Korea, South

According to official data released by the South Korean Ministry of National Defence, in 2017, the country’s defence budget is expected to reach 40.33 trillion South Korean Won – KRW- (approximately 36.5 billion US dollars), increased by some 4% compared to the previous year (38.8 trillion KRW or 34 billion US dollars) and surpassing the 40 trillion Won mark, for the first time. This increase, is largely attributed to the military threat posed by North Korea, the strengthening of military power of neighbouring countries in Northeast Asia and the changes in the security and military environment of the region. The lion’s share of the budget increase falls on plans to deploy the Korean Air and Missile Defence (KAMD) system. According to the 2017 defence budget, 533.1 billion KRW (about 456 million US dollars) will be allocated to the KAMD project, an increase of 40.5% compared to the 2016 budget in which 379.5 billion KRW (325 million US dollars) were allocated for the specific program. The KAMD system is currently capable of intercepting North Korean ballistic missiles in their terminal stage and its core weapons system consists of medium- and long-range surface-to-air missiles, Patriot missiles, and an early warning radar. The plans are for the KAMD construction project to be completed by the mid-2020s.

The Republic of Korea has exhibited tremendous economic progress, as it experienced a real Gross Domestic Product (GDP) growth averaging some 9% annually between 1961 and 1995 (according to World Bank data), and an average annual export growth of some 20% over the period 1957-2016 (according to Korea International Trade Association data). The Asian financial crisis of 1997-98, temporarily halted this trend, as the Republic of Korea’s GDP plunged by 6.9% in 1998, and then recovered by an average of 9% in 1999-2000; thereafter GDP growth remained relatively high (about 4% annually), between 2003 and 2007. For the period 2008-2015, the Republic of Korea experienced an annual average GDP growth of 3.2%, while in 2015, GDP increased by 2.6%.

South Korea, is one the best countries in the G20, for ease of doing business. The Asian country provides power, water, and telecommunications infrastructures that are among the best in the world. Additionally, South Korea has established an advanced legislation as far as the protection of intellectual property rights, and policies that are friendly to foreign investors, such as external remittance guarantees and tax deduction provisions. As a result, the Asian country scores rather well, in several international indicators measuring the ‘openness’ of a country’s economic and business environment. South Korea ranked 5th out of 190 countries in the World Bank’s Doing Business report 2017, 27th out of 178 countries in the 2016 Heritage Foundation’s Index of Economic Freedom and 11th out of 128 in the Global Innovation Index of 2016.

Year

Measure/Indicator

Rank

Website Address

2017

Doing Business report

(5 out of 190)

http://www.doingbusiness.org/

2016

Index of Economic Freedom

(27 out of 178)

http://www.heritage.org/index/

2016

Global Innovation index

(11 out of 128)

https://www.globalinnovationindex.org/

Furthermore, the openness of the local economy attracted a relatively significant amount of Foreign Direct Investment (FDI). FDI in South Korea, has recorded an upward trend since 2001, while for two consecutive years (2014-15), FDI annual inflow was approximately 20 billion US dollars. According to official data, South Korea received a record high of some 20.9 billion US dollars in pledges of foreign direct investment (FDI) during 2015, significantly increased when compared to 2014, when inflows of FDI reached about 19 billion US dollars. This rise, is mainly attributed to the growing capital inflow from investors in emerging countries, such as China and some Middle East nations. Additionally, it is worth noting that around 16,000 foreign companies have invested in Korea in a variety of fields, including finance, technology, motor vehicles and automotive parts, as well as in medical devices. Some of them have also establish headquarters and R&D centers in the country.

Furthermore, South Korea has an ‘open’ economy that guarantees access to international markets, through a network of free trade agreements. In recent times, Free Trade Agreements (FTAs) have been signed with most of the global economic ‘power houses’, such as the United States (2012), the European Union (2011), and China (2015).

Official statistics published by the investment authority of South Korea indicated a trade surplus of 90.2 billion US dollars in 2015 (quite similar to that of 2016, of some 89.4 billion US dollars), significantly increased when compared to the trade surplus the country exhibited in 2014, which was 47.1 billion US dollars. This was mainly attributed to the 16.9% decrease in the country’s imports for the year. Exports also followed this trend, but at a smaller rate, of 8%. More specifically, in 2015, exports amounted to some 526.8 billion US dollars, while imports amounted to about 436.5 Billion US dollars. In 2016, imports and exports further decreased, reaching 406.1 and 495.5 billion US dollars respectively.  

The top export destinations of South Korea in 2016, were China (124.4 billion US dollars), the US (66.5 billion US dollars), Hong Kong (32.8 billion), Vietnam (32.6 billion) and Japan (24.4 billion). On the other hand, the five top suppliers for 2015 imports by the country, were China (86.9 billion US dollars), Japan (47.5 billion), the US (43.2 billion), Germany (18.9 billion) and Taiwan (16.4 billion).     

Regarding the labour market, in October 2016, the employment rate grew by 1.1% (year-on-year), a growth equivalent to the creation of 278,000 new jobs, while the unemployment rate decreased by 0.3%, to 3.7%, on a seasonally adjusted basis.