the

country was able to pull through despite the odds, lifting itself out of poverty and emerged as

one of the richest nations in the world. In addition, the country has proven itself to be relatively

conscientious in uplifting the lives of its citizens. In fact, in 2016, it has established relevant

and comprehensive government plans and policies, some of which overlap, in order address

each one of the 17 SDGs recommended by the UNDP, as shown in Table 3.1. 20

19
Sustainable Development Goals, UN, https://www.un.org/sustainabledevelopment/sustainable-development-
goals/ (accessed 4 April 2020).
20
Although it is not an exhaustive list of plans and policies corresponding to the SDGs, it shows that government
plans are in place to address the SDGs.
33
Table 3.1. List of Plans and Policies Corresponding to the 17 Goals of the SDGs21

Sustainable Development Goals Relevant Government Policies

Goal 1. End poverty in all its  The Second Five Year Plan for Green Growth
forms everywhere  The Fifth Comprehensive Medium-term Plan for Environment
Protection
 The Fourth Comprehensive Plan for National Environment
 The Three Year Plan for Economic Innovation
 The Third Plan for Low Fertility and Ageing Society
Goal 2. End hunger, achieve food  The Second Five Year Plan for Green Growth
security and improved nutrition  National Climate Change Adaptation Measures
and promote sustainable  The Third National Biodiversity Strategy
agriculture  The Three Year Plan for Economic Innovation
Goal 3. Ensure healthy lives and  The Second Five Year Plan for Green Growth
promote well-being for all at all  The Fifth Comprehensive Mid-term Plan for Environmental Protection
ages  The Fourth Comprehensive Plan for National Environment
 The Second Master Plan for Public Transportation
 The Three Year Plan for Economic Innovation
 The Fourth Health Plan
Goal 4. Ensure Inclusive and  The Second Five Year Plan for Green Growth
equitable quality education and  The Sixth Plan for Industrial Technology Innovation
promote lifelong learning  The Plan for Realization of Creative Economy
opportunities for all  Comprehensive Plan for Environment and Health
 The Three Year Plan for Economic Innovation
 The Fourth Comprehensive Plan of Policies for Persons with
Disabilities
Goal 5. Achieve gender equality  The Sixth Plan for Industrial Technology Innovation
and empower all women and girls  The Fourth Master Plan for Women’s Policy
 The Three Year Plan for Economic Innovation
Goal 6. Ensure availability and  National Climate Change Adaptation Plan
sustainable management of water  The Fifth Comprehensive Mid-term Plan for Environmental Protection
and sanitation for all  The Fourth Comprehensive Plan for National Environment
 Revised Plan of the Fourth Comprehensive Plan for National Territory
Goal 7. Ensure access to  The Second Five Year Plan for Green Growth
affordable, reliable, sustainable,  The Fourth Master Plan for New Renewable Energy
and modern energy for all  The Second Master Plan for Energy
 National Climate Change Adaptation Plan
Goal 8. Promote sustained,  The Three Year Plan for Economic Innovation
inclusive and sustainable  The Second Five Year Plan for Green Growth
economic growth, full and  The Sixth Plan for Industrial Technology Innovation
productive employment and  The Plan for Realization of Creative Economy
decent work for all
Goal 9. Build resilient  The Second Five Year Plan for Green Growth
infrastructure, promote inclusive  The Second Master Plan for Energy
and sustainable industrialization  The Sixth Plan for Industrial Technology Innovation
and foster innovation.
Goal 10. Reduce inequality within  The Three Year Plan for Economic Innovation
and among states  The Second Master Plan for International Development Cooperation
 The Second Five Year Plan for Green Growth
 The Second Master Plan for Energy
 The Fifth Comprehensive Mid-term Plan for Environmental Protection
 The Third National Biodiversity Strategy
 The Plan for Realization of Creative Economy
 The Fourth Comprehensive Plan of Policies for Persons with
Disabilities

21
Year One of Implementing the SDGs in the Republic of Korea, 2016 National Voluntary Review, The
Government of the Republic of Korea, https://sustainabledevelopment.un.org/ (accessed 5 April 2020).

