Tourism development policy (invest korea organization, tourism and leisure 2015, www investkorea org, 2015

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS *** - REPORT ON SOUTH KOREA 2010 - 2020 Group Members: Class: Khóa: Lecturer: Ha Noi, tháng năm FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS *** - REPORT ON SOUTH KOREA 2010 - 2020 Group Members: Class: Khoá: Lecturer: Ha Noi, tháng năm TABLE OF CONTENTS LIST OF TABLES LIST OF CHARTS Report on South Korea “Tên khóa luận” PREFACE Group KTEE203 MSSV 14324325 Report on South Korea “Tên khóa luận” GDP, Economic Growth and Government’s policies I GDP Basic concepts - GDP (Mankiw, 2008): The gross domestic product (GDP) measures national income and output for a given country's economy The gross domestic product (GDP) is equal to the total expenditures for all final goods and services produced within the country in a stipulated period - GDP includes all items produced in the economy and sold legally in markets It measures the market value of not just apples and oranges but also pears and grapefruit, books and movies, haircuts and healthcare, and on and on GDP also includes the market values of the housing services provided by the economy’s stock of housing - There are some products, however, that GDP excludes because measuring them is so difficult GDP excludes most items produced and so illicitly, such as illegal drugs It also excludes most items that are produced and consumed at home and, therefore, never enter the marketplace For example, vegetables you buy at the grocery store are part of GDP; vegetables you grow in your garden are not - Nominal GDP: the production of goods and services valued at current prices - Real GDP: the production of goods and services valued at constant prices - GDP Deflator: A measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 - Inflation rate: The percentage change in some measure of the price level from one period to the next An overview of South Korea After the 1950-1953 Korean War, Korea was one of the poorest countries in the world with a per capita income of only 64 USD/year By the 1960s, Korea's GDP per capita was comparable to that of poor countries in Africa and Asia In 1963, General Park Chung Hee became the President of South Korea Under him, the entire country from the ashes of the Korean War began a process of strong and continuous growth thanks to policies to boost exports, restructure the economy, develop the heavy industry and rapidly modernize Group KTEE203 MSSV 14324325 Report on South Korea “Tên khóa luận” From one of the poorest countries in the world, the Korean economy is currently ranked 21st out of 205 countries in the world with a total per capita income of $30,000, ranking 30th globally With a strategy to boost the production of export goods, including making the most of cheap labor, maintaining high-interest rates, and policies to encourage foreign investment, Korea's total export turnover increased from $32 million in 1960 to $10 billion in 1977 In 2016, the country's total export revenue reached $494 billion “Korea has risen from being a major recipient of foreign aid to a developed country in just a few decades The key to this country's success in attracting foreign direct investment (FDI) while remaining cautious with international investors,” said Emanuel Pastreich, President of the Asia Institute in Washington (USA), Independent candidate in the 2020 US presidential election South Korea’s GDP from 2011 to 2020 YEAR GDP GROWTH 2011 1.253.223.044.719 3,69% 2012 1.278.427.634.343 2,40% 2013 1.370.795.199.976 3,16% 2014 1.484.318.219.634 3,20% 2015 1.465.773.245.547 2,81% 2016 1.500.111.596.236 2,95% 2017 1.623.901.496.836 3,16% 2018 1.724.845.615.629 2,91% 2019 1.646.739.219.510 2,04% 2020 1.630.525.005.469 -0,96% Table A- 1: South Korea's GDP from 2011 to 2020, source: CEIC, Morgan Stantley Research Group KTEE203 MSSV 14324325 Report on South Korea “Tên khóa luận” Chart A-1: South Korea's GDP from 2011 to 2020, source: World Bank The line graph gives information about the total national output of Korea in the period between 2011 and 2020 Overall, Korea’s GDP in 2011 was the lowest, then increased dramatically and reached a peak in 2018 It can be seen that the total national output of Korea in 2011 was approximately 1,25 trillion, which went up significantly to about 1.45 trillion in 2014 After, it fluctuated between 1,45 and 1,50 trillion years later From 2016 onwards, the annual gross domestic product of Korea rose substantially from 1,5 trillion and reached a peak at around 1,7 trillion in 2018 The figure for Korea’s GDP decreased markedly at the end of the