A Case of Government-Led Integration into the World Economy
Although Korea fell prey to a severe financial crisis in late 1997, in less than three decades it went from a small isolated and poor country to a middle-income economy closely integrated with the rest of the world. With per capita GDP rising at an average annual rate of nearly 7 per cent over the past three decades, Korea's economy outstripped many other developing countries and all industrial economies. This exceptional performance was due to strong export growth and systematic capital accumulation. The high degree of openness to international trade is a striking feature of the modern Korean economy: on the eve of the financial crisis, Korea was the eleventh largest trading economy in the world.1 In 1996, exports of merchandise goods represented 26.5 per cent and imports of merchandise goods 29.6 per cent of current price GNP, compared with barely 5 per cent and less than 15 per cent, respectively, some 30 years earlier. As one of the most dynamic economies in the world, Korea is also closely connected to the rest of the world through an increasingly complex network of inward and outward direct investments. The role of the latter type of economic interaction in the Korean development experience is the subject of the present chapter.