34
 Sustainable Development Goals
Goal 11. Make cities and human
settlements inclusive, safe,
resilient and sustainable
Goal 12. Ensure sustainable
consumption and production
patterns
Goal 13. Take urgent action to
combat climate change and its
impact
Goal 14. Conserve and
sustainably use the oceans, seas,
and marine resources for
sustainable development
Goal 15. Protect, restore, and
promote sustainable use of
territorial ecosystems, sustainably
manage forests, combat
desertification, and halt and
reverse land degradation and halt
biodiversity loss
Goal 16. Promote peaceful and
inclusive societies for sustainable
development
Goal 17. Strengthen the means of
implementation and revitalizing
the global partnership for
sustainable development
Source: 2016 National Voluntary Review
Relevant Government Policies
 The Second Master Plan for Public Transportation
 The Second Five Year Plan for Green Growth
 National Climate Change Adaptation Plan
 The Fifth Comprehensive Mid-term Plan for Environmental Protection
 The Revised Plan of the Fourth Comprehensive Plan for National
Territory
*Guideline for Evaluation of Sustainability and Living Infrastructure of
Cities22
 The Second Five Year Plan for Green Growth
 The Fourth Master Plan for New Renewable Energy
 The Second Master Plan for Energy
 The First Master Plan for Resource Circulation
 The Fifth Comprehensive Mid-term Plan for Environment Protection
 The Second Five Year Plan for Green Growth
 The Second Master Plan for Energy
 The Fifth Comprehensive Mid-term Plan for Environmental Protection
 National Climate Change Adaptation Plan
 The Third National Biodiversity Strategy
 The Revised Plan of the Fourth Comprehensive Plan for National
Territory
*The Fourth Comprehensive Plan for Marine Environmental Protection
*The Five Year Basic Plan for Fisheries Resource Management
 The Second Five Year Plan for Green Growth
 National Climate Change Adaptation Plan
 The Fifth Comprehensive Mid-term Plan for Environmental Protection
 The Third National Biodiversity Strategy
 The Second Five Year Plan for Green Growth
 The Fifth Comprehensive Mid-term Plan for Environmental Protection
 The Three Year Plan for Economic Innovation
 The Second Five Year Plan for Green Growth
 The Sixth Plan for Industrial Technology Innovation
 National Climate Change Adaptation Plan
 The Fifth Comprehensive Mid-term Plan for Environmental Protection
 The Third National Biodiversity Strategy
 The Plan for Realization of Creative Economy
 The Revised Plan of the Fourth Comprehensive Plan for National
Territory

However, notwithstanding the fact that the Republic of Korea is already considered as

a fully developed nation, it still faces several issues that its government and economists are still

trying to curtail and resolve in order for it to achieve sustainable economic development.

Among these are (1) Poverty and Inequality, (2) Gender Disparity, (3) Urbanization and Rural-

Urban Migration, and (3) Environment and Climate Change, which are discussed subsequently.

22
*suggestions on additional policies and plans corresponding to the SDGs during consultations among the
ministries and between the government civil society.
35
Poverty and Inequality

Poverty and Inequality are among the major issues that are faced by the world today.

Poverty can either be absolute or relative. Absolute poverty occurs when household income is

insufficient to afford basic necessities of life. Meanwhile, relative poverty, also referred to as

inequality, occurs when households receive 50% less income than average median household

disposable income.

The World Bank has set the International Poverty Line at a value of 1.9 US Dollars a

day. This means that people who are living below 1.9 US Dollars a day are living in extreme

poverty. As of 2015, the World Bank estimated that 700 million people worldwide lived in

extreme poverty, or below the International Poverty Line. 23

The World Bank also came up with two other poverty thresholds. This is because

different countries have different standards of living, and therefore, richer countries have higher

poverty lines while poorer countries have lower poverty lines. Lower middle-income countries

have a poverty line of 3.2 US Dollars a day while upper middle-income countries have a poverty

line of 5.5 US Dollars a day.