period According to the World Bank (WB) on 7/7, Korea's nominal gross domestic product (GDP) in 2018 reached 1,619.4 billion USD, continuing to maintain 12th place out of 205 countries in the world Previously, South Korea's GDP was in 14th place consecutively from 2009 to 2013, and then rose to 13th place in 2014 and 11th place in 2015, 2016, before falling to 12th place in 2017 Korea's 2020 ranking is two places higher than 2019's ranking (12th) Thus, Korea has returned to 10th place after years, since 2018 Nominal GDP is an indicator of the quantity of goods and services produced in a country, measured at market prices (in the year of calculation), while real GDP shows the growth rate of the economy, nominal GDP shows the size of a country's economy The results this time show that the Korean economy still has bright spots despite the COVID-19 shock in 2020 In 2020, the Korean economy has the third highest growth rate in the Group of leading developed and emerging economies (G20), after China Group KTEE203 MSSV 14324325 Report on South Korea 10 “Tên khóa luận” and Turkey, the most positive result among developed countries (OECD, 2021) II Economic Growth Basic concepts - Economic growth refers to an increase in the production of goods and services over a specific period It can be measured in nominal or real terms, the latter of which is adjusted for inflation Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used The most accurate measurement of growth is real GDP, which removes the effects of inflation, and takes into account the country's entire economic output - Economic growth is one of the most important indicators of a healthy economy One of the biggest impacts of long-term growth of a country is that it has a positive impact on national income and the level of employment, which increases the standard of living However, if the growth rate is too fast and unstable, it may cause severe harms to the economy, such as inflation, recession, boom and bust cycle, etc Factors of economic growth - Natural resources - Human capital - Physical capital formation - Technological developments - Social and political factor (customs and laws) Types of economic growth - Boom and bust economic cycles - Export-led growth - Consumer-led growth - Commodity exports - Sustainable or balanced growth Benefits of economic growth - Higher average incomes - Lower unemployment - Increased research and development Group KTEE203 MSSV 14324325 Report on South Korea 27 “Tên khóa luận” • • Group Chart D-8: Unemployment Rate 2010 – 2020, source: World Bank KTEE203 MSSV 14324325 Report on South Korea 28 “Tên khóa luận” • Table D-8: South Korean Unemployment Rate 2010 - 2020 3.1 Korea’s Youth Labor Market Trends While Korea's total unemployment rate remained relatively stable, the youth unemployment rate rapidly surged to around 10% since 2013 Among them, the majority of those in the 15-19 and 22-24 age groups were still student and had not made their entrance into the labor market Accordingly, the 25-29 and 30-34 age groups better reflects the labor • market condition in Korea Group KTEE203 MSSV 14324325 Report on South Korea • 29 “Tên khóa luận” Chart D- 9: Youth Unemployment Rate 2010-2017, source: Statistics Korea, Economically Active Population Survey, various year, KOSIS 3.2 Characteristics of Korea’s Youth Labor Market - Job selection and career choice: Youth employment is driven more by future careers than income - The skill level of young Koreans is densely concentrated in the middle, which means that their skill level is high among the bottom but low among the top - The impact from Demographic changes to the youth unemployment rate is insignificant as of now, but the population aged 25-29 is expected to rise by 390,000 in 2017-2021 (Choi, 2017) - The Ministry of Employment and Labor’s Employment Success Package Program partially increases the unemployment rate but with little significance 3.3 Unemployment rise among college graduates - The rising youth unemployment rate is driven by the increase in the unemployment rate of college graduates, particularly due to the decrease in semi- professional jobs - Korea’s innovation level must be enhanced to increase the number of skilled jobs To that end, an environment must be created to motivate innovation, business growth dynamism and excellence in education o Living standard Basic concepts - Living standard (or ‘Standard of living’) refers to the quantity and quality of material goods and services available to a given population - Standard of living focuses on basic material factors such as income, gross domestic product (GDP), life expectancy, and economic