2004 OECD Economic Surveys: Korea 2004

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Korea has recently been one of the fastest growing OECD countries, and in this report on its economy, OECD examines the key challenges Korea faces to sustain this growth.  The report carefully assesses macroeconomic policy, reform of the labour market and reform of the corporate and financial sectors. This edition’s special feature examines product market competition.

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Becoming a High-income OECD Country

Key Economic Challenges

In July 2003, the government announced a medium to long-term target of doubling per capita income from around $10 000 to $20 000.1 Thirty years of extraordinary growth had boosted per capita income from about $100 in 1965 to the $10 000 level by the mid-1990s (Figure 1.1). However, weaknesses in Korea’s economic structure, which lacked many of the basic elements of a market economy, left the country vulnerable to the financial crisis that swept through Asia in 1997, reducing per capita income by a third in US dollar terms, primarily due to the sharp fall in the exchange rate. In particular, close government-business links had created moral hazard problems, resulting in excessive risk-taking and insufficient attention to credit and exchange-rate risks. The government responded ...

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