Since Republic of Korea is a high-income country as classified by the World Bank, and

it has experienced massive economic growth and development over the years, absolute poverty

has declined by so much that it is no longer considered as a major issue for the country in the

modern times. However, relative poverty is still a pressing concern of the country. In fact,

there is much evidence of rampant income inequality in the country – a considerable number of

its elderly citizens is suffering from low income issues and high healthcare needs. 24

23
International Poverty Line, Investopedia, https://www.investopedia.com/terms/i/international-poverty-line.asp
(accessed 5 April 2020).
24
B. Jeon, H. Noguchi, S. Kwon, T. Ito, & N. Tamiya, Disability, Poverty, and role of the basic livelihood
security system on health services utilization among the elderly in South Korea, (Elsevier Publishing Company,
2017), pp. 175-183.
36
 Through the passage of time, the Republic of Korea has experienced a massive economic

and paradigm shift where children are no longer observing traditional Confucian teachings

about filial piety. Coupled with the increasing polarization of its society, it is becoming

increasingly difficult for adult children to provide their parents with financial support. 25 In 2019,

the Republic of Korea has the highest elderly relative poverty rate26 at close to 45% among the

Organization for Economic Cooperation and Development (OECD)27 countries, as shown in

Figure 3.5. This is significantly higher than that of its Asian counterpart, Japan at close to 20%.

Meanwhile, Denmark’s elderly poverty rate is only less than 5%.

Figure 3.5. Poverty Rate of 66 year-olds and up of Selected OECD Countries in 2019

Source: OECD

25
South Korea’s inequality paradox: long life, good health and poverty, The Guardian,
https://www.theguardian.com/inequality/2017/aug/02/south-koreas-inequality-paradox-long-life-good-health-
and-poverty (accessed 6 April 2020).
26
Poverty rate, OECD, https://data.oecd.org/inequality/poverty-rate.htm (accessed 6 April 2020). According to
OECD, the poverty rate is the ratio of the number of people (in a given age group, in this case, 66 years-olds and
more) whose income falls below the poverty line; taken as half the median household income of the total population.
Two countries with the same poverty rates may differ in terms of the relative income-level of the poor.
27
Most OECD member countries are high-income countries with a very high human development index (HDI).
They and key partners represent about 80% of world trade and investment.
37
 Moreover, in 2019, the Republic of Korea has the second highest elderly poverty gap28

at around 40% among the OECD nations as shown in Figure 3.6. This is higher than Japan,

whose elderly poverty gap is around 33%. Mexico has the highest elderly poverty gap at a little

above 45% while Denmark has the lowest elderly poverty gap at a little over 10%.

Figure 3.6. Poverty Gap of Selected OECD Countries of People Aged 66 and up in 2019

Source: OECD

One of the most commonly used statistical measure to gauge economic inequality and

wealth distribution of a particular economy is called the Gini Index or the Gini Coefficient. It

is developed by Conrado Gini, an Italian statistician in 1912. According to OECD, “the Gini

Coefficient is based on the comparison of cumulative proportions of the population against

cumulative proportions of income they receive, and it ranges between 0 in the case of perfect

equality and 1 in the case of perfect inequality.”

28
Poverty gap, OECD, https://data.oecd.org/inequality/poverty-gap.htm (accessed 6 April 2020). According to
OECD, the poverty rate is the ratio by which the mean income of the poor falls below the poverty line. The
poverty gap helps refine the poverty rate by providing an indication of the poverty level in a country.
38
 Figure 3.7 shows the Gini Coefficient of the selected OECD Countries in 2019. The

Republic of Korea has a Gini Coefficient of a little over 0.35, which means that, although the

country is leaning closer to perfect income equality than perfect income inequality, it still lags

behind most of the of OECD nations when it comes to income disparity. Among the countries

being studied, South Africa has the highest income inequality with a Gini Ceofficient of more

than 0.60. Slovak Republic, on the other hand, has the lowest income inequality with a Gini

Coefficient of less than 0.20.

Figure 3.7. Income Inequality using Gini Coefficient of Selected OECD Countries in

2019

Source: OECD

Gender Disparity

Many Asian countries adopt a patriarchal society – a society which is deeply rooted in

Confucianism beliefs where men have more authority and power in the family and in society.

Because of this, there are tendencies for women to experience prejudice in many facets of their

lives.