opportunity It is closely related to quality of life, which can also explore factors such as economic and political stability, political and religious freedom, environmental quality, climate, and safety - Standard of living is often used to compare geographic areas, such as the standard of living in the United States versus Canada, or the standard of living in St Louis versus New York Standard of living can also be used to compare distinct points in time - For example, compared with a century ago, the standard of living in the United States has improved greatly The same amount of work buys an increased quantity of goods, and items that were once luxuries, such as Group KTEE203 MSSV 14324325 Report on South Korea 30 “Tên khóa luận” refrigerators and automobiles, are now widely available Moreover, life expectancy has increased, and annual hours worked have decreased - Standards of living are usually higher in developed countries In fact, basic measures of standard of living, such as per capita GDP, are often used to define the differences between more and less developed countries Emerging market economies usually see rising standards of living over time as they grow and develop into modern, industrialized economies The Human Development Index (HDI) - One measure of standard of living is the United Nations' Human Development Index (HDI), which scores 189 countries based on factors including life expectancy at birth, education, and income per capita - To ensure as much cross-country comparability as possible, the HDI is based primarily on international data from the United Nations Population Division (the life expectancy data), the United Nations Educational, Scientific and Cultural Organization Institute for Statistics (the mean years of schooling and expected years of schooling data) and the World Bank (the GNI per capita data) To allow for assessment of progress in HDIs, the 2020 Human Development Report includes recalculated HDIs from 1990 to 2019 using consistent series of data 5.1 Republic of Korea’s HDI value and rank Korea (Republic of)’s HDI value for 2019 is 0.916 – which put the country in the very high human development category – positioning it at 23 out of 189 countries and territories The rank is shared with Luxembourg • Between 2010 and 2019, Korea’s HDI value increased from 0.089 to 0.916 Table reviews Korea’s progress in each of the HDI indicators Between 2010 and 2019, Korea (Republic of)’s life expectancy at birth increased by 2.6 years, meanwhile years of schooling decreased by 0.3 years and expected years of schooling decreased by 0.3 years Korea (Republic of)’s GNI per capita increased by about 24.8 percent between 2010 and 2019 • • Group • Life expectan cy at birth • Expected years of schooling KTEE203 • Mean years of schoolin g • MSSV 14324325 GNI per capita (2017 PPP$) • H D I v a l u e Report on South Korea • 31 “Tên khóa luận” • 80.4 • 16.8 • 11.6 • 34,480 • 8 • 82.1 • 16.6 • 12.1 • 38,990 • • 82.4 • 16.6 • 12.2 • 40,002 • • 82.6 • 16.5 • 12.2 • 41,168 • • 82.8 • 16.5 • 12.2 • 42,002 • • 83.0 • 16.5 • 12.2 • 43,044 • • • • • • • Table D- 9: South Korea's HDI trends OECD Better Life Index 6.1 Definition - Your Better Life Index (BLI), launched in May 2011, is an interactive tool that allows people to compare countries' performances according to their own preferences in terms of what makes for a better life It was designed by Berlin-based agency Raureif in collaboration with Moritz Stefaner First published on 24 May 2011, it includes 11 "dimensions" of well-being Group KTEE203 MSSV 14324325 Report on South Korea 6.2 Korean’s BLI 32 “Tên khóa luận” Korea performs well in some measures of well-being in the Better Life Index Korea ranks above the average in housing, civic engagement, education and skills, jobs and earnings, personal security, but below average in income and wealth, subjective well-being, environmental quality, health status, social connections, and work-life balance These rankings are based on available selected data • Money, while it cannot buy happiness, is an important means to achieving higher living standards In Korea, the average household net - adjusted disposable income per capita is USD 21 882 a year, lower than the OECD average of USD 33 604 a year There is a considerable gap between the richest and poorest – the top 20% of the population earn more than five times as much as the bottom 20% • In terms of employment, 67% of people aged 15 to 64 in Korea have a paid job, slightly below the OECD employment average of 68% Some 76% of men are in paid work, compared with 57% of women In Korea, the percentage of employees working very long hours is higher