It seems to me that a mutual relationship would go beyond a simple free trade agreement between the two rising countries in the new world economy in the post global crisis era. In this article, I would like to present the rise of Korea very briefly with some policy implications for the coming potential partnerships.
Korea has a long and quite bright history. With the exception of Mongol invasions and attacks in the 13th century, we can say the Koreans maintained their sovereignty.
Throughout their history, they adopted several external streams of thoughts. One of them has been Chinese culture such as Confucianism, Chinese letters, Chinese medicine, etc. This means that their capacity to adapt and survive in radically changing environs is quite strong. In the post-World War II era, they learned from the Japanese and the Americans. Openness to change and a sincere approach to learning are their defining characteristics.
With the start of the 19th century, Korea was invaded by the Japanese till the end of World War II. Soon after the war, the country was divided between the great powers. After the Japanese surrendered, the south part of Korea was dominated by the US, whereas the north part was subjugated by Soviet Russia. This ideological division persists today with two sovereign states.
In this war between the south and the north, in fact, between the communist block and the capitalist block, Turkey took part with the Western block, the so-called democratic and free market block. Turkish troops performed well in the war, and a close friendship started between Turkey and South Korea.
As can be imagined, the economic situation and the level of development were quite poor soon after the war after almost 50 years of Japanese occupation and a civil war. This brought about much political instability, and authoritarian military regimes came to power, etc. In 1957, South Korea had a lower per capita gross domestic product (GDP) than Ghana and much lower than Turkey. However, since the 1960s, the South Korean economy has grown enormously, and the economic structure was radically transformed. By 2008, it was 17 times as high as Ghana's and almost two-and-half times that of Turkey.
Unlike the economic development of the south, the North Korean system resulted in an underdeveloped and poor economy. For instance, as a result of the famine that began in 1995 and peaked in 1997, an estimated 2.5 million to 3 million lives were lost in three years.
South Korea is known as a “late-comer country” in development and called one of the “newly industrialized Asian tigers.” The pace of economic transformation has increased since the early 1990s but was interrupted by the Asian liquidity crisis. However, South Korea recovered quite rapidly, and throughout the 2000s, the country benefited from the expanding global economy and supplied many brand names into global markets.
South Koreans have a high qualified human capital stock with a high level of skills equipped with the necessary know-how. They also successfully assimilated almost all kinds of technology, including nuclear power plants and shipping as well as in the field of producing steel, iron, machine tools, high-speed trains, automobiles, computers, all types of consumer electronics and so on.
All these achievements took place with quite strong macroeconomic fundamentals. In the last decade, basic macroeconomic indicators have been quite impressive. Despite the rise of commodity prices and the return of inflationary pressures in the global economy, the South Korean economy successfully internalized these adverse shocks thanks to its productivity-oriented dynamic economy. They kept the economy growing and kept inflation under control at around 2.5 to 4 percent, which is comparable to any developed county, however, remarkably lower than emerging market averages.
In addition, despite the global economic crisis of 2009, South Korea achieved an average growth rate of 4 percent per annum between 2005 and 2011.
With the implementation of many labor-friendly policies such as active employment programs in concordance with the needs of emerging green economies, unemployment was kept under control at around 3-4 percent.
While Western European economies, Japan and the US are experiencing serious turbulence because of their fiscal malaise, there is no budget deficit problem or public sector debt problem in South Korea.
Last but not least, thanks to their highly competitive economy, the country has had an external or current account surplus of 2 to 3 percent of GDP in the last couple of years.