39
 The Republic of Korea is not an exception to this phenomenon. In an article by Joohee

Kim, Korea’s Board of Audit and Inspection (BAI) has recently revealed that Seoul Metro has

committed gender recruitment discrimination, reflecting the “sexist reality” of the corporate life

in the country today.29 Moreover, research regarding gender disparity undertaken by reputable

researchers in the UNDP and the World Economic Forum (WEF) reveal that the Republic of

Korea is facing some form of gender inequality. In fact, the country itself recognizes this as a

problem and has created the Ministry of Gender Equality and Family that develops the “Basic

Plan for Gender Equality Policies” every five years to realize gender equality in more practical

terms by addressing the gender gap between women and men. 30 The Vision and Objectives of

the Ministry is shown in Figure 3.8 while the Policy Goals are shown in Table 3.2.

Figure 3.8. Vision and Objectives of the Ministry of Gender Equality and Family

29
South Korea shows workplace gender discrimination is alive and kicking, Nikkei Asian Review,
https://asia.nikkei.com/Opinion/South-Korea-shows-workplace-gender-discrimination-is-alive-and-kicking
(accessed 6 April 2020).
30
Gender Equality Policy, Ministry of Gender Equality and Family,
http://www.mogef.go.kr/eng/pc/eng_pc_f001.do (accessed 6 April 2020).
40
Table 3.2. Policy Goals of the Ministry of Gender Equality and Family

6 Major Projects to achieve 22 Implementation Strategies

Policy Goals
1. Promote awareness and
culture of gender equality
2. Ensure equal rights to work
and opportunities.
3. Enhance women’s
representation and
participation.
4. Create social infrastructure
for work-life balance
5. Eradicate violence against
women, and improve
women’s health.
6. Strengthen the
implementation mechanism
for gender equality policies.
1. Combat gender discrimination in the mass media.
2. Enhance gender equality education in school.
3. Promote a gender-equal culture in daily lives.
4. Raise the effectiveness of civic education on gender equality.
1. Promote equal employment opportunity.
2. Address employment-related gender discrimination.
3. Enhance women’s status in the labor market.
4. Provide support for women to maintain and advance careers.
1. Enhance women’s representation in the political and public areas.
2. Boost women’s representation in private corporations.
3. Increase women’s leadership capacity.
1. Strengthen social responsibility for care-giving.
2. Guarantee working parents’ maternal and parental rights.
3. Foster a family-friendly culture in the workplace.
1. Strengthen the framework for policies to eliminate violence against women.
2. Enhance measures to combat diverse forms of violence against women.
3. Provide stronger protection and support for sexual violence victims.
4. Improve the groundwork for gender-responsive health system.
1. Revise the implementation mechanism for gender-mainstreaming policies.
2. Strengthen the capacity of gender-responsive policies.
3. Establish and increase cooperation system with civil society.
4. Promote peace and unification activities with international cooperation.

The UNDP came up with the Gender Inequality Index (GII) which measures gender

inequalities in three important aspects of human development. First is Reproductive health,

measured by maternal mortality ratio and adolescent birth rates. Second is Empowerment,

measured by proportion of parliamentary seats occupied by females and proportion of adult

females and males aged 25 years and older with at least some secondary education. Third is

Economic Status, expressed as labor market participation and measured by labor force

participation rate of female and male populations aged 15 years and older. The GII’s

dimensions, indicators, and dimension index are illustrated in Figure 3.9.

Figure 3.9. Gender Inequality Index

Source: UNDP
41
 In 2018, the Republic of Korea ranks 10th according to UNDP’s GII, with an GII Index

Value of 0.058. It has a maternal mortality ratio of 11 deaths per 100,000 live births and 1.4

births per 1,000 women ages 15-19. Women hold 17% of the seats in Parliament and 83% are

held by men. With regards to education, 89.8% of women have at least some secondary

education as opposed to 95.6% of men. Lastly, the labor force participation rate of women is

52.8% compared to 73.3% for men, as shown in Table 3.3.