than the OECD average of 11% • Good education and skills are important requisites for finding a job In Korea, 88% of adults aged 25-64 have completed upper secondary education, higher than the OECD average of 78% This is truer of men than women are, as 90% of men have successfully completed high school compared with 85% of women Korea is a top-performing country in terms of the quality of its educational system The average student scored 519 in reading literacy, maths and science in the OECD's Programme for International Student Assessment (PISA) This score is higher than the OECD average of 486 On average in Korea, girls outperformed boys by 19 points, much higher than the OECD average gap of points • In terms of health, life expectancy at birth in Korea is 82 years, two years higher than the OECD average of 80 years Life expectancy for women is 85 years, compared with 79 for men The level of atmospheric PM2.5 – tiny air pollutant particles small enough to enter and cause damage to the lungs – is 27.9 micrograms per cubic meter, the highest level in the OECD, where the average is 13.9 micrograms per cubic meter Korea also performs below the OECD average in terms of water quality, as 76% of people say they are satisfied with the quality of their water, compared with an OECD average of 81% • Concerning the public sphere, there is a moderate sense of community and high levels of civic participation in Korea, where 78% of people believe that they know someone they could rely on in time of need, the lowest figure in the OECD, where the average is 89% Voter turnout, a measure of citizens' participation in the political process, was 77% during recent elections; higher than the OECD average of 68% Social and economic status can affect voting rates; voter turnout for the top 20% of the • Group KTEE203 MSSV 14324325 Report on South Korea 33 “Tên khóa luận” Chart D-10: Korea's life expectancy compared to OECD average population is estimated at 92% and for the bottom 20% it is an estimated 60%, a much larger difference than the OECD average gap of 13 percentage points, and points to shortcomings in the political mobilization of the worst-off • In general, Koreans are slightly less satisfied with their lives than the OECD average When asked to rate their general satisfaction with life on a scale from to 10, Koreans gave it a 5.9 grade on average, lower than the OECD average of 6.5 Conclusion There are plenty of criteria to determine the living standard of Korea, while the statistics listed above are just a small sphere of the topic The other figures, such as GDP or employment rate, will definitely be elaborated in detailed in other parts of this report To sum up, in general, South Koreans work hard, are paid well and enjoy a stable currency and a high standard of living, which is generally higher than the world average and clearly higher than Vietnam’s • To exemplify the difference between the scores of 0.957 and 0.394, Norway has a life expectancy at birth of 82.4 years, 18.1 expected years of schooling per citizen, gross national income (GNI) per capita of $66,494 (purchasing power parity-adjusted currency units), a homicide rate per 100,000 people of 0.5, and an internet usage rate of 96.5% of its population A Niger, meanwhile, has a life expectancy at birth of 62.4 years, 6.5 expected years of schooling, a GNI per capita of $1,201, a homicide rate of 4.44, and an internet usage rate of 5.3% • Korea is one of the few countries that has successfully transformed itself from a low-income to a high-income economy and a global leader in innovation and technology The Korea office works with Korean partner • Group KTEE203 MSSV 14324325 Report on South Korea 34 “Tên khóa luận” institutions to help developing countries learn from Korea’s experience and expertise • As of 2019, the countries with the five highest HDI scores are Norway (0.957), Ireland and Switzerland (0.955), Hong Kong and Iceland (0.949), and Germany (0.947) Group KTEE203 MSSV 14324325 Report on South Korea 35 “Tên khóa luận” Chapter E: Strengths and Weaknesses o Strengths - Diversified industrial base: South Korea’s economy is the 15th-largest in the World with a relatively high GDP per capita It has a strong, diversified and internationally highly competitive industrial and manufacturing base - Leader in high-end electronics such as: Samsung; Kia; LG - High private and public R&D spending - Good educational system - Diversified FDIs in Asia o Weaknesses - Competition from China (steel, shipbuilding, electronics) - High level of household debt - Ageing population - High youth unemployment - Net commodity importer - Overrepresentation of