Context of the peer review of Korea

Korea is often cited as a leading example of how sound economic policies can drive growth and development, blazing a trail from poverty to advanced industrialisation throughout the 1970s and 1980s. Building on its reputation as a development success, Korea now plays a highly valued role on the global stage, sharing its knowledge with others and helping to bridge the divide between developing and developed country interests.

Korea joined the OECD in 1996. Since then, its economy has remained highly dependent on export-oriented industries, with shipbuilding, steel and petrochemicals accounting for 20% of the value of exports in 2016. However, in recent years these industries have struggled with high levels of debt and revenue shortfalls. Following several years of low growth in the wake of the global financial crisis, the growth forecast for 2018 remains modest at 2.8%. Key challenges going forward include weaker consumption, high household debt, rapidly rising greenhouse emissions, increasing competition with other Asian countries including China, and renewed threats from the Democratic People’s Republic of Korea (DPRK). According to the OECD’s wellbeing index, life satisfaction in Korea is below the OECD average, largely due to rising wage inequality and pressures on social services due to an aging population. Despite its low long-term unemployment rate of 3.7% in 2016 (well below the OECD average of 6.3%), underlying structural problems pose risks, particularly given the labour market is increasingly divided into a privileged segment of regular workers and a less protected set of irregular workers.

Korea joined the OECD’s Development Assistance Committee (DAC) in 2010 and is now its 26th largest provider of official development assistance (ODA) as a percentage of gross national income (GNI – at 0.16%), and the 16th largest by volume (USD 2.25 billion in 2016). Korea missed its original target of allocating 0.25% of GNI as ODA by 2015 due to several reasons: the global economic downturn, Korea’s tighter fiscal policy and a change in the calculation of GNI. It has, however, set a new target of allocating 0.20% of GNI as ODA by 2020.

President Moon Jae-in (Democratic Party of Korea) was elected for a five-year term from May 2017. His first five-year action plan indicates ongoing support for development co-operation. According to a 2016 survey, public support for aid in Korea remains high at 86%.

Sources

GoK (2017b), “문재인정부 국정운영 5개년 계획” [Moon Jae-in government 5-year plan of state administration], National Planning and Advisory Committee, Seoul.

OECD (2017a), OECD Environmental Performance Reviews: Korea 2017, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264268265-en.

OECD (2017b), OECD Economic Outlook, Volume 2017, Issue 1, Korea Country Note, OECD Publishing, Paris, www.oecd.org/eco/outlook/economic-forecast-summary-korea-oecd-economic-outlook-june-2017.pdf.

OECD (2016a), OECD Economic Surveys: Korea 2016, OECD Publishing, Paris, DOI:http://dx.doi.org/10.1787/eco_surveys-kor-2016-en .

OECD (2016b), “How’s Life in Korea?”, OECD Better Life Initiative, OECD, Paris, www.oecdbetterlifeindex.org/countries/korea/.