Table 3.3. Gender Inequality Index in 2018 for the Top 30 countries according to HDI

Source: UNDP

On the other hand, the WEF has come up with the Global Gender Gap Index to measure

gender disparity. This Index examines the gap between men and women across of four

subindexes, namely: (1) Economic Participation, (2) Educational Attainment, (3) Health and

Survival, and (4) Political Empowerment, the structure of which is shown in Table 3.4.

42
Table 3.4. Structure of the Global Gender Gap Index

Source: World Economic Forum

As of 2018, the Global Average Gender Gap Index is 0.68 as shown in Figure 3.10.

Subindexes include Economic Participation and Opportunity of 0.59, Educational Attainment

of 0.95, Health and Survival of 0.96, and Political Empowerment of 0.22. These figures

demonstrates that in terms of Educational Attainment and Health and Survival, global gender

parity has almost been achieved, however, there is still a considerable gap when it comes to

Economic Participation and Opportunity and most especially for the Political Empowerment.

Figure 3.10. Overall Global Gender Gap Index for 2018

Source: World Economic Forum

43
 Among the 149 countries being studied, Iceland ranks 1st, Yemen ranks 149th, and the

Republic of Korea ranks 115th. Korea’s Global Gender Gap Index is 0.657, which is below the

Global Average of 0.68.31 In terms of Economic Participation, it ranks 124th with a score of

0.549. For Educational Attainment, it ranks 100th with a score of 0.973. For Health and Survival,

it ranks 87th with a score of 0.973, and for Political Empowerment, it ranks 92nd with a score of

0.134. A comparison of the Gender Gap Index between Iceland, the Republic of Korea, and

Yemen, and the Overall Global Gender Gap Index is shown in Figure 3.11.

Figure 3.11. Gender Gap Index of Yemen, Republic of Korea, Overall Global, and

Iceland for 2018

Source: World Economic Forum

31
The Global Gender Gap Report 2018, (World Economic Forum, 2018), pp. 8.
44
Urbanization and Rural-Urban Migration

The Republic of Korea has seen a vast economic transformation in the past decades, so

much so that its economic policies and strategies has been emulated by other countries aspiring

to experiencing the same economic success. The Republic of Korea has undergone a shift from

traditional to modern sector in order to achieve economic development where there was a vast

migration from the rural to urban areas – and this describes the Lewis-Fei-Ranis (LFR) model,

the model used by the Asian economic tigers when they embarked on the path to rapid

development in the 1960s and 1970s.

However, continuous urbanization can pose significant problems. For one, mass

migration without adequate infrastructure and job availability can be detrimental to society. The

law of diminishing marginal returns states that if a factor of production is increased, while other

factors are constant, the output per unit of the variable factor will eventually diminish. 32 This

suggests that economic prosperity cannot be achieved if there is no balance among the other

factors of production. Another possible problem is that there may be overcrowding in the urban

areas and a rise in unemployment is inevitable for the industrial and service sector should the

job availability be not enough to support the supply of labor.

Urban-rural migration in the Republic of Korea was most rampant between 1945 to 1985

when people from the countryside flocked to the cities. Migration also increased substantially

after the Korean War when more people went to the rural areas to search for greener pastures.33

In the 1960s, the country has experienced issues such as housing shortage, lack of infrastructure,

and weak economic foundation, as shown in Table 3.5.

32
J. M. Dowling, M. R. Valenzuela, J. M. Brux. Economic Development, (Cengage Learning Asia Pte. Ltd.,
Philippine Edition, 2019), p. 36.
33
South Korea Urbanization, Country Data, http://www.country-data.com/cgi-bin/query/r-12271.html
(accessed 15 April 2020).
45
Table 3.5. Issues and Conditions of Seoul’s rapid urbanization in the 1960s