chaebols in the economy - Proximity to North Korea: The Korean War ended in 1953 without a formal peace-treaty and the countries are thus still officially at war As a result of highly erratic and at times aggressive behavior of North Korea, tensions flare up from time to time - Increasing tensions with Japan o Risk Assessment Growth set to rebound despite downside risks Although exports (40 percent of GDP) are expected to remain weak, growth is expected to gradually rebound through 2021 on the strength of a revival in private consumption aided by fiscal stimulus measures External demand has been driven by a steady recovery in important trade partner China (25 percent of exports) and semiconductors (17 percent of exports) However, current US technological restrictions, combined with falling semiconductor prices in recent years, may further adverse pressures Although a rising unemployment rate (3.9 percent in September 2020 compared to 3.4 percent for the same period in 2019) and high household debt (97.8 percent of GDP in 2020) may constrain private consumption (46 percent of GDP), the four supplementary budgets (3.6 percent GDP) passed in 2020 should bolster business and consumer sentiments, resulting in a • Group KTEE203 MSSV 14324325 Report on South Korea 36 “Tên khóa luận” revival of private consumption (46 percent of GDP), although a rising unemployment rate (3.9 percent in September 2020 compared to 3.4 percent for the same period in 2019) and Following interruptions in domestic activity and a worse economic forecast, investment should remain modest Inflation should rebound and edge up closer to the BOK (Bank of Korea) 2% target range, but will be unlikely to reach it despite a recovery in domestic demand After two 25 bps rate cuts in 2020, the BOK should not lower the policy rate any further in order to avoid spurring households’ debts (which have already reached high levels), leaving the recovery to rely only on fiscal stimulus measures, which would further dig the budget deficit The budget deficit will widen for the second consecutive year The budget deficit will widen as a result of expansionary policies that will be prolonged through 2021 to help a pandemic-affected economy For the second year in a row, the government has proposed a record USD 469.9 billion fiscal budget for 2021, marking the second year in a row that spending have exceeded revenues Given the rising unemployment rate, the budget will primarily focus on health, welfare, and employment (30.5%), as well as job creation (5.5%), as President Moon Jae-in promised to expand public sector jobs before the end of his term in 2022 In 2021, the public debt is expected to rise, with government bonds serving as a partial source of funding In 2021, the government intends to sell 172.9 trillion won in bonds (167 trillion in 2020) • Because the trade surplus is expected to widen in 2021, the current account balance should remain favorable While fiscal stimulus measures help to offset the drop in import demand, the resurgence in China will stimulate exports Given that international borders would stay closed until the first half of 2021, the tourist balance deficit (due to the number of Koreans travelling abroad outnumbering foreign visitors) should shrink, resulting in a wider current account surplus The economy should continue to have sufficient foreign exchange reserves, which were 10.4 months of imports in September 2020 • No major improvements with its neighbours President Moon Jae‐in’s ruling Democratic Party secured a majority in the Parliamentary elections in April 2020, with a strong public support for its management of the COVID‐19 pandemic The left‐leaning ruling party could push its reform agenda before the presidential elections in 2022, particularly regarding unemployment and reforming chaebols – which consists in reducing conglomerates’ dominance on the economy Relations with neighbours not seem to get any better so far Increasing tensions recently led Pyongyang to blow up the joint liaison office with Seoul near • Group KTEE203 MSSV 14324325 Report on South Korea 37 “Tên khóa luận” Kaesong (North Korea) It is unlikely that Japan and South Korea’s ongoing trade conflict – with South Korea requesting reparations from Japan for crimes committed during the Second World War – could ease under the new Japanese Prime Minister Suga, who inherited Abe’s policy line Group KTEE203 MSSV 14324325 Report on South Korea 38 “Tên khóa luận” Chapter F: Evaluation and comparison of the South Korea’s economy amongst other countries Evaluation South Korea is one of the few countries that has successfully transformed itself from a low-income