Supply ratio of housing: 50%

Number of unauthorized or substandard housing was at least 1/3 of
total housing
Housing Shortage
Increasing slums, slum expansion to hills and watersides
Provision of housing required huge budget, but due to financial
constraints, small number of houses could be provided
Street Ratio of the built-up area: 8%
Road width was narrow
Traffic
Roads were frequently squatted by illegal buildings
Congestion
Huge compensation for land and buildings was necessary to expand
roads, but lack of financial status prevented expansion
Infrastructure
Water supply ratio: 56%
Water supply The sewage plan targeted the population of 1 million
and Sewage Unsanitary streams for the drainage of sewers harmed city
Disaster Safety Frequent flooding damage
Lack of safety against crimes and fire
GNP per capita: 82 USD
Proportion of secondary industry workers : 22%, tertiary industry
workers: 76%
Weak economic foundation
Lack of infrastructure like highway
Promotion of export-oriented light industry acceleraged the influx of
population

Source: Seoul Solution

Because of this, the government of the Republic of Korea instituted various measures in

order to alleviate the problem of urbanization. First, a new urban planning bureau was

established in 1961 with the objective to improve economic efficiency, resolve traffic

congestion, solve hygienic problems, enhance safety, security, and order, and secure the

sustainability of the natural environment. Moreover, the country has initiated a land

readjustment project, which ultimately improved the land’s accessibility, residential

environment, and increased land value. While some of the harmful effects of urbanization have

somehow been alleviated, the country still considers it as one of its economic concerns

especially in environment sustainability and is continuously finding ways to further improve in

this regard.

46
Environment and Climate Change

There has been an increasing awareness on how climate change adversely impacts the

environment. Non-profit organizations and environment advocates such as 350.org and the

World Wildlife Fund (WWF) are constantly advising governments to adopt environment

conservation measures. Found in the United States of America, 350.org’s goal is to build a

global climate movement fighting for a fossil free future. It is named after 350 parts per million,

referring to the safe concentration of carbon dioxide in the environment.34 Meanwhile, based

in the United Kingdom, WWF is the world’s leading independent conservation organization

whose mission is to create a world where people and wildlife can thrive together. To achieve

this, they are finding ways to transform the future for the world’s wildlife, rivers, forests, and

seas; pushing for a reduction in carbon emissions that will avoid catastrophic climate change;

and pressing for measures to help people live sustainably, within the means of the planet. 35

There is certainly a trade-off between economic development and environmental

protection. When a country wants to maximize its level of economic output, it has to forego

environmental protection. On the other hand, if it decides to prioritize environment protection,

then it would not be able to reach its fullest economic potential. Since the world is becoming

more open due to globalization and competition is becoming fiercer, most countries, if not all,

would opt for economic development rather than environmental protection.

According to economic historian Walt Whitman Rostow, economies of all countries

belong to one of the five different stages of economic growth. Figure 3.12 shows that in order

for a country to advance from one stage to the next, it is necessary to build infrastructure and

adopt new technology. However, industrialization also necessitates the degradation of nature

and toxic gases and waste being released to the atmosphere, aptly illustrating the

aforementioned economic and environment trade-off.

34
About 350, 350.org, https://350.org/about/ (accessed 7 April 2020).
35
Who We Are, World Wildlife Fund, https://www.wwf.org.uk/who-we-are (accessed 7 April 2020).
47
 Figure 3.12. Rostow’s Stages of Economic Growth

Carbon dioxide (CO2) is one of the greenhouse gas emissions that causes global

temperatures to rise. This can have disastrous effects such as an increase in malaria cases,

displacement due to natural disasters caused by climate change, asset destruction, scarcity of

water, among others.36 As shown in Figure 3.13, the CO2 emission per capita of the Republic

of Korea has been increasing through the years and it is directly related to its economic growth

as measured by GDP per capita. In 1970, the country’s CO2 emission per capita was only 1.94

metric tons, however, it has grown to 13.59 metric tons in 2018.

Figure 3.13. CO2 emission per capita (in metric tons) vis-à-vis GDP per capita of the

Republic of Korea from 1970-2018

Source: Knoema Corporation37 and The World Bank

36
22 Devastating Effects of Climate Change, Business Insider, https://www.businessinsider.com/effects-of-
climate-change-2014-6 (accessed 7 April 2020).
37
CO2 emission per capita, Knoema Corporation, https://knoema.com/atlas/ranks/CO2-emissions-per-
capita?baseRegion=KR (accessed 7 April 2020).
48
 In comparison to other selected Asian countries, the Republic of Korea has a relatively

high CO2 emission per capita at 13.59 metric tons. This is not surprisingly since the country is

highly developed. Figure 3.14 shows that among the countries being studied, Palau has the

highest CO2 emission per capita at 57.95 metric tons, in spite of its economy only consisting

primarily of agriculture and fishing. Perhaps, this is because fuel is among the top main trades

in the country. On the other hand, Timor-Leste has the least CO2 emission per capita at 0.22

metric tons.

Figure 3.14. CO2 emission per capita (in metric tons) of Selected Asian Countries in

2018

Source: Knoema Corporation

49
 CHAPTER IV

SUMMARY, CONCLUSION, AND RECOMMENDATIONS

This chapter presents the summary of this research project along with the conclusion

and recommendations of the researchers. The researchers have divided the chapter in sections

that provide insights on each specific section of the study. Lastly, the researchers have

presented recommendations that the Republic of Korea can adopt for further economic

development.

The main focus of this study was to conduct a research study on the Republic of Korea.

Chapter 1 looks at the country demographics, Chapter 2 studies the country’s economic profile,

and Chapter 3 scrutinizes the economic problems and issues that the country is facing.

Summary

Country Demographics

Regarding the country demographics, the Republic of Korea is a country in East Asia

located at the southern part of the Korean Peninsula. It takes up 45% of the peninsula’s land

area and shares its border with the Democratic People’s Republic of Korea. The country has 9

provinces, 1 special city, 6 metropolitan cities, 1 special autonomous cities, and 77 municipal

cities. Its national capital is Seoul, which serves as the country’s economic, political, and social

hub.

As of 2018, its total population is 51,635,256, with a growth rate of 0.33%. Its

population is increasing but at a decreasing rates. Moreover, majority percentage of the

population comprise of the working age class. The percentage of children comprising the

population has seen a decreasing trend and the percentage of elderly comprising the population

has seen an increasing trend.

50
 The Republic of Korea adopts a floating exchange rate system and its official currency

is the South Korean Won. The movement of the Won is against the US Dollar was fairly stable,

but it can be seen to depreciate as a result of the COVID-19 pandemic where thousands of

people became infected with the disease. It adopts a Centralized Republic form of Government

that comprises of three branches that performs specific functions to keep the country functioning

properly: Executive, Legislative, and Judicial which serves different functions to keep the

country going. Lastly, the sector distribution of the country shows that a vast majority of GDP

and people are employed in the Services Sector, followed by the Industry Sector, and then the

Agricultural Sector.

Economic Profile

The Republic of Korea boasts of having the 12th highest GDP in the world totaling 1.619

Trillion US Dollars as of 2018. In the same year, its GDP per capita has also surpass that of the

World by almost three-fold. The country’s GNI stands at 1.618 Trillion US Dollars and it has

a Net Disposable Personal Income of 17,200 US Dollars and is growing at a rate of 1.8% as of

December 31, 2018.

The inflation rate of the country stands at 1.48% and its unemployment is 3.8% as of

2018. Compared to other Asian countries, The Republic of Korea has a relatively low inflation

rate but it has a relatively high unemployment rate. The Monetary Authority of the country is

the Bank of Korea and policy decisions are made by the Monetary Policy Board.

Meanwhile, the fiscal expenditure has continually risen and the government has a

approved a budget of 512.3 Trillion SK Won for 2020. It has a robust export and import industry

where exports and imports total 724.5 Billion US Dollars and 642.4 Billion US Dollars,

respectively in 2018. More than 40% of its exports and 28% of its imports are in machines.

Finally, the Republic of Korea has a current account surplus of 76.4 Billion US Dollars in 2018

which is one of the highest in Asia.

51
Economic Problems and Issues

The HDI of the country has been climbing consistently and is at 0.906, ranking 22 nd in

the World in 2018. However, it still faces issues connected to Poverty and Inequality, Gender

Disparity, Urbanization and Rural-Urban Migration, and Environment and Climate Change.

Despite the fact that the country is considered as a high-income country, the Republic

of Korea is suffering from relative poverty especially among its elderly population. In 2019,

the country’s elderly relative poverty rate is at 45%, its elderly poverty gap is at 40%, and it has

a Gini Coefficient of 0.35 denoting some degree of income inequality.