to a high-income economy and a global leader in innovation and technology, it has achieved remarkable success in combining rapid economic growth with significant poverty reduction during the so-called Miracle on the Han River from the mid-20th and early21st century, which has brought South Korea to the ranks of countries in the OECD and the G-20 By nominal GDP, South Korea has the fourth largest economy in Asia and the 10th largest in the world while by GDP per capita, (PPP), it ranks 24th • According to the World Trade Organization, South Korea was the world’s seventh-largest exporter last year, accounting for 3.1% of the global total exports Recently, South Korea was reclassified as an advanced economy by the United Nations Conference on Trade and Development (UNCTAD), alongside 31 nations including the United States, the United Kingdom, Germany, France and Japan Of the four so-called Asian Tigers (South Korea, Singapore, Hong Kong, Taiwan), South Korea boasts the highest nominal GDP as well as total exports, however, its GDP per capita is only 30000 US$, much lower in comparison to Singapore’s due to South Korea’s growing and ageing population • Nevertheless, as an economy which exports of goods and services account for 40-50% of the GDP on average, South Korea is facing an enormous challenge from other growing countries, such as China in the production of electronics and shipbuilding With over 70% of labor working in the services sector, generating nearly 60% of the country’s GDP, the COVID19 was a terrible strike to South Korea’s economy as a whole, resulting in the country’s negative growth of -1% in 2020 after a period of more than 20 constant-growing years According to UNCTAD's 2021 World Investment Report, FDI to the Republic of Korea declined by 4% to US$ 9.2 billion in 2020 from US$ 9.6 billion in 2019 However, in 2021, South Korea’s economy is starting to see light at the end of the tunnel • After the initial COVID-19 shock, Korea’s target growth rate is set at 4% in 2021, which is the country’s highest in a decade since an economic burst in 2010, and approximately 3% in the next following years The economy is seeing great recovery as export continues to grow rapidly and the national vaccination is in progress, paving the way for an acceleration in private consumption The Bank of Korea has raised their key rate from a record-low 0.5% (from May 2020) to 1% in November 2021, indicating that the economy is steadily recovering and expected to grow despite the ongoing COVID-19 disease • Group KTEE203 MSSV 14324325 Report on South Korea 39 “Tên khóa luận” Comparison South Korea presents great favors for foreign corporations and investors as well as domestic entrepreneurs According to the aforementioned report by UNCTAD, South Korea’s FDI stocks in 2020 increased to US$ 265 billion, up from US$ 135 billion in 2010 • • • Table F- 10: Doing Business Rankings in 2018 As seen in the table above, South Korea dominates in the ease of starting and doing business and enforcing contracts All of them play a vital role in promoting investment, production, communication and, as a result, economic growth Therefore, the government is doing their best to encourage investment and entrepreneurship, by adjusting fiscal and monetary policies, at least in the short term, to regulate economic activity in response to the dreadful and on-going COVID-19 disease • Group KTEE203 MSSV 14324325 Report on South Korea 40 • Group “Tên khóa luận” CONCLUSION KTEE203 MSSV 14324325 Report on South Korea 41 “Tên khóa luận” • • REFERENCES • Choi, K (2017) Why Korea's Youth Unemployment Rate Rises KDI FOCUS No 88(eng) • Mankiw, N G (2008) Principles of Macroeconomics New York: Worth Publishers • OEC (2019) Retrieved from OEC: https://t.ly/hbsw • OECD (2021, March 15) Retrieved from https://t.ly/9nca • Paul Samuelson, William Nordhaus (1998) Economics Boston: McGraw-Hill • Robin Bade, Micheal Parkin, Brian Lyons (2005) Essential Foundations of Economics Toronto: Pearson Addison Wesley • Group KTEE203 MSSV 14324325 ... economic growth Tourism development policy (Invest Korea Organization, Tourism and Leisure 2015, www. investkorea. org, 2015) Over the years, the Korean government has closely monitored and constantly... facilitate the development of the tourism industry Korea has policies to support the development of tourism products and a policy of tourism promotion made with the enthusiastic participation of tourism. .. Ministry of Culture, Sports and Tourism of Korea (Ministry of Culture, Sports and Tourism -MCST) held a meeting to propose plans to promote tourism and improve the quality of the tourism industry for