Meanwhile, the Republic of Korea’s Gender Inequality Index stands at 0.058 in 2018.

In terms of empowerment and participation in the labor market, the country’s women lagged

behind their male counterparts. This gender disparity is echoed in the Global Gender Gap Index

where the country scored 0.68. The study showed that women still lagged behind men in all

sub-indexes, but most especially in economic participation and opportunity, and political

empowerment.

Problems of Urbanization and Rural-Urban Migration of the country includes housing

shortage, infrastructure that lead to traffic congestion and concerns about water supply and

sewage disaster safety, and weak economic foundation. The country has established measures

to deal with urbanization problems, yet environmental sustainability has yet to be resolved.

Lastly, in terms of environment and climate change, the country has one of the highest CO2

emission per capita in Asia and its emissions has continuously increased, resulting to 13.59

metric tons in 2018.

52
Conclusion

The Republic of Korea has been lauded by many countries for being able to rise up from

the many economic and political challenges that it has experienced during the past to become

the country that it is today. With its impressive economic profile, it is not surprising that the

strategies they employ are deemed to be worth emulating not only for developing Asian

countries but also for developing countries from other continents. Nevertheless, the government

of the Republic of Korea still recognizes the challenges that it still has to address in order to

continuously improve and become even more prosperous and continue to become one of the

best in the world in economic development.

Recommendations

In the light of the economic issues faced by the Republic of Korea, the researchers would

like to recommend the following to address these issues:

Poverty and Inequality

First, the Republic of Korea should adopt stronger floating pension systems so that the

elderly will be able enjoy the financial benefits after retiring without diminishing their buying

power as inflation increases. Second, companies can be required to offer a certain percentage

of their job offerings to the elderly who are still capacitated to work so that they will still be

able earn income, and at the same time, boost their self-confidence. Third, the country could

mandate employers to collect forced savings from employees with the purpose to enable the

employees to acquire affordable and accessible housing and health care once they retire. Lastly,

the government could institute filial responsibility laws obligating children to support their

elderly parents who are incapacitated and experiencing poverty.

53
Gender Disparity

The researchers recommend that in order to combat gender disparity, the government of

the Republic of Korea should encourage schools to educate the children about the importance

of gender equality and empowering girls by assigning tasks that are traditionally for boys.

Second, schools and universities, together with non-profit organizations, can help by

subsidizing tuition fees or give scholarships to deserving female students so that they will be

have access to a college degree. Third, the country should enact laws that protect the welfare

women and girls and safeguard them from facing gender discrimination. Lastly, the government

can encourage companies to incorporate gender quality as part of its company culture and give

incentives and subsidies to companies that will give senior and board positions to qualified

women.

Urbanization and Rural-Urban Migration

For the issue of urbanization and rural-urban migration, the researchers recommend that

since the Republic of Korea is already quite wealthy, the government could apportion some of

its funds to build environment-friendly infrastructure and adequate facilities in the rural areas.

Consequently, some of them will no longer be excessively enticed to go to the cities. In addition,

the government should promote the agricultural and fishing products produced by their farmers

and fishermen as well as give them subsidies to improve their financial status and quality of life.

Environment and Climate Change

The researchers recommend that the government should establish policies to reduce CO2

and other greenhouse gas emission in the country by instilling a limit or a cap on how much

CO2 and pollution is allowed for factories in certain industries. Hefty penalties shall then be

imposed to those factories that go beyond the limit. This is a preventive measure by

discouraging the factories from emitting too much harmful pollutants in the environment.

54
 Second, the country could invest in, and encourage the use other sustainable and

environment-friendly sources of power such as using wind energy by installing windmills and

solar energy through the installation of solar panels. Lastly, the researchers recommend that

the government require companies to acquire the International Standards Organization (ISO)

14001 Certification by strictly complying with ISO 14001:2015 standards by improving their

Environmental Management System. Since the standards of ISO are quite stringent, a company

that complies gives an assurance that in the course of running the organization, it has taken steps

to minimize its negative impact on the environment.

55
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